S&P Global Ratings said it sees the possibility of raising the Philippines’ investment grade credit rating within the next year or two, despite the uncertainty created by the tariff policies overseas.
While global growth is expected to go through a significant slowdown, Rain Yin, director in the Soverein and International Public Finance Ratings group of S&P Global Ratings in Asia, sees the Philippines being less affected than other countries in the region.
“With the current positive outlook, we are expecting that the constructive trends that we are seeing in the Philippines, namely its strong growth trajectory, narrowing current account deficits and fiscal consolidation, will enable us to raise the rating in the next one or two years,” Yin said during a webinar on Tuesday.
“However, if downside risks are very significant and derail our expectations on those constructive trends, then the outlook can possibly go unstable,” she added.
In November 2024, S&P raised its outlook for the Philippines to positive, which indicates a possible upgrade, or “in our case, to an ‘A–’ rating, within 24 months.”
A higher rating helps lower a country’s borrowing costs and makes it more attractive to investors. This also allows businesses to borrow at lower rates, helping fund expansion and job creation.
“What will it take to remove the positive outlook? It really comes down to a judgement of the size of the negative tariff impact on growth, fiscal, debt and external positions,” Yin said.
Yin pointed out the Philippines has one of the lower initial reciprocal tariff rates of 17 percent, and does not have a very large bilateral trade surplus with the US, as a substantial portion of the country’s exports are in services.
“Nevertheless, growth is still likely to be affected, and we have penciled in a decline of 0.3 percentage points compared to the pre-tariff forecast for this year,” Yin said.
In its May 1 Economics Research report, S&P Global Ratings estimates that the Philippine economy will grow by 5.7 percent this year, with the projection falling below the government’s full-year growth assumption of 6 percent to 8 percent.
“On Nov. 26, 2024, S&P Global Ratings revised its outlook on the Philippines to positive from stable. At the same time, we affirmed our ‘BBB+’ long-term and ‘A-2’ short-term sovereign credit ratings on the Philippines,” S&P said in a statement.
