By Katherine K. Chan, A reporter
S&P GLOBAL ratings continue seeing strong prospects for debt consolidation in the Philippines as it remains optimistic for the country basic growth despite drag from recent floods control corruption scandal.
Speaking in a webinar on Thursday, Yee Farn Phua, director of sovereign and international credit ratings at S&P Global Ratings, said the Philippine economy could accelerate if the argument for flood control is becoming less and less.
“Due to the slowdown in many infrastructure projects, there has been a (decline) in economic growth in the Philippines over the past few months,” said Mr. Phew.
“However, we do not think that this is a structural problem in the story of the growth of the Philippine economy.
In November 2025, S&P affirmed the Philippines’ long-term and “A-2” short-term credit ratings. It also maintained its “positive” outlook on the country, indicating an improvement in the rating is likely in the next one to two years if credit fundamentals continue to improve.
“Now, when we put the Philippines (a) in a good perspective for one year and more, it was not just because of the improvement of weather conditions overnight,” said Mr. Phew. “It was really to see the fact that the institutional settings in the Philippines have been very strong in the last decade or so. And that has led to very good results for the growth and sustainability of the public finances.”
However, Mr. Phua noted that political concerns arising from this flood may slow down the growth of the country’s debt.
However, he added that the economic slowdown due to corruption allegations against officials of the Department of Public Works, legislators and private contractors and the impeachment of the President over the issue of flood control may be “temporary.”
Last year, the Philippines missed its growth target for the third consecutive year after gross domestic product (GDP) fell to a post-pandemic low of 4.4% as weak confidence dampened investment, household consumption and government spending.
Despite this, S&P sees the economy returning to growth of 5.7% this year. If it happens, the government will achieve its target of 5%-6% of the year.
“This year, I think our growth forecast for the Philippines is still strong at 5.7%,” Mr Phua said. Therefore, despite the recent economic downturn, the Philippines continues to perform well compared to peers at the same income level.
He added, this comes after a projected reduction in the country’s fiscal and current account deficits in the next year or two, which could raise debt levels.
“What is interesting is that due to the decrease in the use of infrastructure in the past few months, it is possible that you will start to see (i) the financial deficit actually being lower than what was originally planned,” said Mr. Phew.
“Another thing is due to the decline in the level of projects and the reduction in the import of capital goods, we are beginning to see that the account deficit may be very small. than before,” he added.
Based on the latest data, infrastructure spending fell for the fifth consecutive month after dropping 45.2% year-on-year to P48 billion in November.
Meanwhile, the country’s deficit decreased significantly in the same month, down 26.02% to P157.6 billion from P213 billion a year ago.
However, single-digit growth in spending and revenue collection led the gap to widen to P1.26 trillion in the 11-month period.
The government wants to close the fiscal deficit to P1.56 trillion by the end of 2025.
Meanwhile, the Philippines’ current account balance stood at a $12.5-billion deficit at the end of the third quarter, the latest Bangko Sentral ng Pilipinas (BSP) data showed. This was equivalent to -3.6% of GDP.
The BSP expects the current account deficit to end at $15.5 billion in 2025 or -3.2% of GDP, before declining to $15.3 billion or -3% of GDP this year.
However, Mr. Phua said S&P will continue to monitor how continued developments in the flood management scandal will affect the long-term outlook for the Philippines.
