S&P lowers PH outlook from ‘positive’ to ‘stable’

Credit watcher S&P Global Ratings has lowered its outlook for the Philippines from “positive" to “stable," indicating waning chances of a rating upgrade due to the war in the Middle East and its impact on global oil prices.

In a dispatch released Thursday, S&P affirmed the country’s “BBB+” investment-grade rating while it downgraded its outlook to stable, implying that the rating is unlikely to change over the intermediate term or the next six months to two years.

“We revised the rating outlook on the Philippines to stable from positive because the way in the Middle East has increased risks for the trajectory of the country’s external and fiscal metrics,” S&P said.

The S&P base case assumes that the conflict will peak and the closure of the Strait of Hormuz, which carries around a fifth of the world’s oil, will ease in April, but disruptions are projected to continue for months.

“We believe it is unlikely that the external and fiscal support will improve sufficiently over the next two to three years to meaningfully augment support for the sovereign ratings,” it said.

S&P upgraded its outlook on the Philippines to “positive” in November 2024, citing “effective policymaking." It had also said it could raise the sovereign credit rating if the current account deficit were tapered moving forward.

In the same dispatch, S&P said it expects Philippine economic growth to average 5.8% this year, after a 4.4% expansion in 2025. Should this be realized, this would be in line with the downgraded target range of 5.5% to 6.5% for 2026.

“We believe the impact of the ongoing energy shocks due to the Middle East war and governance-related issues would wane by the second half of the year. Reforms in policies affecting business, investment, and tax will benefit growth over the next three to four years,” S&P said.

“Despite heightened political and economic pressures, we believe the Philippine government will continue to adhere to its established medium-term fiscal framework that has delivered constructive development outcomes,” it added.

The Bangko Sentral ng Pilipinas (BSP) said it would stay vigilant in managing risks amid the outlook downgrade.

“The BSP will continue to monitor local and overseas data to effect policies aimed at safeguarding price and financial stability amid a challenging economic and geopolitical landscape,” BSP Governor Eli Remolona Jr. said in a statement. —VBL, GMA News