S&P: Upgrade prospects delayed as external risks rise
From AB Capital's The Opening Bell: Three Moves
Event
S&P revised the Philippines’ outlook to stable from positive while affirming its BBB+ rating, citing oil shock risks. Current account deficit is seen widening to 4% of GDP, while fiscal support measures increase near-term pressure.
View
The outlook revision reflects higher near-term pressure on fiscal and external metrics. Elevated oil prices widen the import bill and current account deficit, while subsidy measures increase spending. These factors slow the pace of fiscal consolidation and reduce the likelihood of a near-term rating upgrade.
Catalyst
Oil trajectory and fiscal execution are key. At sustained elevated oil prices, deficits and external gaps could widen further. If energy pressures ease by the second half, we think consolidation could resume, supporting a potential return to a positive outlook trajectory.
Action
We think the development supports a cautious stance on rates and FX-sensitive assets. Favor defensives and exporters benefiting from peso weakness, while monitoring fiscal discipline and external balances as key determinants of sovereign risk premium and market valuation direction.
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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