Global debt watcher Moody’s Ratings said the Philippines and several Asian peers face high credit exposure to physical climate risks, but the country is relatively better positioned due to its stronger fiscal capacity to build resilience.

In a report published last week, Moody’s noted that the Philippines, Vietnam, Indonesia, and Sri Lanka “all have high credit exposure to physical climate risks,” each scoring a four on a one-to-five scale (with five as the highest exposure).

The Philippines' climate risk score is higher than that of Thailand, Cambodia, Laos, and Malaysia, which all scored three.

However, the country’s fiscal strength stands out at a Baa2 stable rating. This is higher than Malaysia and Bangladesh (both around Ba2), India (B2), Pakistan (Caa3), and the Maldives, Sri Lanka, and Laos (all around Ca). The Baa2 rating is lower than Cambodia and Thailand (both around A3), and Vietnam (Ba2).

While Typhoon Verbena had a limited impact on most of the region, the Philippines was hit hard by heavy rains, flooding, and landslides. Metro Manila, Luzon, Visayas, and Southern Cebu experienced several severe flooding incidents since the start of the second half of 2025.

Moody’s cited that “infrastructure damage, and disruptions to agriculture and the business process outsourcing sector from the flooding, along with the impact of earthquakes” contributed to the lackluster four percent gross domestic product (GDP) growth in the third quarter—the slowest in four and a half years.

Growth averaged five percent in the first three quarters of the year, falling short of the government’s full-year growth target of 5.5 percent to 6.5 percent. The credit rating agency also noted that alleged corruption in flood control and other infrastructure funds was also blamed for the growth slump.

“Amid the ongoing probe into spending on flood-control projects, it is unclear whether this will lead to greater transparency in public procurement and governance—enabling more capital allocation toward high-quality infrastructure projects—or result in scaled-back plans and weaker execution, which would curb growth,” Moody's said.

This uncertainty comes despite the Marcos administration’s commitment “to higher infrastructure spending to increase connectivity, boost productivity, and address the country’s high exposure to physical climate risks.”

Metro Manila contributes about one-third of the country’s GDP, supported by its service-oriented economy and relative resilience to natural disasters. Moody’s concluded that “Economic diversification—supported by a sizable manufacturing base and large services sector—underpins the country’s broad resilience.”