Upgrade path intact despite governance noise
From AB Capital's The Opening Bell: Three Moves
Event
S&P maintained the Philippines at BBB+ with a positive outlook, citing improving fiscal and external balances. Despite political controversy around flood control projects and slower 4Q25 GDP growth, the agency sees potential for an upgrade within one to two years.
View
We believe this reinforces sovereign credibility even amid governance headlines. Narrowing current account deficits near 3% of GDP and gradual fiscal consolidation support credit buffers. In our view, improved macro stability lowers sovereign risk premiums, supporting valuations across rate-sensitive sectors.
Catalyst
Key catalysts include sustained deficit reduction and clearer infrastructure execution. If growth stabilizes near S&P’s 5.7% forecast, upgrade momentum strengthens. Risks include prolonged political noise or weaker revenue growth. A wider current account deficit could materially delay the rating trajectory.
Action
We favor banks, infrastructure developers, and REITs that benefit from lower funding costs if upgrade momentum builds. Sovereign risk compression could support equity rerating, though execution risks keep conviction balanced.
Disclaimer: The information, analyses, and views contained herein is based on sources which we, AB Capital Securities, believe are reliable, but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or solicitation of an offer to sell or buy the securities herein mentioned. AB Capital Securities and its Directors and Officers and/or members of their families may have a position in the securities herein mentioned and may make purchases and/or sales of the securities from time to time in the open-market and otherwise.
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