Fitch Ratings has placed the Philippines’ outlook from stable to negative, putting the nation’s long-standing sovereign credit rating in peril, even though its “BBB” investment rating remains unchanged.
In a commentary by the credit rating agency, the change in outlook was primarily caused by external pressures—especially the rise in global energy prices—which could affect growth, inflation, and the country’s fiscal performance, as well as disruptions to public investment due to a recent graft scandal.
A negative outlook could mean that the Philippines’ current “BBB” rating could be cut within just the next 18 to 24 months, which would signal its first downgrade in more than 20 years.
The last credit rating downgrade occurred in 2005, when a political crisis shook former Pres. Gloria Macapagal-Arroyo’s administration.
The Bangko Sentral ng Pilipinas (BSP) clarified that a negative outlook does not immediately mean a rating downgrade.
BSP Governor Eli Remolona Jr. noted that the economy is still in a strong position, and that the central bank continues to monitor the impact of rising oil prices and geopolitical tensions on the Philippine economy.
Yet, Fitch held that the country’s long-term foreign-currency issuer default rating (IDR) remains at the same level, indicating that even if risks have increased, the Philippines continues to have an adequate capacity to meet its financial commitments.
Furthermore, the agency expects the nation’s gross domestic product (GDP) to reach 4.6 percent as investment begins to recover, though higher energy costs could affect daily household consumption.
This could bring the current account deficit of the Philippines from 3.3 percent of the GDP in 2025 to 3.8 percent of the GDP in 2026.
Although the deficit is expected to be shouldered by long-term borrowing and foreign investment, the credit rating agency notes that additional external pressures could affect the nation’s buffers.
The higher energy prices also increased the expected inflation rate for the country, with it soaring to 4.1 percent for this year compared to 1.7 percent in 2025.
Fiscally, the general government deficit is projected to remain at 3.7 percent of GDP this year, though Fitch warns that a lengthened energy shock could raise spending pressures.
These pressures could lead to a narrowing of the Philippines’ growth advantage compared to its neighbors in a time of elevated government debt and a weakening of its external finances, it added.
Written by Francis Santos, Insight PH
Francis Santos, Insight PH is a dedicated campus journalist and contributor. Their insightful writing sparks meaningful conversations and keeps the community informed.
