S&P cuts Philippines outlook to 'stable' as Middle East conflict lifts inflation risks

April 8 (Reuters) - Credit ratings agency S&P Global on Wednesday revised the Philippines' outlook to "stable" from "positive," citing heightened risks to the country's external and fiscal metrics stemming from the war in the Middle East.

Higher energy prices would widen the country's current account deficit and erode buffers in the net external asset position, S&P said, warning that energy shocks since March would weigh on economic activity and consumer sentiment in the first half of 2026.

The Philippines' central bank on Tuesday warned of ' spillover effects ' on consumer prices from sharp oil price increases, after headline inflation rose to 4.1% in March from 2.4% in February, breaching its 2% to 4% target range for the year.

This marks the highest inflation reading since the July 2024 figure of 4.4%.

The Bangko Sentral ng Pilipinas said risks to inflation had tilted sharply to the upside as the Middle East conflict drives fuel and transport costs higher, underscoring the economy's vulnerability due to its heavy reliance on Middle East oil.

S&P said it expects GDP growth of 5.8% in 2026, with weaker momentum in the first half due to softer consumption and a slowdown in public infrastructure spending, followed by a rebound in the second half.

The agency, however, affirmed the Philippines' "BBB+" long-term and "A-2" short-term sovereign credit ratings.