TOKYO-BASED Japan Credit Rating Agency Ltd. (JCR) maintained its investment-grade rating with a stable outlook on the country as it expects a mid-3 percent growth by the end of this year despite internal and external headwinds.
In its Oct. 22 issuer report, JCR cited the slowdown in the first half of 2026 when gross domestic product (GDP) grew by 2.6 percent year-on-year as household consumption weakened amid higher inflation and public investment remained sluggish.
The rating agency expects growth to improve in the second half, likely in the mid-3 percent range, as the government’s public infrastructure projects and price stabilization measures take effect.
JCR maintained the Philippines’ A- long-term issuer rating with a stable outlook, citing sustained economic growth supported by domestic demand, manageable external debt and the country’s resilience to external shocks.
The Bangko Sentral ng Pilipinas (BSP) welcomed JCR’s assessment of the country’s external position, saying strong foreign exchange reserves and other external buffers help the economy withstand global headwinds.
“JCR’s recognition of the country’s strong external buffers reflects confidence in the Philippine economy’s ability to weather global headwinds, including those arising from the Middle East conflict,” BSP Governor Eli Remolona Jr. said in a statement on Friday.
“The BSP will continue to manage the country’s foreign exchange reserves prudently to help safeguard economic stability,” he added.
As of end-September, the country’s gross international reserves stood at $99.5 billion, enough to cover 6.2 months’ worth of imports of goods and payments of services and primary income, the BSP said.
The reserves were also equivalent to 3.1 times the country’s short-term external debt based on residual maturity.
The central bank said steady remittances and business process outsourcing revenues continued to support the current account.
Cash remittances from overseas Filipinos reached $23.4 billion from January to August, up 2.2 percent year-on-year, while BPO revenues reached $15.4 billion in the first half.
JCR also cited the country’s favorable foreign currency liquidity position despite heightened uncertainties arising from changes in United States tariff policies.
However, the agency warned that the slowdown in public works projects and weaker consumption caused by rising crude oil prices could delay fiscal consolidation, with the government debt-to-GDP ratio projected to remain in the mid-60-percent range.
The Philippines’ real GDP growth slowed to 4.4 percent in 2025, from 5.7 percent in 2024, as the government tightened scrutiny of public works projects following allegations of irregularities in flood control spending.
The review slowed infrastructure implementation and weighed on private investment. Construction investment began declining in the second half of 2025, contributing to slower economic growth in the first half of this year.
JCR said public infrastructure spending was expected to accelerate in the second half of 2026 as the government implements already allocated budgets and resumes projects that have completed the review process.
Infrastructure investment fell to P1.32 trillion in 2025, equivalent to 4.7 percent of GDP. The agency projected the ratio to ease further to 4.2 percent in 2026 and 4 percent in 2027.
Inflation has also emerged as a concern, with rising crude oil prices and supply risks linked to worsening conflicts in the Middle East pushing up fuel, transportation, electricity and food costs in the import-dependent economy.
Inflation climbed to 7.2 percent in April 2026 from 4.1 percent in March before easing to 6.1 percent in August. The BSP raised its target reverse repurchase rate by 25 basis points to 5 percent at the latest policy meeting covered in JCR’s report.
On the external front, the current account deficit widened to $15.4 billion in the first half of 2026, equivalent to 6.4 percent of GDP, from 3.3 percent of GDP for the full year in 2025.
JCR attributed the persistent deficit to the country’s merchandise trade gap, although remittances, BPO revenues and foreign investment provide some support.
The agency reported that foreign exchange reserves stood at $104.8 billion at the end of August, while external debt reached $154.9 billion in the second quarter, equivalent to 31.6 percent of GDP.
On public finances, the central government’s fiscal deficit narrowed slightly to 5.6 percent of GDP in 2025 from 5.7 percent in 2024. However, central government debt rose to 63.2 percent of GDP at the end of last year from 60.7 percent in 2024.
JCR said the pace of fiscal improvement was expected to slow amid weaker economic activity and higher spending pressures, although the government was continuing efforts to improve revenue collection and spending efficiency.
The agency identified higher per capita income, industrial upgrading, expanded domestic employment and continued infrastructure investment as factors that could support a positive rating outlook over time. Conversely, a reversal in fiscal reform efforts could weigh on the rating.
It also cited infrastructure development and the reduction of income disparities through rural development as continuing challenges for the country.
