The Philippines’ push to secure an ‘A’ sovereign credit rating is facing mounting roadblocks, as global shocks, fiscal pressures, and policy risks converge at a critical juncture for the Marcos Jr. administration.

The challenge sharpened after S&P Global Ratings revised the country’s outlook to ‘stable’ from ‘positive’ last April 8 while affirming its ‘BBB+’ rating—effectively narrowing the window for an upgrade. A ‘stable’ outlook signals the likelihood of an unchanged rating within the next two years, putting the government’s 2028 ‘A’ target under pressure.

S&P said the revision reflects “increased risks for the trajectory of the country’s external and fiscal metrics,” underscoring vulnerabilities tied to geopolitical tensions, particularly the Middle East conflict.

Credit ratings assess a government’s creditworthiness and reflect the stability of its finances, which is closely linked to overall economic performance. As such, they serve as a proxy indicator of the economy’s health.

An investment-grade rating enables the government to secure loans at lower interest rates, which can, in turn, reduce borrowing costs for consumers and businesses. This is because banks often use government-issued debt as a benchmark for setting interest rates on loans.

The Philippines currently enjoys investment-grade ratings from the “big three” debt watchers—Fitch Ratings, Moody’s Ratings, and S&P—but remains one notch below the coveted ‘A’ level.

The current administration aims to achieve ‘A’ ratings from all three major credit rating agencies before it steps down in 2028, as part of its broader push to strengthen fiscal credibility, sustain investor confidence, and improve the country’s long-term borrowing profile.

Earlier, the administration’s economic team had struck an optimistic tone.

As Manila Bulletin reported earlier, the Cabinet-level, interagency Development Budget Coordination Committee (DBCC) said last October that the country was “on track to achieve a single-‘A’ credit rating,” citing structural reforms and sustained growth.

“The country is in a strong position due to the fast implementation of ongoing structural reforms, sustained economic growth, and efforts to open key sectors to greater foreign ownership and investments,” the DBCC had said.

But that optimism has since been clouded by both domestic and external risks. S&P had earlier held back a potential upgrade after controversies involving alleged corruption in the flood-control budget raised red flags for credit watchers.

For Thomas Rookmaaker, head of Asia-Pacific (APAC) sovereign at Fitch, the Philippines’ efforts to thin its debt pile are visible—but not fast enough.

“Fiscal consolidation in the Philippines is happening, but it is rather slow. So, the debt is still relatively high,” Rookmaaker said in an April 9 virtual briefing.

He added that the sovereign warrants robust expansion to ensure that the debt-to-gross domestic product (GDP) ratio continues to decline.

Revenue constraints also loom. Government projections show that revenue effort from 2025 to 2029 may remain below the 2024 level of 16.7 percent, with only a slight increase expected by 2030.

The government’s borrowing strategy is likewise under review, as volatility complicates financing decisions.

“Given the crisis and the resulting fiscal strain—whose duration remains uncertain—it could affect what the government chooses to borrow for, as well as which priorities it may need to defer or postpone,” Andrew Jeffries, Asian Development Bank (ADB) Philippines country director, told reporters on Friday, April 10.

Jeffries said the ongoing financing review with the Manila-based multilateral lender is expected to conclude by May, with discussions also covering a proposed $100-million loan for the Bureau of Internal Revenue’s (BIR) digital shift.

“There is significantly more uncertainty around borrowing in general—including from the ADB—now than there was a year or two ago,” he said.

Private-sector economists also flagged the impact of geopolitical tensions on the country’s external position and growth outlook.

For Domini Velasquez, chief economist at China Banking Corp. (Chinabank), the latest outlook revision signals additional strain on the current account.

“This makes achieving an ‘A’ rating by the end of President Marcos’ term challenging, though not entirely out of reach,” said Velasquez, also former chief economist at the Department of Finance (DOF).

She added that the effects of the Middle East conflict could persist through 2027—overlapping with the reassessment cycle of credit rating agencies.

Despite the headwinds, economists say the ‘A’ rating remains attainable—if reforms are delivered.

“An ‘A’ rating by the end of Ferdinand Marcos Jr.’s term is still possible, but only if we deliver on the basics: sustained fiscal discipline, credible revenue reforms, and strong, investment-led growth,” Reyes Tacandong & Co. senior adviser Jonathan Ravelas said.

Ravelas stressed that credit upgrades depend on policy execution.

“Get the reforms right over the next two to three years, and the door to an ‘A’ rating stays open,” he said.

SM Investments Corp. (SMIC) group economist Robert Dan Roces and Union Bank of the Philippines (UnionBank) chief economist Ruben Carlo O. Asuncion echoed this view.

Asuncion said securing an ‘A’ grade will “hinge more on sustained fiscal consolidation, stronger revenue mobilization, and durable gains in growth and institutional strength.”

However, he added that “the easing of tensions and eventually a solid settlement of hostilities play a major role in how we see the Philippines’ much-coveted ‘A’ rating.”

Even with current pressures, S&P said a ‘stable’ outlook assumes the Philippines will maintain steady economic expansion despite a deteriorating fiscal balance over the next two years.

But with just two years before the end of the Marcos Jr. administration—and rating reviews typically spaced over 12 to 18 months—the margin for error is shrinking.

A faster easing of global tensions may help. But ultimately, the country’s path to an ‘A’ rating will depend less on external relief—and more on whether it can deliver on long-promised fiscal and structural reforms.

For now, the goal remains within reach—but increasingly difficult to attain.