By Katherine K. Chan, A reporter
S&P GLOBAL RATINGS updated The Philippines’ credit outlook is moving from “stable” to “good,” citto pose risks to foreigners and the financial situation from the rise electricity prices due to the conflict in the Middle East and the decline in infrastructure use.
“We have revised the rating situation on the Philippines to stable from positive because the conflict in the Middle East has increased the risk to follow the country’s external and financial metrics,” the rating agency said in a report by analysts YeeFarn Phua and Andrew Wood released late Wednesday.
The stable outlook means that the Philippines’ credit rating will likely be maintained for the next two years, reflecting the expectation that the country will “maintain a healthy economic growth rate that will allow fiscal performance to gradually improve while external metrics moderate.”
S&P noted that “higher energy prices will widen the Philippines’ current account deficit this year, narrowing the gap in its total foreign asset position.” Global oil prices have risen to more than $100 per barrel following the Middle East conflict, from around $60-70 per barrel earlier this year, raising import costs for energy-dependent economies like the Philippines.
The current account deficit is expected to widen to 4% of gross domestic product (GDP) by 2026, as higher energy import costs reduce imports of major goods following the freeze. in some of the infrastructure projects.
The energy shock blocked the country’s path to inflation.
After inflation slowed to 1.7% in 2025, S&P said “the trend has changed since the outbreak of the war in Iran and led to higher oil prices,” as inflation is expected to rise to 3.4% in 2026. it is the first time since July 2024 that it has breached the bank’s 2%-4% target.
On the domestic side, the credit keeper said “the investigation of flood control projects that started in August 2025 has hit the growth momentum of the Philippines,” leading to a “temporary reduction in public infrastructure spending.”
This has pushed GDP growth down to 4.4% in 2025, although S&P expects it to rebound to 5.8% in 2026 as these factors ease. in the second half.
However, the S&P affit downgraded the country’s long-term “BBB+” investment-grade rating, two notches above minimum investment grade, and its short-term “A-2” rating, citing “above-average economic growth potential,” supported by a “strong external position.” This was supported by foreign exchange reserves that reached $107.5 billion in March and remittances at a record high of $35.6 billion billion by 2025, said the organization.
However, S&P also noted that “the long-term consolidation path confirms” a shift to a more stable outlook, pointing to a December 2025 revision of deficit targets, indicating a slower recovery path over the next four years.
The credit watcher said the conflict in the Middle East is expected to continue to disrupt the global economy in the coming months, although it expects the intensity of the war to rise and disruptions to key oil supply routes such as the Strait of Hormuz. Hormuz may subside before April.
“However, uncertainty about how the situation will play out is high,” it added, noting that external and financial support may not improve enough in the next two to three years to provide a meaningful boost. in the country’s credit profile.
Consumer spending may be weak in the near term amid higher oil prices.
“The ongoing electricity price shock that started in March 2026 will boost the economy in the Philippines,” S&P said. “We expect consumer sentiment to moderate, with household spending declining.”
Despite the headwinds, S&P said the Bangko Sentral ng Pilipinas (BSP) is likely to maintain a “neutral stance” on monetary policy throughout the year.
“We believe that the central bank will take a neutral stance on monetary policy until the end of the year, as there is a need to balance the risks of inflation and the slowing economy,” it added.
The BSP kept its interest rate unchanged at 4.25% in an off-cycle meeting last month following market volatility caused by the Middle East conflict, marking its first freeze since June 2024 after nearly two years of policy easing.
In the medium term, S&P expects the Philippine economy to remain strong, forecasting GDP growth to 6.2% from 2027 to 2028 and 6.1% in 2029, driven by strong household consumption, investment recovery, and steady income growth.
“Strong domestic and corporate balance sheets, and strong net income support a positive medium-term trajectory for the Philippine economy,” it said, adding that continued infrastructure development and regulatory reforms. should increase productivity.
However, the agency warned that fiscal pressure could continue, especially if the government implements measures such as fuel tax cuts that could reduce revenue amid high global oil prices.
Last month, President Ferdinand R. Marcos, Jr. signed a law authorizing the Executive Branch to temporarily suspend or reduce fuel excise taxes to mitigate the impact of the Middle East-driven oil price shock. conflict.
However, Malacañang is yet to announce whether it will implement this measure.
“Additionally, if the economic situation worsens, the government may be forced to take on a deficit with an additional budget to support the economy,” said S&P.
The agency said it could downgrade the ratings if the country’s long-term growth trend “erodes significantly” or if “persistent current account deficits” lead to a deterioration in the structure of the external balance sheet.
S&P also said it may raise ratings if the Philippines’ current account deficit “worsens over the next two years so that the small external balance maintains the asset position,” and if “the government achieves fiscal consolidation more quickly than we currently expect.”
“The BSP will continue to monitor local and overseas data to implement policies aimed at protecting prices and financial stability amid a challenging economic and political environment,” said BSP Governor Eli M. Remolona, Jr. in a statement on Thursday.
