Philippines warned over slowing growth

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February 14, 2026 | 12:00am

Moody’s also flags rising debt, climate risks

MANILA, Philippines — Moody’s Ratings flagged slower-than-target economic growth, climate vulnerability and rising debt servicing costs as key challenges facing the Philippines, even as it said fiscal consolidation remains on track and medium-term growth prospects remain resilient.

In completing its periodic review of the country’s sovereign credit profile, Moody’s said the country’s gross domestic product (GDP) growth slowed to 4.4 percent in 2025, well below the government’s 5.5 to 6.5 percent target range, as investment activity stayed subdued amid an ongoing probe on corruption in flood control projects.

The rating agency said export growth has been strong so far, but warned that this momentum is likely to normalize as higher tariff rates and lingering uncertainty over US trade policy weigh on external demand. 

Still, Moody’s expects growth to be supported by “robust household consumption, steady remittance inflows from overseas workers, a recovery in public investment and continued progress on structural reforms” going forward. 

Meanwhile, fiscal consolidation remains on track, although at a more modest pace, with the government aiming to narrow the national government deficit to 4.3 percent of GDP by 2028 from an estimated 5.6 percent in 2025.

The debt watcher said this will be supported by reforms to boost revenue collection and improve spending efficiency, contributing to a gradual moderation in the government’s debt burden, although debt levels will remain above pre-pandemic norms. 

Debt affordability, however, is expected to weaken over the next two years before gradually normalizing, as elevated government funding costs and lags in monetary policy transmission keep interest payments high despite policy rate cuts by the central bank, Moody’s said.

The agency also highlighted the Philippines’ high exposure to physical climate risks, including typhoons, flooding and heat, which it said continues to weigh on the country’s credit profile alongside low per capita income and institutional constraints, despite comparatively strong macroeconomic and fiscal policy effectiveness. 

Moody’s said the balance of risks remains even, noting that structural reforms and a pipeline of public and private investment projects could lift growth and improve fiscal outcomes beyond current expectations. 

These positives are offset by downside risks from slower-than-expected fiscal consolidation, regional geopolitical tensions and climate-related shocks that could weigh on the country’s economic and fiscal outlook.

Moody’s stressed that the periodic review “does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future.”