By Katherine K. Chan, Reporter
S&P GLOBAL RATINGS revised the Philippines’ credit outlook to “stable” from “positive,” citing risks to the country’s external and financial position from surging energy prices on account of the Middle East conflict and a slowdown in infrastructure spending.
“We revised the rating outlook on the Philippines to stable from positive since the war within the Middle East has increased risks for the trajectory of the country’s external and financial metrics,” the rating agency said in a report by analysts YeeFarn Phua and Andrew Wood released late on Wednesday.
A stable outlook means the Philippines’ credit standing will likely be maintained over the following two years, reflecting expectations that the country will “maintain healthy economic growth rates that may allow fiscal performance to enhance regularly while external metrics deteriorate barely.”
S&P noted that “elevated energy prices will widen the Philippines’ current account deficit this 12 months, reducing cushion on its net external asset position.” Global oil prices have risen to over $100 per barrel following the Middle East conflict, up from about $60-70 per barrel earlier this 12 months, increasing import costs for energy-dependent economies comparable to the Philippines.
The present account deficit is projected to widen to 4% of gross domestic product (GDP) in 2026, as higher energy import costs offset reduced capital goods imports following the suspension of some infrastructure projects.
The energy shock has also bucked the country’s easing inflation trend.
After inflation cooled to 1.7% in 2025, S&P said the “trend has bucked for the reason that outbreak of the Iran war led to a surge in oil prices,” with inflation projected to rise to three.4% in 2026. Inflation averaged 2.8% in the primary quarter, as back-to-back oil price hikes pushed March inflation to a near two-year high of 4.1%, the primary time since July 2024 that it breached the central bank’s 2%-4% goal.
On the domestic front, the credit watcher said the “investigations into flood control projects that commenced in August 2025 have severely hit the Philippines’ growth momentum,” resulting in a “temporary reduction in public infrastructure spending.”
This contributed to GDP growth slowing to 4.4% in 2025, though S&P expects a rebound to five.8% in 2026 as these aspects ease within the second half.
Still, S&P affirmed the country’s “BBB+” long-term investment grade rating, two notches above the minimum investment grade, and its “A-2” short-term rating, citing “above-average economic growth potential,” anchored by a “strong external position.” That is supported by foreign exchange reserves that reached $107.5 billion in March and record-high remittances of $35.6 billion in 2025, the agency said.
Nevertheless, S&P also noted that the “prolonged fiscal consolidation path also warrants” the shift to a stable outlook, pointing to the December 2025 recalibration of deficit targets, which signals a slower path to fiscal recovery over the following 4 years.
The credit watcher said the Middle East conflict is predicted to proceed disrupting global economies in the approaching months, even though it assumes the intensity of the war will peak and disruptions to key oil supply routes comparable to the Strait of Hormuz may ease inside April.
“Nevertheless, uncertainty over how the situation will unfold is high,” it added, noting that external and financial support may not improve sufficiently over the following two to 3 years to supply a meaningful boost to the country’s credit profile.
Consumer spending may weaken within the near term amid higher oil prices.
“The continued energy price shocks that began in March 2026 will further dampen economic activity within the Philippines,” S&P said. “We expect consumer sentiment to be undermined, with decreased growth in household spending.”
Despite these headwinds, S&P said the Bangko Sentral ng Pilipinas (BSP) is probably going to take care of a “neutral stance” on monetary policy for the remaining of the 12 months.
“We imagine the central bank will take a broadly neutral stance on monetary policy for the remaining of the 12 months, given its have to balance inflationary risk with a slowing economy,” it added.
The BSP kept its benchmark rate of interest unchanged at 4.25% in an off-cycle meeting last month following market volatility triggered by the Middle East conflict, marking its first pause since June 2024 after nearly two years of policy easing.
Over the medium term, S&P expects the Philippine economy to stay resilient, projecting GDP growth to average 6.2% from 2027 to 2028 and 6.1% in 2029, driven by strong household consumption, investment recovery, and sustained remittance inflows.
“Solid household and company balance sheets, and sizable remittance inflows underpin the Philippine economy’s positive medium-term trajectory,” it said, adding that ongoing infrastructure development and regulatory reforms should further boost productivity.
Nevertheless, the agency warned that fiscal pressures could persist, particularly if the federal government implements measures comparable to fuel tax cuts which will reduce revenues amid elevated global oil prices.
Last month, President Ferdinand R. Marcos, Jr. signed a law authorizing the Executive branch to temporarily suspend or reduce excise taxes on fuel to cushion the impact of oil price shocks driven by the Middle East conflict.
Nevertheless, Malacañang has yet to announce whether it is going to implement the measure.
“Moreover, if the economic situation worsens, the federal government could possibly be compelled to soak up the next deficit with a supplementary budget to support the economy,” S&P said.
The agency said it could lower the rankings if the country’s long-term growth trend “erodes significantly” or if “persistently large current account deficits” result in a structural weakening of the external balance sheet.
S&P also said it could raise the rankings if the Philippines’ current account deficits “taper over the following two years such that the narrow net external balance maintains a structural net asset position,” and if “the federal government achieves more rapid fiscal consolidation than we currently anticipate.”
“The BSP will proceed to observe local and overseas data to effect policies geared toward safeguarding price and financial stability amid a difficult economic and geopolitical landscape,” BSP Governor Eli M. Remolona, Jr. said in an announcement on Thursday.