United States – S&P Global Ratings, on Wednesday, reaffirmed the Philippines’ ‘BBB+’ long-term and ‘A-2’ short-term sovereign credit ratings. This decision reflects the nation’s ongoing economic recovery, driven by the government’s efforts to bridge infrastructure gaps and enhance the business environment.

According to Philippines News Agency, the stable outlook for the Philippines is based on expectations of healthy growth rates and significant improvement in fiscal performance over the next two years. The country’s GDP is projected to grow by 5.4 percent in 2023, influenced by a high base effect and the slower growth of the global economy. Economic growth is expected to accelerate further to 5.9 percent in 2024, 6.2 percent in 2025, and 6.4 percent in 2026.

S&P Global highlighted the Philippine government’s ongoing initiatives to address infrastructure deficiencies and improvements in the business climate through regulatory and tax reforms. These efforts are anticipated to support expansion in economic productivity, keeping the country’s growth well above the average of its peers.

The report also recognized the government’s prioritization of infrastructure development and fiscal measures. Significant reforms like the public-private partnership (PPP) framework and the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act were noted as crucial to these efforts. S&P Global praised the Philippine government’s track record of effective and prudent fiscal policies over the past decade, which has contributed to sustainable public finances and the ability to respond to the pandemic.

Tax reforms were underscored as key to maintaining sustainable public finances while addressing infrastructure and social needs. The general government (GG) deficit is expected to decline to 3.8 percent of GDP in 2023, from 4.4 percent in 2022. S&P Global anticipates a continued narrowing of the fiscal shortfall as the economy recovers and stimulus measures are scaled back, guided by the Medium-Term Fiscal Framework (MTFF) introduced by the Marcos administration.

The report also pointed out the country’s strong household and corporate balance sheets and significant remittance inflows, predicting stable foreign direct investments for the year.

However, S&P Global cautioned that a downgrade could occur if economic recovery falters, or if specific fiscal metrics are not met. Conversely, the ratings could be raised if the economy recovers faster than expected, or if there is a significant improvement in institutional settings leading to enhanced credit metrics.

Finance Secretary Benjamin Diokno, in a separate statement, reaffirmed the administration’s commitment to fiscal consolidation and structural reforms to strengthen the country’s fiscal and economic position. He emphasized the international community’s continued confidence in the Philippine economy’s fundamentals and the government’s pursuit of the “Road to A” under President Marcos Jr.’s administration.