PHILIPPINES — The Japan Credit Rating Agency (JCR) has retained the Philippines' investment-grade "A-" credit rating with a stable outlook. The agency affirmed this assessment on August 28, noting the country's strong external buffers and ongoing economic recovery.
Navigating a Temporary Growth Slowdown
JCR noted that economic growth decelerated to 2.6 percent in the first half of 2026, following a 4.4 percent expansion in 2025. This slowdown was driven by sluggish public works and weakened household consumption, largely due to elevated crude oil prices and tighter fiscal scrutiny.
Despite these hurdles, the debt watcher expects the gross domestic product to pick up over the medium term. The government targets a growth rate of five to six percent from 2027 through 2030, supported by industrial upgrades and a more stable investment environment.
Infrastructure Investment Trajectory
JCR projects infrastructure investment to remain around four percent of GDP through 2027. Specifically, it estimates 4.2 percent for 2026 and four percent for 2027. This is lower than the 4.7 percent recorded in 2025.
The decline follows stricter scrutiny of Department of Public Works and Highways projects after irregularities in flood control were discovered. The government has since strengthened project planning, procurement, and payment verification to ensure transparency and accountability.
JCR anticipates a recovery in public infrastructure spending during the second half of the year. This rebound will occur as agencies utilize previously allocated budgets and reviewed public works projects resume implementation nationwide.
Fiscal Health and External Reserves
The country’s debt-to-GDP ratio stood at 66 percent by end-June 2026, the highest in 21 years. JCR expects this ratio to remain in the mid-60 percent range, with the government pursuing gradual fiscal consolidation through its medium-term framework.
On a positive note, the Bangko Sentral ng Pilipinas welcomed JCR's assessment of the country's resilience. Foreign exchange reserves reached $99.5 billion by end-September, providing a robust cushion against global economic shocks.
The country's external position remains supported by steady remittances from overseas Filipino workers and business process outsourcing revenues. JCR also noted that over 60 percent of Philippine exports to the US remain exempt from additional tariffs.
Outlook and Remaining Challenges
While JCR recognizes the government's efforts to improve the investment environment, the agency highlighted several key challenges. Reducing income disparities through rural development and improving infrastructure remain critical to sustaining long-term growth.
BSP Governor Eli Remolona Jr. reaffirmed the central bank's commitment to prudent reserve management. He emphasized that safeguarding economic stability is paramount as the country navigates persistent global headwinds and geopolitical tensions.
