PHILIPPINES continues track potential credit rating improvements such as financing improvements and external balance outweigh risks from the government’s conflict over flood control, said Standard & Poor’s (S&P) Global Ratings.
“We also see solid Philippine credit metrics strengthening over the next one to two years,” the rating firm said in a Feb report. 3. “At this time, we expect that the reduction of the deficit of funds and current accounts can increase the collateral of the main debt.fseriously better support a higher rate.”
S&P last affirmed the Philippines’ long-term “BBB+” and short-term “A-2” credit ratings in November. It also maintained a “positive” outlook on the country, indicating a possible rate upgrade within the next one to two years if credit fundamentals continue to improve.
The credit watchdog said it remains optimistic about medium-term growth prospects in the Philippines despite the political fallout from corruption allegations surrounding flood control projects.
However, it warned that the dispute could delay progress in strengthening the country’s credit rating.
“The political upheaval over allegations of corruption related to flood control projects could delay credit upgrades,” S&P said.
It added that the government is focused on investigating the misuse of public funds and dealing with impeachment complaints against the President, and some infrastructure projects have been suspended as a result.
Still, S&P kept its forecast for gross domestic product (GDP) growth in the Philippines at 5.7% this year, near the high end of the government’s target of 5% to 6%.
This will make the Philippines one of the fastest growing economies in the Asia-Pacific region, behind only India and Vietnam, which are expected to grow by 6.7%.
“Despite the possible economic slowdown, we still expect the Philippines to remain a leader among peers at similar income levels,” S&P said.
The Philippine economy grew by 4.4% last year, its weakest performance in five years. Fourth-quarter GDP growth slowed to 3%, the lowest figure in 16 years outside the pandemic, as delays in flood control projects weighed on investment, housing consumption, and government funds.
Financial pressures also remained evident. The National Government’s budget grew to P1.26 trillion by the end of November 2025 from P1.18 trillion last year, according to Treasury data. This reflected sluggish revenue growth alongside limited spending during the period.
State revenue reached P340.7 billion in November, a 0.72% increase from last year.
Still, S&P said that reduced spending could limit the impact of revenue inefficiencies on the deficit. It expects the deficit to continue to narrow in the medium term as fiscal consolidation efforts are being held.
For 2027 and 2028, S&P projects GDP growth of 6.5%. The Development Budget Coordination Committee is looking at economic growth of 5.5% to 6.5% next year and 6% to 7% in 2028.
S&P said an improvement in the Philippines’ credit ratings is possible if the government strengthens fiscal consolidation and reduces its current account deficit, which supports a stable external position in the long term.
Ensuring that the external narrow balance sheet supports the net asset position can be credit.
On the other hand, S&P warned that a deterioration in financial or debt metrics, coupled with weakening long-term growth prospects, could cause it to revise the country’s outlook to “stabilize.”
“We may also revise the outlook for stability if the ongoing current account deficit leads to a deterioration in the structure of the Philippines’ external balance sheet,” it said.
Data from the Bangko Sentral ng Pilipinas (BSP) showed that the country’s current account deficit decreased to 2.8% of GDP in the third quarter of last year from 4.8% the previous year.
The BSP expects the current account deficit to reach 3.2% of GDP by the end of 2025 and ease to 3% this year. – Katherine K. Chan
