Philippines credit outlook upgraded to positive

MANILA, Philippines — S&P Global Ratings has raised the Philippines’ credit rating outlook to positive from stable, increasing the possibility of an upgrade in the next 12 to 24 months.

In a report, the New York-based debt watcher affirmed its “BBB+” long-term investment grade rating and “A-2” short-term sovereign credit ratings on the Philippines.

“The positive outlook reflects our improved assessment of institutional and policy settings in the Philippines. This improvement could lead to stronger sovereign support over the next 12 to 24 months if the Philippine economy maintains its external strength, healthy growth rates and that fiscal performance will strengthen,” it said.

S&P said it might raise the Philippines’ ratings if current account deficits taper off and the government achieves faster fiscal consolidation.

On the other hand, the debt watcher could revise the outlook back to stable if economic growth momentum weakens or if the current account deficit becomes persistent and erodes the country’s external balance sheet.

However, S&P believes the Philippines has demonstrated strong economic recovery in the last two years.

“The ratings on the Philippines reflect the country’s above-average economic growth potential. This strength underpins constructive development outcomes. The ratings also benefit from the country’s strong external position,” it said.

The credit rating agency projects the Philippines’ gross domestic product (GDP) to grow by 5.5 percent this year before picking up to six percent in 2025, 6.2 percent in 2026 and 6.5 percent in 2027.

According to S&P, growth is expected to be supported by private consumption and improving external demand. GDP per capita could rise to about $4,119 this year and $4,478 in 2025.

“The country has a diversified economy with a strong record of high and stable growth. This reflects supportive policy dynamics and an improving investment climate,” it said.

Data from the local statistics agency showed GDP growth slowed to 5.2 percent in the third quarter from 6.4 percent in the previous quarter and six percent a year ago. From January to September, GDP expansion averaged 5.8 percent.

S&P also sees inflation at 3.3 percent this year, 3.1 percent in 2025, 3.2 percent in 2026 and three percent in 2027. All forecasts are within the two to four percent target of the Bangko Sentral ng Pilipinas (BSP).

“With inflation currently still at the upper limit of its inflation target range, the central bank is likely to take a measured pace in easing tight monetary conditions,” the credit rater said.

The country’s fiscal deficit also remains manageable and economic growth will help lower the general government deficit to four percent of GDP in 2024 from 4.5 percent in 2023.

The Philippines’ debt remains stable, with its general government debt ratio expected to fall to 40.6 percent by 2027 from 41.7 percent in 2023 as fiscal consolidation takes hold.

The upgrade in outlook and the affirmation of the Philippines’ credit rating elated President Marcos and his economic managers.

Finance Secretary Ralph Recto said the upgrade proves that investors and creditors have strong confidence in the way President Marcos is managing the economy.

“It reaffirms our stable economic and political environment and that we are on track to achieve a growth-enhancing fiscal consolidation. We have a comprehensive Road to A initiative to ensure that we secure more upgrades soon,” Recto said.

He also said that the main benefit of having a high credit rating is broader access to cheaper and more cost-effective borrowing costs for both the government and the private sector. With this, the government can allocate more funds to programs for infrastructure, healthcare and education, among others.

Meanwhile, BSP Governor Eli Remolona Jr. said this reflects government efforts to improve the economic, fiscal and monetary environment, enabling strong growth to continue.

“The BSP remains committed to promoting price stability, financial stability, and an efficient payment system to support sustainable economic growth,” Remolona said.

S&P upgraded the Philippines’ credit rating to its current level in 2019, following earlier upgrades to BBB- in 2013 and BBB in 2014. The next milestone is A-, marking the start of the A rating category.

Meanwhile, Moody’s and Fitch assign the Philippines ratings of Baa2 and BBB, respectively. 

“The country has a diversified economy with a strong record of high and stable growth. This reflects supportive policy dynamics and an improving investment climate.”