Borrowing costs in the Philippines surged to among the highest in the region in the first quarter of 2026, tracking heightened market anxieties over economic uncertainty and potential energy supply shocks triggered by the flare-up of the Middle East conflict nearly four months ago.

According to the Singapore-based ASEAN+3 Macroeconomic Research Office’s (AMRO) inaugural Quarterly Fiscal Bulletin (QFB), regional financing conditions tightened in tandem with the escalating military rift between the United States (US) and Iran.

“Financing conditions have tightened,” AMRO noted, pointing out that yields on regional 10-year government bonds spiked due to risks tied to the conflict. The increases were particularly pronounced in Thailand, Japan, and the Philippines.

“Thailand recorded the sharpest rise, followed by Japan and the Philippines, broadly reflecting risk-off sentiments, capital outflow pressures, and rising inflation expectations amid concerns over energy supply disruptions,” the report read.

As the country’s fiscal position faced mounting pressure during this period, global credit watchdogs began shifting their outlooks.

S&P Global Ratings downwardly revised its outlook for the Philippines from positive to stable in April, signaling a “less favorable assessment” that dims the immediate prospects for a credit rating upgrade to BBB+ over the next two years.

Concurrently, Fitch Ratings adjusted its stable outlook to negative, placing the country’s current BBB investment-grade rating at risk of a downgrade over the next 12 to 24 months should underlying fiscal risks persist or deepen.

Meanwhile, Moody’s Ratings maintained its stable outlook, keeping the country’s credit profile at an investment-grade Baa2.

While actual sovereign credit ratings have held steady so far, the wave of outlook revisions signals a distinctly more cautious stance from global rating agencies.

Domestically, however, the government's internal revenue collection showed resilience, buoyed by ongoing administrative and structural reforms.

The regional surveillance body highlighted that the Philippines’ robust tax haul reflected “intensified administration, digital transformation, and efforts to curb leakages.”

Overall tax collections during the first five months of 2026 reached ₱1.43 trillion, outperforming the ₱1.35 trillion collected during the same period in 2025. Benefiting from an extended tax filing season, the Bureau of Internal Revenue’s (BIR) year-to-date collections successfully surpassed its ₱1.42-trillion target.

Similarly, the Bureau of Customs (BOC)—the state's second-largest tax collection arm—beat expectations through its ongoing "modernization and accountability initiatives." The bureau collected ₱406.4 billion as of end-May, printing a ₱9.3-billion surplus over its ₱397.1-billion target.

This baseline of internal efficiency has helped cushion the local economy against severe external headwinds, even as the full, long-term impact of the Middle East shock on state revenues remains to be seen.