S&P held off credit upgrade amid scandal

Debt watcher S&P Global Ratings could have upgraded the Philippines’ credit rating this year if not for the eruption of cases involving alleged corruption in the flood control budget, President Ferdinand R. Marcos Jr.’s chief economic manager revealed.

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Department of Finance (DOF) Secretary Ralph G. Recto disclosed to reporters on the sidelines of the Senate finance subcommittee’s briefing on the DOF’s 2026 budget proposal that S&P held back on upgrading the Philippine sovereign credit rating from BBB+ to A-.

This comes after Recto cautioned that the proposal to trim the value-added tax (VAT) rate to 10 percent from the current 12 percent could hurt the country’s credit rating.

“If not for this flood control issue, when we met with S&P Global, they were ready to give us a credit rating upgrade. We were already going to move up a notch. It’s a pity,” Recto said on Tuesday, Oct. 14.

Despite this, the Finance chief remains hopeful that the credit rating agency will maintain its current rating and outlook for the Philippines.

On the VAT front, Recto said the rate reduction would erode government revenue collections, which the DOF estimates would drop by an average of P300 billion annually. This decline would be equivalent to one percent of the country’s economic output.