FLOOD CONTROL. President Ferdinand Marcos Jr. inspects a flood control project in Baliwag City, Bulacan, on August 20, 2025.FLOOD CONTROL. President Ferdinand Marcos Jr. inspects a flood control project in Baliwag City, Bulacan, on August 20, 2025.

What Fitch’s outlook downgrade means for the Philippines

2026/04/21 15:47
3 min read
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MANILA, Philippines – Fitch Ratings on Monday, April 20, downgraded its credit outlook for the Philippines to negative from stable.

While Fitch Ratings affirmed the Philippines “BBB” credit rating, the negative outlook places this at risk of getting cut in the next 18 to 24 months.

According to Fitch Ratings, its revised outlook for the Philippines reflects its elevated exposure to the ongoing global energy shock brought by the Middle East crisis given the Philippines’ high reliance on imported oil.

“Consumers are absorbing the bulk of energy price increases with the government providing targeted subsidies to vulnerable sectors. As such, effects on the credit profile are likely to come through lower GDP growth, higher inflation, and a rising current account deficit, with modest risks to public finances,” it said.

Fitch Solutions unit BMI forecast household spending to slow, albeit at a slower pace, as the elevated fuel prices pushed inflation beyond government targets in March.

Aside from the impact of the Middle East crisis on the Philippines, Fitch Ratings also cited a slowdown in public spending as a reason for the outlook downgrade. The credit rating agency noted that public infrastructure spending dipped during the second half of 2025 as the flood control scandal triggered tighter bidding and procurement processes within the Department of Public Works and Highways.

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The risks of subdued public spending and the impact of the oil crisis could slow down economic growth in 2026 at a time of rising government debt. Fitch warned that a further rise in the country’s debt-to-GDP ratio and the deterioration of the Philippines’ foreign-currency reserves could lead to a rating downgrade.

For Rappler’s resident economist JC Punongbayan, Fitch’s negative outlook is a warning for the Philippines to restore public and investor confidence.

“It’s not the end of the world, and the policy priorities for the Marcos administration are clear: restore credible and efficient public investment, avoid wasteful broad subsidies, protect vulnerable groups through targeted aid, and preserve fiscal and monetary credibility as inflation risks rise for the rest of the year,” he said.

While the negative outlook is still reversible, this dims the government’s hopes of securing an “A” rating from a major credit rating agency. Standard & Poor (S&P) also cut its outlook for the Philippines to “stable” from “positive” last week.

A lower credit rating means a country could face higher borrowing costs and dimmer investor confidence.

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BSP remains vigilant

The Bangko Sentral ng Pilipinas (BSP) said it noted Fitch Rating’s credit outlook downgrade and remains vigilant against the spillover effects of the Middle East crisis on the country’s economy.

BSP Governor Eli Remolona Jr. said the Philippine economy remains in a good position since growth is strong and the banking sector is in good shape. However, the BSP remains ready to act on the impact of the oil crisis on inflation.

“The economy remains in a good position because growth is strong and banks are in good shape. The BSP is closely monitoring the impact of higher oil prices and geopolitical developments, particularly the conflict in the Middle East, on inflation and the overall Philippine economy,” he said. – Rappler.com

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