* Fitch raises Indonesia rating to BBB from BBB-
* Govt and central bank welcome the move
* Stock index rises nearly 1 pct
* Fitch Indonesia rating matches that of Philippines (Adds central bank, analyst comments)
JAKARTA, Dec 21 (Reuters) - Fitch Ratings raised Indonesia's credit ratings a notch above its lowest investment grade on Thursday, saying economic and monetary policies have made Southeast Asia's largest economy resilient to external shocks.
The rating was raised to BBB from BBB-, with a stable outlook. The upgrade means Indonesia has a higher rating from Fitch than from S&P Global Ratings and Moody's Investors Service.
Investors welcomed the news, with the rupiah strengthening 0.2 percent in early trading and the benchmark stock index rising 1 percent.
For Fitch, Indonesia is now on par with its ratings for the Philippines and Italy.
"Monetary policy has been sufficiently disciplined to limit bouts of volatile capital outflows during challenging periods," the agency said in a statement.
"Macro-prudential measures have helped curb a sharp rise in corporate external debt, while financial deepening has coincided with improved market stability," it said.
Fitch said the focus on macro stability is also evident in credible budget assumptions in the past few years.
Bank Indonesia (BI) Governor Agus Martowardojo said the upgrade puts Indonesia's credit rating at the highest since 1995.
BI "will continue its commitment in maintaining macroeconomic and financial system stability to support a strong, sustainable, balanced, and inclusive economic growth," Martowardojo said.
Luky Alfirman, a senior Finance Ministry official, said the Fitch upgrade will help Indonesia attract more foreign and domestic direct and portfolio investment.
In December 2011, Fitch restored Indonesia's sovereign rating back to investment grade after nearly 14 years. In May this year, S&P became the last of the three big agencies to again give the country an investment grade rating.
The Fitch upgrade comes at a time of some concern about possible impact on Indonesia from the U.S. Federal Reserve's balance sheet normalization and expectations of further U.S. rate hikes in 2018.
In a bid to lift economic growth, BI unexpectedly cut its key policy rate in August and September, triggering some selling of Indonesian government bonds.
"Fitch's upgrade should be considered a good sign of confidence for Indonesia," said Taye Shim, head of research at brokerage Mirae Asset Sekuritas in Jakarta.
Shim added that the upgrade is "meaningful step in stimulating other rating agencies to potentially upgrade Indonesia's sovereign rating."
Moody's upgraded Indonesia's outlook in February to positive from stable.
Over the past three years, President Joko Widodo's government has focused on cutting public spending, reducing investment bottlenecks and boosting the tax take through a tax amnesty program.
Still, Fitch cautioned that the government's revenue intake is "very low" and that the economy remains hampered by "some structural weaknesses."
Indonesia has seen a rebound in exports this year, but tepid private consumption has hampered policymakers' efforts to lift growth well above 5 percent a year.
Fitch forecast that Indonesia will grow 5.4 percent next year, in line with the government's target. (Editing by Ed Davies and Richard Borsuk)