THE Philippines’ BBB+ sovereign rating is based on assumptions of a strong 2021 rebound, with the risk of a downgrade possible if the recovery disappoints, and even an upgrade if it turns out stronger than expected, S&P Global Ratings said.

Across the Asia Pacific, S&P Global said in a note Thursday, most sovereign ratings are expected to be maintained until about 2023.

S&P Global affirmed its BBB+ rating with a stable outlook for the Philippines in May.

“The stable outlook reflects our expectation that the Philippines’ orthodox policymaking will continue to underpin its credit metrics, and that the economy will rebound strongly in 2021,” it said.

A stable outlook indicates that a rating may be maintained over the next 18 to 24 months.

“We may lower the rating if the economy suffers from a sharper and more prolonged downturn than we expect, leading to a material deterioration in the Philippines’ fiscal and debt positions,” S&P Global said.

On the other hand, S&P said the Philippines may secure a rating upgrade over the next two years if the recovery outperforms expectations.

A reduction of net general government debt as a share of gross domestic product (GDP) due to fiscal reforms may also be a catalyst for an upgrade, S&P said. Net general government debt was about 28% of GDP in 2019.

“We may also raise the rating if we believe the institutional settings that have contributed to the significant credit metric improvements over the past decade or so will persist,” it added.

Among Asia-Pacific sovereigns, only Australia (AAA), Fiji (BB-), Indonesia (BBB), and Malaysia (A-) had negative outlooks at the end of 2020. Meanwhile, 16 have stable outlooks with only New Zealand (AA) having a positive outlook, which signals an upgrade in the near term.

In the same report S&P Global also maintained its 2021 and 2022 GDP forecast for the Philippines at 9.6% and 7.6%, respectively, which it first issued in September.

In 2020, the economy contracted by a record 9.5% due to the slump associated with the pandemic. S&P’s estimate was for a drop of 9.6%. — Luz Wendy T. Noble