S & P optimistic on credit rating upgrade

S&P optimistic on Philippines credit rating upgrade

Louise Maureen Simeon 
The Philippine Star
May 7, 2025

Despite US tariffs

MANILA, Philippines — S&P Global Ratings is optimistic on the Philippines’ credit rating upgrade despite the impacts of the reciprocal tariffs imposed by the United States, as the country remains among the least affected in the region.

In a webinar yesterday, the New York-based rating agency maintained that it continued to have a positive outlook on the Philippines even after US President Donald Trump imposed reciprocal tariffs during its Liberation Day last month.

S&P Sovereign and International Public Finance Ratings for Asia director Rain Yin said that the Philippines is going to be less affected than other countries in the region considering that it has one of the lower initial reciprocal tariff of 17 percent.

The country also does not have very large bilateral trade supplies with the US, as a substantial portion of its exports is in services.

“With the current positive outlook, we are expecting that the constructive trends that we are seeing in the Philippines, namely its strong growth trajectory, narrowing current account deficits and fiscal consolidation, will enable us to raise the rating in the next one or two years,” Yin said.

Last November, S&P raised the Philippines’ credit rating outlook to positive from stable, increasing the possibility of an upgrade in the next 12 to 24 months.

“However, if downside risks are very significant and derail our expectations on those constructive trends, then the outlook can possibly go back to stable,” Yin said.

Nonetheless, S&P noted that economic growth would still be affected by Washington’s protectionist policies as it penciled in a 0.3-percentage point decline in gross domestic product.

“What will it take to remove the positive outlook? It really comes down to a judgment of the size of the negative tariff impact on growth, fiscal, debt and external positions,” Yin said.

According to S&P, the US tariffs could affect sovereign ratings of emerging Asian economies, including the Philippines, through economic growth outcome, fiscal stimulus that could worsen fiscal and debt metrics and trade slowdown that could weaken external positions and strain reserves.

On fiscal stimulus, the debt watcher said no large ones have been rolled out by economies as many governments are still negotiating with the US for tariff relief.

Following the large stimulus during the pandemic, it added that many governments are also in a fiscal consolidation phase and may not easily roll out new measures.

However, S&P warned that a few sovereigns such as Indonesia, Malaysia and the Philippines are having more elevated interest burdens.

“A combination of higher debt and potentially higher interest rates could increase this ratio further, which would increase the downside risk to the rating,” Yin said.

“But it’s also likely for monetary policies to ease further due to a combination of debt growth and disinflationary pressures. So, this could help to alleviate the interest burden, even if debt levels would increase,” she said.