MANILA, Sept. 9 (PNA) -– Amid surging inflation and the current global economic tightening, the Bangko Sentral ng Pilipinas (BSP) is positive that the country's credit ratings will not suffer a downgrade despite posting a slower year-on-year growth.

"I believe the ratings outlook will hold," said BSP Governor Amando
Tetangco Jr.

Citing on the economy's resiliency vis-à-vis the global tightening, the
BSP chief said this would continue to buoy the country under the current
economic crisis.

"In fact the 4.6 percent growth for the first semester is still within the
country's long-term trend growth rate," he pointed out.

The National Economic and Development Authority (NEDA) has reported that
the economy grew by 4.6 percent both in the second quarter and the first
half of the year.

The inter-agency Development Budget Coordination Committee (DBCC) has set
the 2008 low end gross domestic product (GDP) target at 5.5 percent.

Even with the lower expansion this year, Tokyo-based Rating and Investment
Information, Inc. (R&I) recently affirmed its foreign currency issuer
rating for the country as BBB- with a positive rating outlook.

R&I said the government seems to be on the right track in pursuing
appropriate efforts to manage annual expenditures by increasing
infrastructure investment while preventing the fiscal deficit to balloon.

"While the outlook remains positive, it is imperative for the government
to pursue measures to strengthen the fundamental building block for growth
centered on infrastructure investment while simultaneously implementing a
public debt reduction plan," R&I, in a report, said.

R&I said that as inflation surge this year, economic growth has been
affected but "the factors that had supported the vigorous economy,
including remittances from overseas Filipino workers and bouyant business
process outsourcing sector, continue to expand at a steady pace, and there
appears little reason to expect that the underlying strength of the
economy had changed significantly."

Taking note of this, Tetangco said other credit ratings agency might also
do the same given the over-all performance of the economy.

He said the business process outsourcing (BPO) and services sectors would
continue to drive the economy along with consumption, particularly by
beneficiaries of Overseas Filipino Workers (OFWs).

He noted that "even as the global economy is seen to slow down, the demand
for our highly skilled workers remains inelastic."

Given this, he assured the public that the central bank "remains to be
focused on its mandate of price stability, which, we believe, provides the
underpinning for long term economic development."

He reiterated that their "current monetary policy stance is calibrated
with the view to guide inflation expectations, and therewith actual
inflation, to move to the target range during the policy horizon."

The government targets inflation between a range of three to five percent
this year and 2.5-4.5 percent in 2009.

The BSP has revised upward its forecast for the two-year period at nine to
11 percent this year and six to eight percent next year because of the
continued heating up of inflation.

Rate of price increases has surged to a new 17-year high last August to
12.5 percent from 12.2 percent in the previous month as higher oil prices
was further aggravated by impact of typhoons to the domestic prices.

BSP forecasts inflation to peak either in September or October but will
not exceed 13 percent.

"Our runs still show that the inflation path will remain hump-shaped, with
the inflation rate reaching the single digit territory by late first
quarter/early second quarter next year," Tetangco added. (PNA)
DCT/JS