S&P Global Ratings reaffirmed the Philippines’ position on its short list of Asia-Pacific sovereigns with improving credit prospects, citing expectations of narrowing fiscal and external deficits over the next two years.
In its latest regional assessment, the ratings agency identified the Philippines as one of only three governments in the Asia-Pacific region carrying a “positive” outlook, alongside Laos and the Cook Islands. The majority of regional peers currently hold “stable” outlooks, suggesting limited rating movement for 2026.
S&P noted that the country’s credit fundamentals are poised to strengthen as shrinking current account and fiscal gaps rebuild sovereign buffers.
“We see the Philippine sovereign credit metrics strengthening over the next one to two years,” S&P said, adding that the accumulation of these buffers could eventually “support a higher rating.”
The agency warned, however, that domestic political developments could temper the pace of these improvements.
Investigations into alleged corruption related to flood-control projects have led to impeachment complaints against the president and the suspension of certain infrastructure works.
Despite these headwinds, S&P expects the macroeconomic fallout to remain contained. “Despite a likely economic slowdown, we still expect the Philippines to remain an outperformer among peers at similar levels of average income,” the report stated.
The agency suggested that while softer economic activity might weaken revenue growth, the impact on the general government deficit would be mitigated by a corresponding moderation in capital spending.
The Philippines’ positive standing comes amid heightened geopolitical risks in the region. S&P highlighted ongoing tensions in the South China Sea, where Filipino and Chinese vessels have had multiple encounters over the past year.
S&P emphasized that for the Philippines to secure a formal upgrade, the government must maintain its path toward fiscal consolidation and external rebalancing while successfully attracting investment amid a global realignment of supply chains.
