MANILA, Philippines — Global debt watcher Fitch Ratings has warned that the Philippines’ economic recovery may be more gradual than initially projected as Middle East-driven oil price shocks place “renewed pressure” on the country’s sovereign credit standing. With the regional conflict entering its third week and global crude prices hovering above $100 per barrel, the Philippines is emerging as one of the most exposed economies in the Asia-Pacific (APAC) region due to its heavy reliance on imported fuel.
Jeremy Zook, Senior Director for APAC Sovereign Ratings at Fitch, noted that while a recovery in 2026 was the baseline expectation, the “escalating military conflict” involving Iran now challenges this trajectory. The country’s GDP growth—already hampered by a 4.4% performance in 2025 following a high-profile corruption scandal—could see further delays in its rebound.
“Growth is quite important for the Philippine rating,” Zook said during a virtual briefing. “If these growth challenges become more ingrained and more structural in nature, then that would really be where the potential rating challenges and rating risks come from.”
The Fitch report highlights several key vulnerabilities for the Philippine economy:
- Fiscal Consolidation Delay: The government’s efforts to narrow the budget deficit—which hit ₱1.58 trillion in 2025—may be stalled as authorities roll out subsidies to cushion the public from the “diesel double whammy.”
- A-Rating Goal at Risk: The Marcos administration’s pursuit of an “A-level” credit rating faces headwinds. While the current “BBB” rating remains stable, any sustained erosion of medium-term growth prospects could trigger negative rating pressure.
- Current Account Pressure: As a large net energy importer, a prolonged period of $100+ oil prices could significantly widen the current account deficit, which currently stands at -3.3% of GDP.
- Inflationary Spillovers: Rising fuel costs are already being felt across the board, with diesel prices surpassing ₱100 per liter in some areas and the Philippine Peso sliding past ₱60 vs $1.
Finance Secretary Frederick Go maintained an optimistic stance, stating that the administration will “continue to pursue the road to A” by strengthening economic fundamentals. Go assured that there would be no immediate need to raise debt levels to fund energy-related interventions, focusing instead on expenditure savings.
However, the threat remains significant. Fitch pointed out that during the 2022 energy shock, the Philippines’ net energy import bill rose by 2.75 percentage points of GDP. A repeat of such a scenario could force the Bangko Sentral ng Pilipinas (BSP) to turn hawkish, with Governor Eli Remolona Jr. previously warning of potential rate hikes if inflation breaches the 4% tolerance limit.
As the country enters the peak dry season and the “Libreng Sakay” programs continue to mitigate transport strikes, the government’s ability to balance social subsidies with fiscal discipline will be the deciding factor in maintaining its credit standing.