Credit rating agency S&P Global Ratings yesterday affirmed its investment-grade rating of “BBB+” long-term and “A-2” short-term on the Philippines with the outlook remaining stable.
Despite the pandemic and the economic lockdowns that went with it, the Philippines remains among a few of the countries around the world that were able to maintain its investment-grade rating.
Aside from S&P, Moody’s credit rating for the Philippines was also affirmed at Baa2 with stable outlook, while Fitch’s credit rating was last reported at BBB with stable outlook.
Tokyo-based Rating and Investment Information also maintained its rating of BBB+ with positive outlook.
Japan Credit Rating Agency (JCR) upgraded the Philippines’ credit rating by a notch from BBB+ to A- in 2020, citing the country’s resilience.
In a statement, S&P Global said the stable outlook “reflects our expectation that the Philippine economy will maintain healthy growth rates and the fiscal performance will materially improve over the next 24 months.”
“The ratings on the Philippines reflect the country’s above-average economic growth potential, which should drive constructive development outcomes and underpin broader credit metrics,” S&P Global said.
It added the ratings benefit from the Philippines’ strong external settings but warned that “the Philippines’ low GDP (gross domestic product) per capita relative to other investment-grade sovereigns and evolving institutional settings temper these strengths.”
“The government’s fiscal and debt settings have deteriorated due to the economic fallout from the pandemic and the associated extraordinary policy responses. Fiscal buffers built through a long record of prudence before the pandemic have thinned, but we expect a consolidation as the economy recovers,” S&P Global said.
S&P projects the Philippines will achieve a real GDP growth of 5.4 percent in 2023, considering the impact of external macroeconomic developments and a high base.
It noted there are “near-term risks to growth, but economic outlook remains solid for the longer term.”
“The Philippines’ economic growth has been robust in 2023 following a strong recovery last year. The pace of the growth will, however, dip as inflationary pressures and sluggish macroeconomic global conditions persist. This is reflected in data for the first three quarters of 2023, during which the economy grew by an average of 5.5 percent year-on-year compared with an average growth of 7.7 percent during the first three quarters of 2022,” it said.
Inflation, according to S&P, has shown signs of easing in recent months, decelerating to 4.9 percent in October 2023 from 5.8 percent in 2022.
Slower growth of the world economy, including that of China and the United States, the Philippines’ biggest trading partners, is also projected to drag down the economy.
“Nonetheless, economic growth in the Philippines should be well above the average for peers at a similar level of development, on a 10-year weighted average per capita basis.
The country has a diversified economy with a strong record of high and stable growth. This reflects supportive policy dynamics and an improving investment climate,” S&P said.
GDP per capita could rise to about $3,903 in 2023 and $4,273 in 2024, the agency noted, with real GDP per capita growth averaging about 4.4 percent per year over 2023-2026.
