S&P Maintains Positive Economic Outlook For Philippines

Global debt watcher S&P Global Ratings has affirmed the Philippines’ investment-grade credit standing, keeping the country at “BBB+” with a positive outlook as it expects external buffers to remain strong and fiscal consolidation to continue over the next two years.

In a report released on Thursday, Nov. 27, S&P said it decided to maintain the Philippines’ long-term “BBB+” and short-term “A-2” sovereign credit ratings despite a near-term slowdown in public infrastructure spending due to the ongoing probe into flood control projects.

“A slowdown in public infrastructure investment in the Philippines is weighing on its near-term growth prospects. However, we believe this is temporary and economic growth prospects remain strong,” the credit ratings agency said.

The outlook staying positive reflects S&P’s view that institutional and policy settings “could provide stronger support for sovereign credit metrics over the next 12 to 24 months.” S&P also kept the country’s transfer and convertibility assessment at “A-”.

The ratings agency noted that the temporary halt in some infrastructure works, triggered by corruption investigations, would temper gross domestic product (GDP) growth this year and in 2025.

S&P now expects Philippine growth to slow to 4.8 percent in 2025, a drop from the 6.3 percent average in the past three years.

“The resultant slowdown in public capital expenditure will dent GDP growth this year. However, we believe this will not derail the country’s long-term growth trajectory, which remains healthy,” S&P said.

While third-quarter GDP growth plummeted to four percent, marking the weakest since early 2021, the credit rater expects recovery beginning 2026, projecting medium-term growth to average 6.2 percent from 2026 to 2028 on the back of robust consumption and investment.

S&P also said the government is showing progress in repairing its fiscal position after pandemic-era spending swelled the deficit and debt levels.

“The government is continuing its fiscal consolidation, with its debt burden stabilizing,” the agency said, forecasting the general government deficit to narrow to 3.5 percent of GDP in 2025 and to average about three percent over the next three years.

Despite wider current account deficits over the past three years, S&P said the Philippines’ external buffers continue to anchor the rating. It cited healthy gross international reserves and robust remittances from migrant Filipinos abroad.

S&P cited the Bangko Sentral ng Pilipinas (BSP)’s “sound record of keeping inflation low” and its operational independence as key pillars of monetary stability.

With inflation easing to an average of 1.7 percent as of October this year, the BSP has cut policy rates by 175 basis points since August 2024. S&P expects an accommodative stance moving forward.

It also highlighted the government’s series of reforms, including moves to open more sectors to foreign investors, as positive for long-term growth and foreign direct investment inflows.

BSP Governor Eli Remolona Jr. welcomed the debt watcher’s affirmation and said that the country remains well-positioned against external risks.

“S&P’s rating decision confirms our view of the favorable long-term economic growth prospects,” Remolona said in a statement.

Finance Secretary Frederick Go underscored that the affirmation of S&P ‘BBB+’ credit rating with positive outlook for the Philippines is proof of the country’s strong macroeconomic fundamentals and the administration’s sustained commitment to pursuing fiscal consolidation.

“We welcome this development. We will ensure that every policy decision will support sustainable growth and long-term stability,” he said.

“Having a high credit rating will benefit Filipinos because this means cheaper financing for the government, and in effect, more resources for essential public services. This supports our goal of uplifting the life of every Filipino,” the finance chief added.

S&P’s ratings reflect the country's above-average economic growth, relative to its peers, which is supported by firm domestic demand, favorable labor market conditions, lower inflation, and stable overseas remittances.

Since 2022, gross domestic product growth has averaged 5.7 percent, as economic growth remains broad-based, supported by strong domestic demand and resilient services.

Inflation is stable and has remained below the two percent to four percent target range for eight consecutive months, registering at 1.7 percent in October 2025.

The labor market continues to show strength, with the unemployment rate from January to September 2025 at 4.1 percent, outperforming the 4.8 percent to 5.1 percent target for 2025 under the Philippine Development Plan (PDP).

S&P expects the country’s growth to remain well above the average for its peers as a result of the government’s fiscal policies and reforms to improve the country’s investment climate.

“The Philippines government has generally enacted effective and prudent fiscal policies over the past decade, in our opinion. Improvements in the quality of expenditure, manageable fiscal deficits, and low general government indebtedness testify to this,” the S&P said in its press release.

The credit rating agency also recognized the government’s efforts to support infrastructure development, which have the highest multiplier effects on the economy.

Moreover, the S&P sees that the passage of the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act will continue to support foreign direct investments (FDI) in the next two to three years.

They also acknowledged other reforms such as the liberalization of telecommunications, power generation, and transportation sectors. Meanwhile, renewable energy subsectors such as solar and wind in particular allow 100-percent foreign ownership.

An investment-grade credit rating enables the government to borrow at lower interest rates, freeing up resources for essential services and infrastructure. It likewise helps businesses access more affordable financing, supporting expansion and job creation.

A positive outlook points to a possible rating upgrade within 24 months, which would further lower borrowing costs and boost investor confidence.