Finance and central bank officials welcomed the credit ratings affirmation of the Philippines by Fitch, saying on Wednesday the rating action is a clear vote of confidence in the country as the rest of the world wrestles with uncertainty.
Fitch Ratings the night before issued its affirmation of the Philippines’ BBB rating, pointing to the stable outlook and the economy’s medium-term growth.
In a reaction statement issued the following day, Finance Secretary Ralph G. Recto said the agency’s recent action is a “powerful vote of confidence in the Philippines as a bright spot in a world clouded by global uncertainties.”
“It underscores the strength of our economic fundamentals, the credibility of our ongoing reforms, and our resilience in navigating global headwinds — all while maintaining robust growth,” Recto said in an emailed statement on Wednesday.
“Rest assured, we are ready to respond to these risks with agility and resolve — through forward-looking reforms and strategic investments in innovation and human capital,” the cabinet official said.
Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona also issued a swift positive response, citing the central bank’s efforts to keep inflation at bay.
“The Bangko Sentral ng Pilipinas took actions to help keep inflation manageable and promote sustainable economic growth. The BSP will continue to do so,” Remolona said in a separate statement.
Fitch Ratings, a subsidiary of Fitch Group, which is a holding company owned by Hearst Communications, explained its rating action on the Philippines, citing as one factor the gradual decline in government debt in relation to the country’s gross domestic product (GDP).
“The BBB rating and stable outlook reflect the Philippines’ strong medium-term growth, which supports a gradual reduction in government debt to GDP, and the large size of the economy relative to BBB peers,” Fitch said in its ratings statement.
Credible inflation framework
Fitch said it views the BSP inflation targeting framework as credible, noting that inflation will remain at about 2 percent in 2025 and 2026.
The cited rate is at the low end of the government’s target range of 2 to 4 percent.
“We expect consumer price inflation to remain around 2.0 percent in 2025-2026, at the lower bound of the central bank’s target range,” Fitch said.
Fitch assumes the central bank will cut policy rates by 50 basis points (bsp) after cutting it by 25 bps to 5.5 percent in early April.
Last month’s rate cut by the BSP brought the cumulative easing to 100 bps since August 2024, after the central bank increased policy rates by 450 bps in 2022 to 2023.
Confidence in managing inflation
John Paolo Rivera, senior research fellow at the Philippine Institute of Development Studies, agrees the rating decision “is a vote of confidence in the country’s ability to manage inflation, maintain fiscal discipline, and preserve macroeconomic stability despite global headwinds.”
BBB-rated entities indicate that there are currently expectations of low credit risk and that the entity’s capacity for payment of financial commitments is considered adequate.
Rivera said sustaining this rating “will require continued reforms to boost revenue, manage debt prudently, and ensure inclusive economic growth amid external risks like trade tensions and financial volatility.”
Growth forecast
Fitch Ratings expects the Philippine economy to expand by 5.6 percent in 2025, driven by infrastructure spending, services exports, and remittance-backed private consumption.
Medium-term growth is projected at 6.0 percent.
In response, Recto said: “We remain committed to sustaining this trajectory through sound fiscal management and an open, investment-friendly environment that invites and welcomes partners from around the globe.”
Fitch said global trade tensions could put a drag on growth, in particular indirectly through weaker global demand.
The rating agency stressed that the Philippines has limited direct exposure to trade tensions currently being experienced by most countries at the moment.
It explained that if the reciprocal tariffs announced by the US in April go into effect, the relatively low tariff rate of 17 percent applicable to the Philippines could be an advantage compared with regional peers.
Continued reforms
Sustaining Fitch’s investment grade rating dictates that reforms must keep on coming, Carlo Asuncion, chief economist at Union Bank of the Philippines, said.
“Meeting fiscal targets via revenues and expenditures should be a priority,” Asuncion added.
It is somewhat expected that the major pillars of the country’s credit ratings continue to deliver, Michael Ricafort, RCBC chief economist, said.
“NG’s (national government) debt-to-GDP ratio is slightly above the international threshold of 60 percent. This is the most credible scorecard of the country used by foreign investors and creditors before investing in the country,” Ricafort said.
The latest action by Fitch also means lower borrowing cost and better terms for the Philippines as having been a notch above the lowest investment grade rating, he said.
An investment-grade rating signals low credit risk and affordable access to funding that the Philippines can allocate to socially beneficial initiatives and programs, Ricafort stressed.
