Fitch Affirms the Philippines at ‘BBB’ Investment-Grade Credit Rating, ‘Stable’ Outlook

Fitch Ratings has kept the Philippines' "BBB" credit rating with a "stable" outlook in its latest rating action. This investment-grade credit rating has been in place since December 2017.

Fitch acknowledged the country’s robust medium-term growth potential, stable debt levels, strong macroeconomic policies as well as the central bank's credible inflation targeting framework.

Since May 2022, the Bangko Sentral ng Pilipinas (BSP) has raised the policy rate by 450 basis points to 6.5 percent to bring inflation within government’s target range of 2.0 to 4.0 percent. 

In May 2024, the Philippine Statistics Authority (PSA) reported that headline inflation rose slightly to 3.9 percent from April's 3.8 percent, with the national average for January to May 2024 at 3.5 percent, down from 6.1 percent in May 2023.

Fitch projects inflation to remain within the upper half of the BSP’s inflation target range, and to moderate to 3.8 percent and 3.4 percent by 2024 and 2025, respectively.

BSP Governor Eli M. Remolona, Jr. welcomed Fitch's recognition of the central bank's efforts to keep inflation within target and highlighted the BSP's data-driven approach to setting monetary policy.

Meanwhile, Fitch forecasts a 5.8 percent real gross domestic product (GDP) growth in 2024, driven by investments in infrastructure and trade reforms, with over 6.0 percent growth expected over the medium term.

In Q1 2024, the economy grew by 5.7 percent year-on-year, primarily driven by robust growth in financial activities (10.0 percent), wholesale and retail trade, repair of motor vehicles and motorcycles (6.4 percent), and manufacturing (4.5 percent), according to the PSA.

Fitch also expects the general government debt to remain stable at 54 percent of GDP by 2025, alongside a narrowing current account deficit.

Moreover, the debt watcher sees the current account deficit decreasing to under 2.0 percent of GDP (below USD10 billion) by 2025 from 2.6 percent of GDP (over USD11 billion) in 2023.

An investment-grade rating signals reduced credit risk, allowing countries to access funding at lower costs. A 'BBB' rating, which is above the minimum investment grade, indicates a low expectation of default risk, with the country's capacity to meet financial commitments deemed adequate. Meanwhile, a "stable" outlook suggests a low likelihood of a rating change over the next one to two years.​