MANILA, June 20, 2005
 (STAR) By Zinnia B. Dela Peña - Foreign investors remain upbeat on the Philippines’ macroeconomic fundamentals despite scandals rocking the Arroyo administration, Philippine Stock Exchange (PSE) president and chief executive officer Francis Lim said over the weekend.

Lim said separate assessments made by London-based Fitch Ratings and broker firm UBS Securities Asia show that foreign investors continue to look at the Philippines as an alternative investment site given the country’s improving fiscal performance.

In a research note released recently, Fitch said the country’s overall deficit and debt positions are expected to improve in the near term following the passage of key revenue measures.

By end-2009, the European rating agency expects the National Government’s debt to go down to about 58 percent of gross domestic product (GDP) from an estimate of 71.4 percent last year.

The credit rating agency said the landmark value-added tax legislation was likely to haul in P80 billion in revenues or 1.3 percent of GDP by 2006.

Fitch Ratings, which earlier upgraded its outlook on the country’s long-term foreign and local currency sovereign credit ratings to "stable" from "negative" revised downward its Philippine debt projections.

In a separate investment research report, UBS Securities Asia named the Philippines as the most dynamic turnaround stories in progress in the Asian region, along with Indonesia.

According to UBS, the enactment of the new VAT bill has laid the groundwork for a turnaround in the country’s fiscal dynamics. UBS reported that over the next two years, public sector debt could actually fall by nine percent of GDP, before stabilizing in the second half of the decade.

This will be made possible by: higher tax revenues due to the new tax bills, lower Napocor losses due to higher cost pass-through, and lower real interest rates and a stronger real exchange rates– both of which are a direct result of the improved fiscal environment, UBS said.

Furthermore, UBS reported the Philippines is undergoing a "virtuous circle" that could have ramifications well beyond a simple turnaround in the deficit.

UBS furthered the benefits are already visible: the peso has been outperforming most other Asian currencies and the Philippines is one of the only economies in Asia where short-term interest rates have fallen rather than risen.

Lim, for his part, said the "the positive outlook on the country’s macroeconomic fundamentals demonstrates that the Philippines as an investment site is sound and healthy."

Proof of this, he said, is the impressive performance of companies listed on the PSE which saw their net earnings grow 51 percent to P36.75 billion in the first quarter this year.

"These assessments by credible research houses, coupled by the superior performance of our listed companies, should be able to attract more investors into the Philippine stock market," Lim said.

Reported by: Sol Jose Vanzi

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