S&P Global Ratings maintained its BBB+ long-term credit rating for the Philippines with a stable outlook, as it expects the economy to bounce back next year after the coronavirus crisis.

“The Philippines’ economy should achieve a strong recovery from 2021, following a deep slowdown due to the COVID-19 (coronavirus disease 2019) pandemic this year. Although the country’s fiscal and debt settings will deteriorate due to the COVID-19 stimulus measures, the government’s long track record of fiscal prudence provides some buffer, assuming a meaningful stabilization begins in 2021,” the global debt watcher said in a statement on Saturday.

The country’s BBB+ rating from S&P – which is a step closer to the country’s targeted A rating – was given in April 2019.

The “stable” outlook suggests that the rating is likely to be maintained over the next six months to two years.

S&P has also affirmed its A-2 short-term credit rating for the Philippines.

“The ratings on the Philippines reflect our expectations that the economy will continue to achieve above-average growth over the medium term, which will drive constructive development outcomes and underpin broader credit metrics… The ratings are also supported by the economy’s sound external settings. These are weighed against the Philippines’ lower-middle-income economy,” it said.

According to the report, the country’s rating strength lies in its external position, the peso’s stability and the increase in the dollar reserves during the crisis.

S&P said it may upgrade the Philippines’ rating depending on how fast the economy recovers.

“We may raise the rating over the next two years if the economy recovers much more quickly than expected, and the government makes significant further achievements in its fiscal reform program, such that the net general government indebtedness falls below 30% of GDP (gross domestic product),” it said.

“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.

However, S&P warned a downgrade is possible if the economy suffers a worse-than-expected and prolonged downturn.

In April, the debt watcher has lowered its GDP projection for the country this year to -2% from a baseline growth estimate of six percent in December. Meanwhile, it expects a nine percent expansion rate in 2021 which is higher than its 6.4% initial forecast.

S&P’s latest ratings actions followed Fitch Ratings’ lowered outlook in early May for the country to “stable” from the “positive” it gave in February. It has however maintained the country’s credit rating at BBB.

Meanwhile, Moody’s Investors Service has given a Baa2 rating with a stable outlook for the Philippines in December 2014.


S&P said the Philippines is among the fastest growing in terms of 10-year weighted-average per capita, due to supportive policy dynamics and improving investment climate. It also noted the country’s declining unemployment rate prior to the pandemic.

But S&P flagged that uncertainty in export markets and a “modest, though improving” transport infrastructure as among the country’s major economic constraints.

“As such, ongoing work to close infrastructure gaps and improve the business climate through greater political stability and regulatory reforms should be supportive of economic productivity,” S&P said.

It also noted current proposals under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill will likely weigh on foreign direct investments over the near term.

“In our view, a deeper and more diversified financial and capital market would further boost the effectiveness of policy transmission and facilitate improved credit metrics,” it said.

Meanwhile, S&P said the Bangko Sentral ng Pilipinas’ measures so far to support growth and cushion the impact of the pandemic is “broadly neutral” ratings-wise as it shows the central bank’s record to manage inflation and history of independence.

Finance Secretary Carlos G. Dominguez III said the affirmation of the BBB+ rating is “an unequivocal recognition by S&P of the resilience of the Philippine economy to regain its high-growth trajectory in the new normal.”

“We are confident that our government’s four-pillar strategy to deal with the pandemic will see us through this global health emergency as we remain focused on saving lives and protecting communities while gradually lifting mobility restrictions to restart the economy and get people back to work,” Mr. Dominguez said. — Luz Wendy T. Noble