Standard & Poor’s has reaffirmed the Philippines’ BBB+ long-term sovereign credit rating with a positive outlook but warned that  the slowdown in infrastructure spending pose risks to near-term economic growth.

The reaffirmation keeps the country two notches above investment grade — an important signal for investors and lenders. S&P said it continues to view the country’s fundamentals as resilient, noting that the current political turbulence appears temporary and that long-term growth prospects remain solid.

However, the ratings firm emphasized that spending disruptions are dragging down public capital expenditure and weighing on gross domestic product (GDP) performance.

“The ongoing investigation into flood control projects has halted some infrastructure works. The resultant slowdown in public capital expenditure will dent GDP growth this year. However, we believe this will not derail the country’s long-term growth trajectory, which remains healthy,” S&P said.

What began as an investigation into anomalous flood control projects has since ballooned into allegations of budget insertions, ghost projects, and systemic kickback operations involving lawmakers, contractors, and senior political figures. 

Auditors and whistleblowers said billions of pesos were embedded into the annual national budgets through opaque amendments, then funneled into projects that were substandard, unfinished, or existed only on paper.

Contractors have testified that they were instructed to remit “commissions” of 20 to 25 percent of contract value — often in cash — to the project proponents before fund releases were processed. 

The testimonies now form part of the graft complaints filed before the Office of the Ombudsman and the Independent Commission for Infrastructure.

Marcoses tagged

The controversy escalated further when former Ako Bicol representative Zaldy Co, now facing plunder charges, directly accused President Ferdinand Marcos Jr., First Lady Liza Araneta-Marcos, House Majority Leader Sandro Marcos, and former Speaker Martin Romualdez of benefiting from the scheme. 

All four have denied the allegations and have urged Co, who is abroad, to return and substantiate his claims. The scandal has intensified the political pressure on the administration. 

S&P cited “large-scale but largely peaceful” demonstrations over the past three months, leading to the planned Trillion Peso March set for 30 November in major Philippine cities and places abroad where overseas Filipinos have mobilized.

“We do not foresee the protests leading to political instability,” S&P said. “The direction of policymaking has not changed, and the government remains committed to delivering pro-business and pro-growth conditions.”

S&P said fiscal buffers built through years of prudent management before the pandemic have thinned, but fiscal consolidation is ongoing. Government deficits are gradually narrowing, and the public debt burden has begun to stabilize, it explained.

The country’s external position remains a key strength, though recent current account deficits have eroded net external assets, it added. S&P warned that further erosion of the long-term growth trend may weaken fiscal and debt metrics.

RCBC chief economist Mike Ricafort welcomed the affirmation, noting that the credit rating has carried a positive outlook since 26 November 2024 — placing the country in contention for a possible upgrade in 2026.

Meanwhile, the Bangko Sentral ng Pilipinas and the Department of Finance hailed S&P’s decision. 

BSP Governor Eli Remolona Jr. said the rating reflects confidence in favorable long-term growth prospects, while Finance Secretary Frederick Go said the outcome validates government efforts to manage debt and support stability.

Growth outlook

The BSP highlighted the country’s gross international reserves of $110.2 billion as of end-October — enough to cover 7.4 months of imports, double IMF adequacy benchmarks. 

For its part, the DoF cited strong labor numbers, with unemployment averaging 4.1 percent in the first nine months of 2025.

S&P expects only a 4.8-percent GDP growth this year, below the government’s 5.5 to 6.5-percent target, citing reduced infrastructure spending and weaker household consumption. 

Infrastructure outlays contracted 26 percent in the third quarter due to tighter scrutiny of projects tied to the corruption probe.

Still, the agency projects growth to rebound to 6.2 percent from 2026 to 2028, driven by private consumption, investments, and reforms such as the CREATE MORE law, which aims to boost foreign direct investments.