Philippines Country Risk Rating

The Philippines remains medium-high overall. Political violence is rated high, reflecting the persistent threat from communist and Islamist insurgencies, periodic localised violence and the possibility that repeated maritime confrontations with China in the South China Sea could escalate through miscalculation. Domestic politics also remain polarised between President Ferdinand Marcos Jr. and the Duterte camp, while the administration has faced sustained scrutiny over alleged irregularities in flood-control and infrastructure spending. Political interference remains medium, but legal & regulatory risk is medium-high as corruption concerns, uneven enforcement and delays in public procurement continue to complicate the operating environment. Supply-chain disruption is also medium-high because the archipelago remains highly exposed to typhoons, port and transport bottlenecks and imported-energy shocks. Economic conditions have weakened noticeably since the May assessment. GDP expanded by only 2.3% year-on-year in Q2 2026, the slowest pace since 2021, bringing first-half growth to 2.6%. Construction contracted sharply and investment fell, partly reflecting the disruption to public works following the infrastructure corruption scandal. The government now expects 2026 growth of 3.5%-4.5%, substantially below recent Philippine growth rates. Inflation averaged around 5% through July, with higher energy and transport costs related to the Middle East conflict eroding household purchasing power. The risk of doing business remains medium-high, while banking-sector vulnerability is medium-low, supported by generally sound capital and liquidity buffers. Sovereign non-payment risk, exchange transfer risk and the government’s inability to provide stimulus are all rated medium. Public debt remains manageable and remittance inflows continue to support the balance of payments, but weaker revenue growth and higher borrowing costs are constraining fiscal flexibility. President Marcos has proposed a PHP7.2 trn 2027 budget, around 6% larger than the current plan, in an effort to restore momentum and rebuild confidence in infrastructure spending. Remittances and the diversified services sector continue to offer some resilience, although political friction, weak investment and elevated energy costs are likely to keep the risk profile above regional peers.