By Katherine K. Chan, Reporter
THE PHILIPPINES is among the many countries most vulnerable to climate-related credit risks as extreme weather imperils the country’s economic and fiscal stability, Fitch Rankings said.
“We expect physical climate risks to have an adversarial (effect) on the Philippines economy and public funds through various channels,” Edward Parker, Fitch Rankings managing director and global head of research, sovereigns and supranationals, told BusinessWorld in an e-mail.
“Unfortunately, more frequent and severe storms and flooding will cause lack of life, and damage to homes, infrastructure and business that can cause disruption to economic activity, associated lack of tax revenues and rebuilding costs,” he added.
In a recent report, Fitch determined that the Philippines faces one in every of the best physical risk pressures on credit by 2050.
“Fitch Rankings believes the Philippines is one in every of the sovereigns most exposed to physical climate risks, based on an array of information and climate projections that feed into our Climate Vulnerability Signals,” Mr. Parker said. “It is especially exposed to more frequent and severe storms and floods, and to a lesser extent to sea level rise.”
“We don’t view it as particularly exposed to transition risks,” he added.
Within the Climate Vulnerability Signals (Climate.VS) report, Fitch analyzed sovereign credit profiles’ potential exposure to climate-related risks from 2030 to 2050 by scoring them on a scale of 0 to 100, based on each physical and transition risks.
Out of the 119 countries analyzed, 60 countries, including the Philippines, were vulnerable to a credit standing downgrade on account of issues arising from climate concerns.
Physical risks include heatwaves and wildfires, droughts, storms, floods and landslides, and an increase in sea levels.
Meanwhile, transition risks pertain to fossil fuel dependence or the exposure of major fossil fuel producers to a projected decline in global demand for fossil fuels in addition to green energy costs or the price of de-carbonization.
Based on the debt watcher’s Climate.VS, the Philippines scored 55 out of 100 when it comes to overall physical risk (VSp).
A VSp of fifty means Fitch Rankings could bring the country’s credit standing one notch lower.
Fitch Rankings last affirmed its “BBB” long-term foreign currency issuer default rating and “stable” outlook for the Philippines in April last yr.
A “stable” outlook means the Philippines will likely maintain its rating in the subsequent 18 to 24 months.
The Philippines normally encounters about 20 storms yearly due its proximity to the Pacific Ocean, based on the state weather bureau Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA).
In 2025, 23 typhoons hit the country, affecting thousands and thousands of Filipinos and leaving billions of pesos price of injury nationwide.
Fitch’s Mr. Parker said such climate risks could disrupt the local agriculture sector, potentially causing food prices and overall inflation to spike.
“Public expenditure geared toward mitigating among the effects could also add to budget deficits, other things equal,” he added.
Considering this, the country should spend money on flood control and disaster preparedness initiatives to make sure the economy has adequate buffers against climate-related risks, Mr. Parker noted.
“Investment in infrastructure reminiscent of sea and flood defenses in critical areas and in disaster preparedness capability might help countries to mitigate among the impact of physical climate risks,” he said. “They also can help to adapt to physical risks through careful consideration of planning, development and land use.”
Last yr, extensive flooding revealed substandard or nonexistent flood control projects across the country. These practices were later linked to Public Works officials, lawmakers and contractors who allegedly received kickbacks from the federal government’s infrastructure program.
Fitch Rankings earlier told this paper that the graft scandal also risks the Philippines’ credit standing on account of its impact on political stability, fiscal policy implementation, in addition to business and consumer confidence.
PAGASA expects 4 to 11 tropical cyclones to hit the country until July this yr, with zero to 1 storm monthly until April and one to 2 each in May and June.