S&P affirms PH credit ratings, flags flood control drag on GDP growth

S&P Global Ratings on Thursday affirmed the Philippines’ investment grade credit with a positive outlook as it expects the country to maintain its external strength and healthy fiscal performance, even as it sees economic growth to post a significant decline this year to 4.8%.

In an advisory, S&P affirmed its “BBB+” long-term and “A-2” short-term sovereign credit rating on the Philippines, with a positive outlook.

The "BBB" rating means the country has adequate capacity to meet its financial commitments, but adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to meet its financial commitments.

Meanwhile, the "A-2" credit rating indicates that the country has a "satisfactory" capacity to meet its financial commitments, but "somewhat susceptible" to the adverse effects of changes in circumstances and economic conditions.

The positive outlook, meanwhile, reflects S&P’s view that the Philippines will maintain its external strength and healthy fiscal performance will strengthen over the next 12 to 24 months.

According to S&P, it now expects economic growth to slow down to 4.8% this year, lower than the 6.3% average in the past the years, and below the economic managers’ economic growth target of 5.5% to 6.5%.

“An ongoing probe into flood control projects has halted some infrastructure works in the Philippines. The resultant slowdown in public capital expenditure will dent GDP growth this year. However, we believe this will not derail the country's long-term growth trajectory, which remains healthy,” S&P Global said.

For his part, Bangko Sentral ng Pilipinas (BSP) governor Eli Remolona Jr. welcomed the ratings affirmation.

“S&P’s rating decision confirms our view of the favorable long-term economic growth prospects,” he said in a separate statement.

Chambers of Congress are currently looking into alleged irregularities in public works spending, after President Ferdinand “Bongbong” Marcos Jr. in August disclosed that 20% of the total P545-billion budget for flood control projects went to only 15 contractors, which he described as a “disturbing assessment.”

The administration has also established the Independent Commission for Infrastructure (ICI), in response to public calls for greater transparency and accountability in infrastructure spending. It is tasked to conduct an in-depth investigation into the alleged irregularities and misuse of funds in flood control, and other infrastructure projects. — RSJ, GMA Integrated News