Continued vigilance over the persistent risks to the Philippine sovereign position is the vow the Bangko Sentral ng Pilipinas (BSP) has pledged after debt watcher S&P Global Ratings downgraded its outlook to ‘stable’ from ‘positive.’

S&P on Wednesday, April 9, revised the Philippines’ outlook while affirming its ‘BBB+’ sovereign credit rating. A stable outlook signals the likelihood of an unchanged rating within the next two years.

“We revised the rating outlook on the Philippines to stable from positive because the war in the Middle East has increased risks for the trajectory of the country’s external and fiscal metrics,” S&P said in a statement.

S&P said a stable outlook signals its assumption that the Philippines will still tread a steady economic expansion despite a deteriorating fiscal balance over the next two years.

For S&P, the war will likely peak and disruptions in the Strait of Hormuz will loosen by April, though some effects may linger for months. It added that, amid elevated uncertainty, external and fiscal support are unlikely to improve enough in the near term to significantly prop up the sovereign position.

Despite the ongoing pressures, the Philippines is still assessed to display above-average growth potential.

“Policy settings in the country have helped to keep economic performance strong and have sustained public investment. Ongoing reforms to support business and investment conditions reflect these strengths,” the credit rater said.

While the Philippine credit profile benefits from the country’s “strong” external position, lower-than-average income levels per capita remain a major constraint compared to investment-grade peers, it said.

It may be recalled that Philippine fiscal authorities were bullish on the country’s sovereign debt performance in the near term, but recent controversies clouded this outlook, as debt watchers had flagged early the risks tied to the government’s fiscal assets.

Even with the recent pressures, S&P said the policy measures that the government has deployed to respond to such bottlenecks prompt it to “believe that consolidation will continue, with fiscal deficits gradually coming down and the debt burden stabilizing.”

BSP Governor Eli M. Remolona, Jr. said in an April 9 statement that the central bank will “continue to monitor local and overseas data to effect policies aimed at safeguarding price and financial stability amid a challenging economic and geopolitical landscape.”

Meanwhile, S&P noted that the country’s external position remains “an anchor of strength,” especially amid the external headwinds. “The BSP has a sound record of keeping inflation low and a history of operational independence,” it said.

As of the end of the first quarter, the Philippines’ gross international reserves (GIR) settled at $107.5 billion, which is equivalent to 7.1 months’ worth of imports and about 3.9 times the country’s short-term external debt based on residual maturity.

This level, however, has already retreated to its thinnest in seven months since August 2025’s $107.1 billion, after the record highs set during the first two months of 2026.

According to the BSP, an investment-grade rating indicates low credit risk and allows a country to access funding at a lower cost, enabling it to support essential services and programs.