S&P upgrades Philippines outlook to positive

The rating agency says effective policymaking has delivered structural improvements to credit metrics.

The Philippines.- S&P Global Ratings has upgraded its outlook on the Philippines from stable to positive. It also affirmed BBB+/A-2 sovereign credit ratings citing effective policymaking that has delivered structural improvements to credit metrics.

Analysts said fiscal reforms had raised government revenue as a share of gross domestic product (GDP) and helped to fund public investment. “Improved infrastructure and policy environment have helped to keep economic growth strong in much of the past decade,” they said.

S&P said the Philippines’ economic growth remained strong in 2024 following expansion last year. The economy grew by 6.1 per cent year-on-year during the first half driven by recovery in government expenditure. The pace of the growth slowed in the third quarter to 5.2 per cent due to a 2.8 per cent contraction in the agriculture sector owing to severe typhoons.

S&P forecast that the Philippine economy will grow at a rate of 6.2 per cent a year over the next three years, supported by private consumption and improving external demand. it sees GDP per capita rising to US$4,119 in 2024 and US$4,478 in 2025.

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Inflation has decreased compared to 2023, averaging 3.4 per cent year-on-year during the first nine months, down from 6 per cent.  “The government’s lowering of import tariffs on rice to 15 per cent from 35 per cent in July this year was instrumental to containing the increase in rice prices,” the agency stated.

Analysts highlighted new laws to bolster public-private partnerships and improve tax incentives for businesses. These initiatives are anticipated to foster economic growth and draw foreign direct investment. S&P also highlighted that gross foreign reserves hit a record US$111bn, offering a cushion against economic volatility. The country has also experienced steady remittance inflows and stable foreign direct investment.

Philippine banks benefitted from deposit funding, with high liquidity and limited linkages to global markets. Strengthened oversight of the financial sector by Bangko Sentral ng Pilipinas, combined with modest growth in private-sector debt and real estate prices, has contributed to improved system stability, S&P said.

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