Debt watcher S&P Global affirmed the Philippines’ ‘BBB+’ long-term and ‘A-2’ short-term sovereign credit ratings with stable outlook amid the country’s sustained economic recovery and strong external position.
S&P Global cited in a Nov. 28 report the Philippines’ above-average economic growth potential compared to its peers, supported by stable macroeconomic fundamentals and driven by the government’s sound macroeconomic policy and fiscal consolidation strategy through the country’s first Medium-Term Fiscal Framework (MTFF).
“The Marcos Jr. administration is committed to pursuing the path of fiscal consolidation and introducing sound policies and structural reforms to strengthen the country’s fiscal and economic position to maintain if not improve this favorable assessment,” Finance Secretary Benjamin Diokno said Wednesday.
S&P said it expects the Philippines to achieve a moderate real gross domestic product (GDP) growth of 5.4 percent in 2023 considering the impact of external macroeconomic developments and a high base.
Such external factors include the projected slower world economic growth, particularly from the Philippines’ largest trading partners––China and the US, it said.
S&P predicted that the country’s growth would increase to 5.9 percent in 2024, 6.2 percent in 2025 and 6.4 percent in 2026.
The credit rater said growth would remain well above the average among its peers due to the government’s ongoing efforts to address infrastructure gaps and improvements in the business climate through regulatory and tax reforms, which would further support expansion in economic productivity.
“That’s an accomplishment of the PBBM administration. In a sea of downgrades, the international rating agencies continue to affirm their confidence in the Philippine economy’s macroeconomic fundamentals. We continue to pursue the Road to A under President Marcos, Jr.’s administration,” Diokno said.
The government said it would continue to implement the necessary policies and measures to help ensure that the country’s economic growth would be stronger than S&P’s moderate growth forecasts as it aims to achieve the MTFF economic growth target of 6.5 percent to 8.0 percent from 2024 to 2028.
S&P recognized the government’s efforts to prioritize infrastructure development and fiscal measures and cited crucial reforms such as the public-private partnership (PPP) framework and the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.
“The Philippine government has generally enacted effective and prudent fiscal policies over the past decade. Improvements to the quality of expenditure, manageable fiscal deficits, and low general government indebtedness testify to this. This track record of sustainable public finances helped the government accumulate fiscal resources to respond to the pandemic,” S&P said.
S&P underscored the importance of tax reforms in ensuring that public finances remain sustainable, while infrastructure and social needs are addressed.
It said the government so far achieved moderate success with its Comprehensive Tax Reform Program.
Meanwhile, the stable outlook stems from S&P’s expectation of sustained economic recovery and declining fiscal deficits over the next two years.
S&P said the strong economic recovery over the past two years would help lower the general government deficit to 3.8 percent of GDP in 2023 from 4.4 percent in 2022.
Under the MTFF, the government aims to reduce the national government deficit-to-GDP ratio to 3.0 percent by 2028.