MANILA - Debt watcher S&P Global Ratings affirmed on Thursday the Philippines’ investment-grade credit rating of BBB+ with a stable outlook, saying the country’s economy was beginning to recover from the disruptions of the COVID-19 pandemic.

S&P however also warned that it “may lower the rating if the Philippines' nascent economic recovery falters over the next 24 months.”

The credit ratings firm said the country’s economy was on the way to recovery and that growth should accelerate further in 2022 as the pace of COVID-19 vaccinations picks up and the pandemic becomes more contained.

“The stable outlook reflects our expectation that the Philippines' economy will achieve a healthy economic recovery and that its fiscal deficits will decline significantly over the next two to three years,” S&P added.

It noted that the country's debt and fiscal metrics have weakened amid the severe pandemic-driven downturn, but added that it expects stabilization and improvement on these fronts as the economy recovers.

The Bangko Sentral ng Pilipinas said S&P’s move shows that “the Philippines continues to defy the wave of credit rating downgrades and negative outlook revisions across the globe.”

“The move of S&P to keep the country’s BBB+ credit rating echoes our view that the impact of the COVID-19 crisis on the economy will be transitory and that the Philippines continues to enjoy bright medium-term growth prospects,” said BSP Governor Benjamin Diokno.

S&P’s affirmation of the country’s rating supports the government’s optimism that the Philippines can bring back its deficit and debt ratios as well as growth to pre-pandemic levels once the pandemic is contained, the BSP quoted Finance Secretary Carlos Dominguez.

The debt watcher however also warned of a possible ratings downgrade.

“We may lower the rating if the Philippines' nascent economic recovery falters over the next 24 months, leading to a significant erosion of the country's long-term trend growth rate, or an associated deterioration of the government's fiscal and debt positions beyond our projections,” it said.

But S&P added that it may also raise the rating over the next two years if the economy recovers much faster than expected, and the government achieves more rapid fiscal consolidation.

“We may also raise the rating if the institutional settings, which have contributed to a significant enhancement in the Philippines' pre-pandemic credit metrics over the past decade, further improve,” S&P said.

• Fitch Solutions lowers PH growth forecast, says rebound to be slower
• PH a regional laggard amid struggle with virus: Moody's Analytics
• PH economy seen growing 9.6% this year despite delayed vaccination program

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