Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona Jr. remains upbeat that the Philippines can clinch a coveted ‘A’ credit rating within the Marcos administration’s term, provided external pressures subside.

“That’s still possible,” Remolona told reporters last week when asked if the administration could still achieve this rating, despite the recent downward revisions by global debt watchers on their outlooks for the Philippines.

Remolona, whose optimism comes as the Philippines navigates a challenging environment, noted that the potential upgrade would be supported by the recent inclusion of peso government bonds in JPMorgan Chase’s Emerging Markets Bond Index.

Even with this optimistic outlook, the governor acknowledged existing pressures. “It’s a bit challenging right now, but if these conditions ease, we should be on track,” Remolona said.

According to the governor, the peso bonds’ inclusion in JPMorgan’s influential bond index could bring in an estimated “$5 billion to $6 billion in additional inflows into our peso bond market.”

Remolona also addressed the timing of potential upgrades, noting that historical patterns usually see a swift move from an outlook change to a rating action. Previous outlook revisions, however, did not translate into rating changes.

“Typically, a negative outlook signals that a rating change may follow. However, over the past year or so, that hasn’t been the case—the outlook has shifted without a corresponding change in the rating,” he said.

While the current global environment has slowed this usual progression, Remolona said a negative outlook is not a reflection of domestic factors, “but rather reflects the external environment.”

He also expressed confidence in local policy settings, banking on these for a potential upgrade. “Perhaps if the external environment improves—that’s the main issue right now. There are no problems with fiscal or monetary policy,” he said.

S&P Global Ratings revised the country’s outlook to ‘stable’ from ‘positive’ earlier this month 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.

Similarly, Fitch Ratings downgraded its outlook on the Philippines’ investment-grade status from ‘stable’ to ‘negative.’

This shift in outlook places the Philippines at risk of a potential credit rating downgrade. For Fitch, a ‘negative’ outlook means there is a higher likelihood of a downgrade over a one- to two-year horizon if underlying risks persist or worsen.

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.