AREVERSAL in fiscal reform efforts could weaken the country’s credit standing amid slowing growth and political fragmentation, according to Japan Credit Rating Agency, Ltd. (JCR).
In an issuer report, the Tokyo-based credit rater warned that the pace of fiscal consolidation is slowing, explicitly cautioning that ‘any reversal in fiscal reform efforts would constitute a negative factor for the ratings.’
‘Although the country’s fiscal position remains reasonably sound, it is taking time to reduce the fiscal deficit-to-GDP ratio, which widened due to the Covid-19 pandemic,’ JCR said.
The ratio began to increase in 2020 due to spending on Covid-19 countermeasures and widened to 8.6 percent in 2021.
Reacting to the JCR report, the Bangko Sentral ng Pilipinas (BSP) vowed to continue to manage the country’s foreign exchange reserves ‘prudently’ to help safeguard economic stability.
In a statement on Friday, BSP Governor Eli M. Remolona Jr. said: ‘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.’
As such, Remolona said the central bank will continue to manage the country’s foreign exchange reserves ‘prudently’ to help safeguard economic stability.
The Marcos Jr. administration has outlined a policy to reduce the fiscal deficit-to-GDP ratio to 3.5 percent and the central government debt-to-GDP ratio to 63.1 percent by 2030 through effective and efficient public spending.
‘Nevertheless, it remains at a relatively low level compared with sovereigns in the A rating category rated by JCR,’ it noted.
The credit rater said the government is implementing a strategy to balance fiscal consolidation with continued investment in infrastructure development and poverty alleviation.
‘The government is proceeding with gradual fiscal consolidation based on its medium-term fiscal framework, and fiscal soundness is expected to be maintained to a certain extent,’ JCR said nonetheless.
For the country’s ratings to improve, JCR said the administration must attain its key objectives, including raising per capita income, upgrading the industrial structure, expanding domestic employment opportunities and continuing infrastructure investment.
‘The government is working to improve the investment environment and promote industrial upgrading, and JCR expects the economic growth rate to pick up again over the medium term,’ it added.
The economy is currently slowing, weighed down by the declining pace of public works projects coupled with the drop in consumption due to rising crude oil prices, the credit rater noted.
While JCR said its ‘A-‘ rating for the Philippines remains anchored by the country’s ‘high and sustainable’ growth potential, reducing income disparities and improving infrastructure remain key challenges.
billboards do the job socmed
‘Highly resilient to external shocks’
In its latest issuer report, the Japan-based credit rating agency said: ‘Given its solid foreign currency liquidity position, JCR believes that the Philippines will remain highly resilient to external shocks despite increased uncertainties caused by changes in the US tariff policies.’
JCR said this resilience is ‘further supported by the relatively limited exposure of Philippine exports to the new US tariffs, with more than 60 percent of exports to the United States remaining exempt from the additional duty.’
At end-September 2026, the country’s foreign reserves, its buffer against external shocks, plunged to the lowest level in three years due to foreign exchange operations amid the weakness of the Philippine peso alongside withdrawals of foreign currency deposits to service external debt obligations.
Data from the BSP showed the Gross International Reserves (GIR) settled at US$99.5 billion as of end-September 2026.
While it was the lowest level recorded in three years or since September 2023, the BSP said this was enough to cover 6.2 months’ worth of imports of goods and payments of services and primary income, ‘well above the international benchmark of 3 months.’
‘The reserves were also 3.1 times the country’s short-term external debt based on residual maturity,’ added the central bank.
According to BSP, the had notednoted that steady remittances and solid BPO revenues continue to support the current account.
Cash remittances from overseas Filipinos reached US$23.4 billion from January to August 2026, up 2.2 percent year-to-date, while BPO revenues rose to US$15.4 billion in the first half of 2026, the central bank said.
JCR also cited the stability of the financial system, noting continued growth in bank lending and strong capitalization,’ the BSP noted.
The ‘favorable assessment’, the central bank said, complements JCR’s decision on August 28, 2026 to affirm the Philippines’ investment-grade credit rating of ‘A-‘ with a ‘stable’ outlook.
An issuer report provides additional analysis and context behind a sovereign credit rating action.