Japan-based debt watcher Rating and Investment Information Inc. (R&I) has downplayed the Philippines’ debt concerns, affirming the country’s high investment-grade ‘A-’ credit rating with a stable outlook.

With the government’s debt level seen to “start falling in a year or two,” R&I said in an Aug. 20 statement that the government’s budget position has already improved compared to the size of the Philippine economy. Last year, the government's outstanding debt stood at 60.7 percent of gross domestic product (GDP).

Further, “the levels of current account deficit and external debts are manageable, hence there is limited concern on the external front.”

Looking ahead, R&I expects the country’s fiscal deficit to narrow continuously, in line with the Marcos Jr. administration’s program. Based on the medium-term fiscal program (MTFP), the government is targeting to gradually lower the budget deficit to 4.3 percent of GDP in 2028 from 5.7 percent in 2024.

For each year, the planned deficits are as follows: ₱1.56 trillion or 5.5 percent of GDP in 2025, ₱1.65 trillion or 5.3 percent in 2026, ₱1.6 trillion or 4.8 percent in 2027, and ₱1.55 trillion or 4.3 percent in 2028. These numbers represent the difference between the annual national budget expenditures and the gross revenues the country could earn.

For R&I, the government debt ratio “will remain within a manageable level with the progress in reducing fiscal deficits,” noting that the government primarily funds its programs by selling bonds to domestic lenders.

“The country has a certain level of debt affordability, given a manageable interest payment burden,” the debt watcher said.

Sound fiscal management, alongside the country’s robust GDP growth and booming investments—both private and public—were the debt watcher’s basis for its high investment-grade rating for the Philippines.

Both the Bangko Sentral ng Pilipinas (BSP) and the Department of Finance (DOF) welcomed this affirmation, which they said reflects the country’s “robust growth, low inflation, and strong external position.”

BSP Governor Eli M. Remolona Jr. said in an Aug. 20 statement that the prevailing environment of slow consumer price hikes is because of “agile and evidence-based monetary policy.” To tame last year’s elevated inflation, the central bank cumulatively reduced the key borrowing cost from 6.5 percent to the current 5.25 percent.

Inflation has also reached nearly six-year lows in recent months. Remolona said this environment “supports an investment climate that is conducive to economic growth.” GDP expansion, meanwhile, accelerated to a slightly faster rate of 5.5 percent in the second quarter, but still far slower than the 6.5-percent growth in the same period last year.

Remolona said the central bank “continues to strengthen the Philippine banking system through policies that underscore strong capitalization, prudent risk management, and sound governance.”

“These enable banks to finance productive economic activities while navigating a fast-evolving global economic landscape,” he added.

An investment-grade rating means low credit risk, which lowers borrowing costs and allows the country to channel more funds to social programs.

For his part, DOF Secretary Ralph G. Recto said this development means “credit rating agencies and investors continue to have high confidence in us. This will bring in more investments, create more quality jobs, raise incomes, and lift more Filipinos out of poverty.”

Recto noted that the fiscal deficit dropped from the pandemic high of 8.6 percent in 2021 to 5.5 percent in 2025, given higher government revenue collections and improved expenditure management. It is projected to further drop to about three percent by 2030.

He assured that the Marcos Jr. administration “will continue to adopt a borrowing mix in favor of local sources to take advantage of domestic liquidity and mitigate foreign exchange (forex) risks.” From a projected 81-percent domestic, 19-percent external financing mix this year, the government projects a 77:23 borrowing mix in 2026 through 2028.