Global credit assessor S&P Global Ratings has downgraded its outlook on the Philippines, warning that persistently high energy costs could expand the country’s current account deficit in the months ahead.
In its latest report, S&P said its baseline scenario assumes tensions linked to the Middle East conflict will reach their peak, with disruptions along the Strait of Hormuz expected to ease by April. However, the agency noted that supply chain challenges may continue for several months.
Despite the more cautious outlook, S&P affirmed the Philippines’ credit rating at “BBB+/A-2,” citing the country’s relatively strong growth prospects compared to its peers.
The agency projects the Philippine economy to grow by 5.8% in 2026 but warned that elevated fuel prices could weigh on consumer spending and temper economic activity in the first half of the year, before conditions improve toward the latter half.
S&P also said that the broader impact of energy-related shocks tied to the regional conflict, along with governance concerns, is expected to gradually subside by the second half of 2026.
The report further pointed to ongoing strain on households, highlighting reduced purchasing power as inflation remains high. It noted that the Philippine peso has weakened significantly, now valued at roughly ₱0.75 compared to its 2018 level.