Philippines among Asia’s stronger ‘BBB’ performers - Fitch

Upgrade to High-Speed Internet for only ₱1499/month!

Enjoy up to 100 Mbps fiber broadband, perfect for browsing, streaming, and gaming.

Visit Suniway.ph to learn

February 16, 2026 | 12:00am

MANILA, Philippines — The Philippines remains one of the stronger performers among Asia’s large ‘BBB’-rated sovereigns, supported by solid medium-term growth prospects and resilient external buffers, even as limited fiscal space and governance challenges continue to weigh on its credit profile.

In a report from Fitch Ratings, the debt watcher expects the Philippine economy to grow by 5.7 percent in 2026, making it the second fastest-growing among the five Asian ‘BBB’ sovereigns after India.

Fitch Ratings noted that the country is likely to remain among the strongest global performers in the coming years as low per capita income gradually converges with the ‘BBB’ median.

However, it flagged downside risks to the gross domestic product (GDP) outlook from lower government spending linked to a corruption scandal.

“We add one notch to the Philippines’ Sovereign Rating Model score for strong and sustained levels of projected GDP growth over the medium term, as this is combined with a sound policy framework,” Fitch said, adding that the policy framework is stronger than what is implied by the country’s relatively low governance scores.

Fitch’s comparison covered India, which is projected to grow by 6.4 percent this year, as well as Indonesia (4.8 percent), Malaysia (four percent) and Thailand (1.9 percent).

While all five are expected to feel the impact of a global growth slowdown in 2026, the agency said Asian ‘BBB’ sovereigns would still post growth rates well above the category median of 2.4 percent.

For the Philippines, growth is being underpinned by public infrastructure spending, which Fitch estimated at about 4.3 percent of GDP, one of the highest in the group. The report noted that infrastructure development plays an important role in the country’s growth strategy, alongside reforms aimed at improving the business environment and opening more sectors to foreign investment.

On the external side, Fitch said the Philippines continues to benefit from strong buffers, with foreign-exchange reserve coverage expected to remain ample. Large goods trade deficits are partly offset by services exports and remittances, which remain a key support for the balance of payments.

Fitch also pointed out that goods exports accounted for only about 12 percent of GDP in 2024, limiting near-term exposure to shifts in global trade patterns. Still, more than 16 percent of Philippine goods exports go to the United States, mainly electronics and machinery, leaving the country exposed to potential tariff-related risks.

Inflation conditions remain benign. Fitch said moderate inflation and weaker domestic demand could allow the Bangko Sentral ng Pilipinas to cut policy rates by 25 basis points, in line with expected easing across several Asian ‘BBB’ peers.

Meanwhile, Fitch highlighted that the Philippines’ government debt ratio is projected at about 55.4 percent of GDP, close to the ‘BBB’ median but up by around 21 percentage points since 2019.

Although Fitch noted that the Philippines stands out for having raised its revenue-to-GDP ratio by about three percentage points since 2016, unlike most peers in the group.

Governance remains a key constraint. Fitch said the Philippines has the weakest World Bank governance scores among the five sovereigns, particularly on control of corruption and political stability. It added that social unrest and protests over governance standards in 2025 added to spending pressures and policy challenges.

Despite these weaknesses, Fitch said strong medium-term growth and external buffers continue to underpin the Philippines’ investment-grade rating.

Sustained high growth would help gradually reduce the debt burden, although the agency warned that a material decline in foreign-exchange reserves or wider and more persistent current account deficits could pose risks to the credit profile.