British banking giant Barclays has maintained its “underweight” rating on Philippine sovereign debt, following Fitch Ratings’ decision to downgrade the country’s credit outlook to ‘negative’ amid mounting fiscal and growth concerns.

In an April 20 report obtained by Manila Bulletin, Barclays’ Singapore-based analysts Sarah Beh, Avanti Save, and Brian Tan affirmed the bank’s cautious stance on the Philippines. They noted that the decision “[reflects] the deterioration in the country’s credit metrics,” coming at a time when the sovereign is grappling with external shocks and domestic policy hurdles.

An “underweight” rating is a recommendation analysts use to suggest that a specific asset or country’s debt is expected to underperform compared with a benchmark index or other peers in a portfolio. For the Philippines, this implies that international investors may be advised to reduce their exposure to Philippine bonds, which could contribute to higher borrowing costs for the government as it seeks to fund its programs.

The report noted that the rating action “aligns with our view that the knock-on effect of higher oil prices on the Philippines’ current account balance, fiscal and government debt metrics, and growth trajectory warrants caution.”

The move follows global debt watcher Fitch’s announcement also on April 20, which revised the Philippines’ outlook from ‘stable’ to ‘negative.’ While Fitch affirmed the country’s ‘BBB’ investment-grade rating, it warned that the shift reflects “heightened risks to the country’s medium-term growth prospects, exacerbated by oil market disruptions.”

Fitch further cautioned that these factors “could lead to gradual but sustained deterioration in the country’s external finance position.” This follows a similar move by S&P Global Ratings last April 8, which revised the sovereign outlook from ‘positive’ to ‘stable.’

Barclays highlighted that the rise in energy prices and supply risks coincide with a “slowing growth trajectory, following slowdowns in public expenditure due to allegations of corruption in the government’s flood-control projects and slowing fiscal consolidation.”

The British bank expects Philippine bonds to “take their cues from local markets, specifically related to the ability of the central bank to tackle inflation and potential negative spillovers from currency markets.”

The report warned that “at the margin, higher oil prices for a prolonged period could translate into higher foreign currency borrowing should financing needs increase/FX [foreign exchange] reserves fall materially.”

For 2026, Barclays expects the Philippine government to raise between $4 billion and $5 billion in gross issuance across United States (US) dollar, euro, and Japanese yen formats, including sukuks, or Islamic Shariah-compliant securities. The bank noted that the government has already issued $2.75 billion year-to-date.

The shift to a ‘negative’ outlook by Fitch marks the first potential threat to the Philippines’ investment-grade status since it was first elevated in 2013 from “junk” status. A formal downgrade would interrupt a 20-year run of credit resilience, potentially raising the cost of funding large-scale infrastructure and social programs.

Economic growth has been under pressure after a collapse in infrastructure spending in the second half of 2025 following a probe into alleged graft. Fitch projected 2026 Philippine gross domestic product (GDP) growth at 4.6 percent, falling below the government’s target of five to six percent.

As Manila Bulletin reported earlier, Barclays expects Philippine economic growth to slow to 3.6 percent in 2026, a new post-pandemic low that reflects weaker momentum following last year’s infrastructure spending disruption linked to the flood-control corruption scandal, which had already weighed on investor confidence and domestic demand.

On monetary policy, the British banking giant expects the Bangko Sentral ng Pilipinas’ (BSP) policy-making Monetary Board (MB) to hold key interest rates steady this coming Thursday, April 23, followed by a 25-basis-point (bp) rate hike on June 18, as above-target inflation limits room for near-term easing despite slowing growth.