The Philippines maintained its investment-grade credit rating with a positive outlook from S&P Global Ratings, citing that the nation’s long-term economic trajectory remains strong despite a politically charged probe into flood-control projects that is now slowing infrastructure spending.

S&P affirmed the country’s long-term sovereign credit rating at ‘BBB+’ and held the outlook at “Positive,” according to a research update published on Thursday, Nov. 27.

The affirmation noted the government’s commitment to fiscal consolidation and the economy’s “above-average growth potential,” which is expected to rebound robustly following a temporary dip.

The Positive outlook indicates that the rating could be lifted within the next 12 to 24 months if the country’s fiscal performance strengthens and current account deficits moderate, bolstering its external balance sheet. A potential upgrade would move the Philippines closer to the sought-after ‘A’ rating category.

However, the rating agency noted that an ongoing corruption investigation into flood-control works has stalled some public capital expenditure, acting as a brake on immediate growth.

S&P now forecasts real gross domestic product (GDP) growth will slow to 4.8 percent in 2025, a significant drop from the 6.3 percent average recorded over the previous three years.

The credit rater said this slowdown was particularly evident in the third quarter, which saw GDP growth slump to four percent year-on-year—the weakest since early 2021.

Moreover, government spending on infrastructure contracted by 26 percent in the third quarter as stricter measures were implemented on public projects following the probe.

“The resultant slowdown in public capital expenditure will dent GDP growth this year,” S&P said, but added that they believe the dip is temporary and will not derail the “healthy” long-term growth trajectory.

The positive outlook is underpinned by expectations of a sharp recovery. S&P projects medium-term GDP growth to average about 6.2 percent over 2026 to 2028, driven by sustained investments and robust public and private consumption.

The report credited the Marcos administration’s commitment to a medium-term fiscal framework, despite recent pressure.

While the government set slightly higher deficit targets in June 2025 to allow for more fiscal flexibility for infrastructure, S&P expects the general government deficit to gradually narrow to 3.5 percent of GDP in 2025 from 3.7 percent the prior year.

Furthermore, the country’s strong external position remains a key rating pillar. The external buffers are supported by sizable foreign currency reserves and robust remittance inflows, which hit an all-time high of $38.3 billion in 2024.

The Bangko Sentral ng Pilipinas (BSP) and the Department of Finance (DOF) welcomed S&P’s affirmation of the Philippines’ investment-grade credit rating, stating the move confirms the country’s “rosier” growth outlook.

The BSP noted that a positive outlook suggests a possible rating upgrade within two years, which would further lower borrowing costs and boost investor confidence.

“S&P’s rating decision confirms our view of favorable long-term economic growth prospects," BSP Governor Eli M. Remolona, Jr. said in a Nov. 27 statement.

Meanwhile, Finance Secretary Frederick D. Go said S&P’s rating is “proof of the country’s strong macroeconomic fundamentals and the administration’s sustained commitment to pursuing fiscal consolidation.”

“We welcome this development. We will ensure that every policy decision will support sustainable growth and long-term stability,” Go said.

He added that a high credit rating means cheaper financing for the government, freeing up more resources for essential public services.

The DOF stated that the ratings reflect the country’s above-average economic growth compared to its peers. Philippine GDP has averaged 5.7 percent since 2022, when the economy began recovering from the Covid-19 pandemic contraction.

However, output growth has expanded below its potential this year, averaging five percent in the first three quarters.

National Socioeconomic Planner Arsenio Balisacan earlier conceded the Philippines may struggle to hit the already lowered goal this year. Both the BSP and DOF have recently lowered their growth expectations for this year and next, with the central bank expecting growth to settle at 5.3 percent in both years.

“While gross domestic product growth eased to four percent in the third quarter of 2025 from 5.5 percent in the second quarter, the rating agency stressed the slowdown is temporary,” the BSP

“S&P forecasts long-term growth prospects for the country to remain sound and above those of countries with similar ratings. It further noted policy reforms that support foreign direct investments (FDI),” the central bank added.

Consumer price hikes, meanwhile, have been stable at 1.7 percent as of October, remaining below the two percent to four percent target band. S&P attributed this to the BSP’s record of keeping inflation low.

The investment-grade credit rating translates to lower borrowing costs for the government, freeing up resources for essential services and infrastructure. It also allows businesses to tap more affordable financing, supporting expansion and job creation.