The Philippines is edging closer to an A credit rating after recent upgrades from three international debt watchers.
“I have always been confident that we can achieve an ‘A’ rating for all credit rating agencies and now, with this latest upgrade from S&P, we are getting closer to achieving this dream,” Department of Budget and Management (DBM) Secretary Amenah Pangandaman said.
S&P affirmed the Philippines’ “BBB+” long-term and “A-2” short-term sovereign credit ratings, with the transfer and convertibility assessment remaining at “A-.”
In August 2024, Pangandaman called for a whole-of-government approach to achieving an “A” credit rating following Moody’s rating of “Baa2” with a stable outlook and Japan’s Rating and Investment Information Inc. (R&I) upgrade to “A-” with a stable outlook.
The S&P report cited the “country’s solid economic outlook anchored by the government’s infrastructure drive and pro-business policies.”
For this year, infrastructure spending reached P1.143 trillion from January to September, increasing by 11.9 percent from the P1.021 trillion outturn in the same period last year. This is expected to contribute to reaching the 6 percent to 7 percent growth target for 2024.
Pangandaman also reiterated the DBM’s commitment to implementing structural reforms, which would enable agencies to accelerate the utilization of their respective budget allocations and ultimately boost economic growth.
Finance Secretary Ralph Recto said the major benefit of having a high credit rating is wider access to cheaper and more cost-effective borrowing costs for the government and the private sector.
“It reaffirms our stable economic and political environment and that we are on track to achieve a growth-enhancing fiscal consolidation. We have a comprehensive Road to A initiative to ensure that we secure more upgrades soon,” Recto said.
The latest credit rating development allowed the Philippines to maintain its high investment-grade status across all major regional and international debt rating agencies.
According to S&P, improved institutional assessment drives its positive outlook on the Philippines.
“We believe the strengthening of the country’s institutional settings, which had contributed to a significant enhancement in the sovereign’s credit metrics over the past decade, will continue. This is demonstrated by the strong economic recovery in the last two years, and ongoing reforms to support business and investing conditions,” S&P said.
S&P highlighted that the Philippines enjoys a solid economic outlook anchored by the government’s infrastructure drive, pro-business policies, and its well-established Medium-Term Fiscal Framework.
It expects the Philippines’ economic growth to remain strong in 2024 at 5.5 percent and continue to grow at a high rate of 6.2 percent a year over the next three years, supported by private consumption and improving external demand.
While global economic growth is expected to be slower due to external uncertainties, S&P believes that the Philippine economy would expand well above the average of its peers as the country has a diversified economy, supportive policy dynamics, and an improving investment climate.
S&P cited that the recently-enacted Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act, coupled with new reforms introduced such as the Public-Private Partnership (PPP) Code, should support stronger foreign direct investment inflows into the Philippines over the next two to three years.
“Other reforms include laws that now permit foreign investors to invest more in business sectors such as telecommunications, power generation, and transportation. Certain renewable energy sectors such as solar and wind allow 100 percent foreign ownership,” S&P said.
The country’s solid household and corporate balance sheets as well as sizable remittance inflows also underpin its positive medium-term trajectory.
S&P also noted the Philippines’ improving fiscal performance due to effective and prudent fiscal policies.
“The Marcos administration, elected in 2022, has demonstrated a commitment to the well-established medium-term fiscal framework that has delivered constructive development outcomes,” it said.
The government’s refined Medium-Term Fiscal Program ensures that the country will reduce its deficit and debt gradually in a realistic manner while creating more jobs, increasing people’s incomes, and decreasing poverty in the process.
The rating agency underscored that the country’s fiscal deficit remains manageable and that normalization of economic growth will help to lower the general government deficit to 4 percent of GDP in 2024 from 4.5 percent in 2023, and average around 3.3 percent of GDP over the next three years.
It said the Philippines’ debt remains stable, with its general government debt ratio continuing to be relatively lower compared to its peers. The ratio is expected to fall to 40.6 percent by 2027 from 41.7 percent in 2023 as fiscal consolidation takes hold.
It also spotlighted the Philippines’ improvements in the quality of expenditure, which further solidified its economic profile.
In 2025, about 33.4 percent of the government’s proposed national budget of P6.35 trillion is allotted to social services to fund education, health and employment sectors. Economic services, which include the Build, Better, More infrastructure program, will receive about 29.2 percent of the total budget.
