(April 20): Fitch Ratings revised its outlook on the Philippines’ credit rating to negative from stable, saying the decline in public investment has created risks to economic growth.
The outlook change reflects “rising risks to the Philippines’ strong medium-term growth prospects from recent disruptions to public investment,” Fitch said in a report on Monday. These challenges are “exacerbated in the near-term by elevated exposure to the ongoing global energy shock.”
Fitch affirmed the Philippines’ long-term foreign currency debt rating at an investment grade BBB.
The Philippine economy grew at its weakest pace in 14 years outside of the pandemic in the wake of a massive corruption scandal involving flood-control infrastructure. Revelations last July that billions of dollars in public funds had been misused have dented business and consumer sentiment, while the wide-ranging probe stalled the rollout of government projects.
The war in Iran dimmed chances of a rebound as domestic fuel prices surged, forcing the government to declare a national energy emergency as the conflict threatened its economy and fuel supplies. The government has also provided cash aid and other subsidies, while the central bank has warned that average inflation this year may shoot up above its 2%-4% target range.
“Investment, in level terms, since 2021 has run below its pre-pandemic trend and is under further pressure amid the recent pullback in public investment. This adds headwinds to our just over 6% medium-term growth assumption,” Fitch said. The Philippines’ gross domestic product is forecast to grow by 4.6% this year with public spending recovering only gradually and higher energy costs weighing on household consumption, Fitch said. GDP expansion slowed to 4.4% last year from 5.7% in 2024.
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According to the rating agency, the issues could narrow the outperformance of Philippine economic growth relative to peers, amid higher post-pandemic government debt and a gradual deterioration in its external finance position.
The rating affirmation reflects Fitch’s baseline view that despite rising risks, the nation’s medium-term growth will remain robust, supporting a gradual reduction in government debt.
Moody’s Ratings rates the Philippines’ long-term foreign debt at Baa2 with a stable outlook, while S&P Global Ratings has the country at BBB+ with a stable outlook.
Uploaded by Magessan Varatharaja
