PHL economy still strong, says S&P

By Katherine K. Chan, Reporter

S&P GLOBAL RATINGS continues to see strong credit rating prospects for the Philippines as it remains optimistic on the country’s growth fundamentals despite drags from the recent flood control corruption scandal.

Speaking at a webinar on Thursday, Yee Farn Phua, director for sovereign and international public finance ratings at S&P Global Ratings, said the Philippine economy will likely rebound immediately once the flood control controversy wanes.

“Because of the slowdown in many infrastructure projects, there has been (an) economic growth slowdown in the Philippines quite considerably in the last few months,” Mr. Phua said.

“However, we don’t think this is a structural problem in the Philippines’ economic growth story. We think that the fundamentals of the Philippine economy continue to be strong. This investigation, we think that once it passes, we could see growth rebounding quite quickly,” he added.

In November 2025, S&P affirmed the Philippines’ long-term “BBB+” and short-term “A-2” credit ratings. It also maintained its “positive” outlook on the country, indicating a potential rating upgrade over the next one to two years if improvements in credit fundamentals are sustained.

“Now, when we put the Philippines on (a) positive outlook one year plus ago, it wasn’t just because of improvement in climate metrics overnight,” Mr. Phua said. “It was really an observation of the fact that institutional settings in the Philippines have strengthened quite considerably over the last decade or so. And that has led to very good growth outcomes and at the same time sustainable public finance.”

Still, Mr. Phua noted that political concerns emerging from the flood mess could slow some of the country’s credit improvement.

However, he added that the economic spillover from the corruption allegations against several Public Works officials, lawmakers and private contractors as well as the impeachment complaints against the President due to the flood control issue may only be “temporary.”

Last year, the Philippines missed its growth target for a third straight year after gross domestic product (GDP) slowed to a post-pandemic low of 4.4% as weak confidence dampened investments, household consumption and government spending. 

Despite this, S&P sees the economy rebounding to a 5.7% growth this year. If realized, the government will meet its 5%-6% goal for the year.

“For this year, I think our growth forecast for the Philippines is still relatively strong at 5.7%,” Mr. Phua said. “So, despite the economic slowdown of late, the Philippines continues to be an outperformer when compared to peers at a level of similar income.”

This, he added, comes on the back of a projected narrowing of the country’s fiscal and current account deficits over the next year or two, which could boost the case for a higher credit rating.

“Interestingly, because of the slowdown in infrastructure spending in the last few months, it is possible that you will start to see (the) fiscal deficit actually be lower than what was originally budgeted for,” Mr. Phua said.

“The other thing also is because of the slowdown in the projects and also the reduction in capital goods import, we are also starting to see that the current account deficit could come down to be narrower than before as well,” he added.

Based on latest data, infrastructure spending declined for the fifth consecutive month after falling by 45.2% year on year to P48 billion in November.

Meanwhile, the country’s budget deficit sharply narrowed during the same month, shrinking by 26.02% to P157.6 billion from P213 billion a year earlier.

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 cap the fiscal deficit at P1.56 trillion by end-2025.

Meanwhile, the Philippines’ current account balance stood at a $12.5-billion deficit by the end of the third quarter, latest Bangko Sentral ng Pilipinas (BSP) data showed. This was equivalent to -3.6% of the GDP.

The BSP expects the current account gap to end at $15.5 billion in 2025 or -3.2% of GDP, before narrowing to $15.3 billion or -3% of GDP this year.

Still, Mr. Phua said S&P will keep monitoring how further developments in the flood control scandal would impact the Philippines’ long-term credit rating prospects.