Moody's affirms PH 'Baa2' rating, stable outlook

Global credit watcher Moody's Ratings has affirmed its long-term local and foreign-currency issuer and senior unsecured ratings on the Philippines at "Baa2" with a stable outlook, citing expected stabilization in the country's fiscal metrics over the next two years.

The rating, one notch above the minimum investment grade, indicates that obligations are subject to moderate credit risk and are considered medium-grade, as such may possess speculative characteristics.

The stable outlook, meanwhile, indicates a low likelihood of a credit rating change over the medium term.

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"The ratings affirmation reflects our expectation that stabilization in the Philippines' fiscal metrics over the next two years will be supported by a gradual recovery in economic growth from the current cyclical slowdown and the government's continued commitment to fiscal consolidation," Moody's said.

"The government has strong access to domestic and international funding markets and sufficient foreign-currency reserves to weather global capital flow volatility," it added.

The Philippines' gross international reserves (GIR)—a measure of the ability to settle import payments and service foreign debt—stood at $103.378 billion in July, down from $104.744 billion in June, and $105.418 billion in July 2025.

"Near-term growth has slowed significantly, weighed down by higher food and energy costs following the conflict in the Middle East and a still-gradual recovery in public investment in the wake of the flood-control probe, and the still-cautious business sentiment amid elevated prices and lingering uncertainty, which have constrained private investment," Moody's flagged.

"Nonetheless, the Philippines' medium-term growth potential and underlying credit fundamentals remain broadly supportive of the rating, even as the recovery in confidence may take time," it added.

The economy grew by 2.3% in the second quarter of 2026, the weakest showing since the fourth quarter of 2009, excluding the contraction seen during the COVID-19 pandemic years. Officials have attributed this to the impact of the flood control corruption scandal on public spending, along with the Middle East war on consumer prices.

For its part, the Bangko Sentral ng Pilipinas (BSP) welcomed the latest decision, noting that this recognizes the economy's ability to withstand global economic headwinds.

"On the part of the BSP, we will continue working to bring inflation back close to target, safeguard the soundness of the country's banking system, promote a safe and efficient payments and settlements system, and prudently manage the country's international reserves," it said in a statement.

"These efforts help preserve macroeconomic and financial stability, which supports sustainable and inclusive growth," it added.

Inflation clocked in at 6.2% in July, slower than the 6.4% in June, but still above the BSP's target range of 2.0% to 4.0%.

"We welcome the stable outlook credit-rating affirmation, even as the world deals with real headwinds. Moody's assessment confirms our strong macroeconomic fundamentals, and that the reforms we've put in place are working." Finance Secretary Frederick Go said in a separate statement. — VDV, GMA News