S&P sees room for Philippines credit rating upgrade

February 6, 2026 | 12:00am

MANILA, Philippines —   The Philippines stands out as one of only three Asia-Pacific economies with a positive sovereign rating outlook for 2026, as improving fiscal and external balances strengthen the country’s credit profile despite political and geopolitical headwinds, according to S&P Global Ratings.

In its latest Asia-Pacific Sovereign Rating Trends report, S&P said it expects Philippine sovereign credit metrics to strengthen over the next two years.

“We see the Philippine sovereign credit metrics strengthening over the next one to two years. Over this period, we expect that narrowing fiscal and current account deficits could augment sovereign credit buffers sufficiently to better support a higher rating,” it said.

The Philippines currently carries a BBB+ rating with a positive outlook, alongside Laos and the Cook Islands. All other sovereigns in the region have stable outlooks.

The debt watcher noted that while the Philippines faces near-term challenges, including political spillovers from alleged corruption linked to flood-control projects, the overall impact on credit fundamentals is expected to be manageable.

S&P said government focus on investigations and impeachment complaints, as well as the halting of some infrastructure projects, could slow the pace of credit improvement. Still, it expects the economy to outperform peers with similar income levels.

“Despite a likely economic slowdown, we still expect the Philippines to remain an outperformer among peers at similar levels of average income. The drag on fiscal revenue may also have only a modest impact on the general government deficit since capital spending will also be lower,” it said.

The country’s positive outlook contrasts with the broader regional picture. S&P said only three Asia-Pacific governments carry positive outlooks, underscoring a cautious credit environment shaped by geopolitical risks, shifting supply chains and uneven fiscal consolidation.

Most sovereign ratings in the region remain investment grade, clustered between BBB and BBB+, with stable outlooks suggesting few rating changes in the near term.

S&P also warned that geopolitical risks remain a key factor to watch in 2026, including tensions in the South China Sea, where Chinese and Filipino vessels have had several encounters over the past year.

However, the ratings agency stressed that domestic political and policy developments are still more likely than external shocks.

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