Philippine economic outlook steady – JCR

Cites strong growth, easing inflation

MANILA, Philippines —  The Philippine economy remains resilient on the back of strong growth, easing inflation and fiscal consolidation efforts under the Marcos  administration, according to Japan Credit Rating Agency (JCR).

In a report, the Tokyo-based debt watcher expects the Philippine economy to sustain its momentum after posting a 5.7-percent gross domestic product (GDP) growth in 2024, fueled by consumption and infrastructure spending.

“High growth is expected to be retained over the medium-term,” it said. “A stable medium- to long-term economic growth is expected to be achieved by boosting domestic demand from a demographic perspective and by supporting the potential growth rate through labor input.”

Inflation, which spiked to 8.7 percent in 2023, has since cooled significantly, hitting 1.5 percent in August. Inflation averaged 1.7 percent in the first eight months.

JCR said this easing trend “has supported household consumption while accelerating the reduction in poverty.” The national poverty rate fell to 15.5 percent in 2023, faster than government targets.

On the fiscal side, the credit rater noted progress in deficit reduction and debt stabilization.

“The fiscal consolidation efforts promoted by the Marcos  administration under its Medium-Term Fiscal Framework has been successful and JCR expects the country’s fiscal soundness to be sustained,” the debt watcher said.

The central government’s debt-to-GDP ratio stood at 60.7 percent at end-2024, while the fiscal deficit narrowed to 5.7 percent of GDP from 6.2 percent in the previous year.

JCR also cited the Philippines’ strong external buffers, with foreign exchange reserves at $106.3 billion at the end of 2024, equivalent to 3.8 times short-term external debt.

“Given its solid foreign currency liquidity position, JCR believes the Philippines would stay remarkably resilient against external shocks,” it said.

JCR also cited the country’s stable financial system as one of the key factors behind the Philippines’ sustained investment-grade credit rating of “A-” with a “stable” outlook.

It listed strong loan growth, lower non-performing loans ratio and capital adequacy ratios that are “well above” both Philippine and international standards.

Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. welcomed JCR’s latest report.

“The BSP continues to implement policies that promote robust capitalization and sound risk management among banks. These support financial stability and further build confidence in the domestic financial system,” he said.

At the same time, the agency warned that key risks could weigh on credit quality moving forward. “Reducing income disparity through rural development and infrastructure development remains a key challenge,” JCR said.

It also flagged the political environment, citing the failed impeachment attempt against Vice President Sara Duterte and the upcoming Bangsamoro elections in October as potential flashpoints.

Looking ahead, JCR said the Philippines’ ratings could improve if reforms succeed in raising income levels, cutting poverty and sustaining investments.