Fitch: Philippines A-rating bid at risk from oil shock, growth slowdown

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March 20, 2026 | 12:00am

 MANILA, Philippines —  The Philippines’ path toward an “A” credit rating may face renewed headwinds as external shocks and lingering domestic issues weigh on growth, according to Fitch Ratings.

Jeremy Zook, senior director for APAC sovereign ratings at Fitch Ratings, said the Philippines’ economic recovery remains intact but is increasingly vulnerable to risks stemming from the Middle East conflict, particularly due to higher oil prices and their spillover effects.

“Our rating model gives the Philippines an outcome of BB+, and we raise the rating two levels to BBB as a result of the things tied to the Philippines’ strong medium-term growth outlook,” he said.

“But anything that really undermines our view on that medium-term growth outlook would really be the key factor that would lead to some negative rating pressures,” he said. 

As a large net energy importer, Fitch said higher energy costs in the Philippines could ripple through inflation, external balances and overall growth.

Zook said that a scenario where oil prices average $100 per barrel this year “could lead to some pretty significant pressures on the current account deficit,” which is currently at -3.3 percent of gross domestic product (GDP).  As of yesterday, the price of WTI or West Texas Intermediate crude oil stood at $96.43 per barrel.

“The follow-on impacts on inflation and then economic growth could also be quite significant if we do see a prolonged period of high oil prices,” he said, recalling that inflation rose sharply and growth weakened during the 2022 energy shock.

The risks come as the Philippine economy is still recovering from last year’s slowdown. “The Philippine economy has already been weakened by the corruption scandal that we saw last year and the subsequent slowdown in public capex disbursement,” Zook said. 

The country’s GDP grew by just three percent in the fourth quarter of 2025, the weakest pace since 2011, excluding the pandemic period, bringing full-year expansion to 4.4 percent.

While Fitch still expects the Philippine economy to recover in 2026, driven by a pickup in government spending, Zook said the pace may be slower than previously anticipated. “We do still see some recovery in the economy, but perhaps more gradual than we would anticipate at the moment,” he said.

He added that while the current slowdown is seen as temporary, further shocks could complicate the picture. 

“If these growth challenges become more ingrained and more structural in nature, then that would really be where the potential rating challenges and rating risks come from,” he said.

On the fiscal front, higher oil prices may also delay the government’s consolidation efforts. Zook said the shock could result in “a slower pace of consolidation going forward and certainly a higher fiscal deficit this year,” partly due to subsidy measures already being rolled out.

He noted that government debt levels remain elevated following pandemic-era spending, with efforts to reduce debt ratios “pushed out into the future.”

“These shocks just kind of add to that pressure on the fiscal side,” Zook said, warning that combined risks to growth and fiscal performance could pose challenges to the Philippines’ credit rating trajectory.