A new medium-term country risk assessment for Philippines

End-February 2025, the CMSR prepared a new medium-term country risk assessment for Philippines, following its own country risk assessment methodology.

We classify Philippines as a country with a limited medium-term country risk (C).

The CMSR assigns the assessed country to one of five risk categories:

·         A - Minimal medium-term country risk

·         B - Very limited medium-term country risk

·         C - Limited medium-term country risk

·         D - High medium-term country risk

·         E - Very high medium-term country risk

In addition to the final country risk assessment, each country risk category, i.e. political, economic and financial risk, is also classified into one of these five risk categories.

Philippines’ medium-term political risk is limited, however bordering on high. In the short term, domestic political tensions will continue ahead of the May elections. Tensions within the ruling coalition between the camps of the incumbent President Ferdinand Marcos Jr. and his predecessor Rodrigo Duterte pose a greater threat to political stability than the official political opposition. A split between the two parties could potentially jeopardise or at least delay the implementation of key structural reforms and undermine the effectiveness of the government and government institutions (including the security forces), as well as social stability. The risk of political violence is also increasing. We estimate that Marcos will win the mid-term elections, and that the situation will then calm down. The territorial dispute between the Philippines and China in the South China Sea, with the US on the side of the Philippines and supporting it militarily, poses an even greater threat to internal stability and risks destabilising the Philippine economy. While relations with China will remain tense, relations with the US are expected to remain good, but the Philippine side will remain cautious in view of Trump's unpredictability. With the Marcos government, relations with the EU will also remain good, and negotiations on a free trade agreement will continue, however, it is unlikely that the agreement will be concluded during the Marcos administration. In the long term, political risk is exacerbated by ineffective institutions and high levels of corruption. 

Economic risk is limited in the medium term and financial risk is very limited (but bordering on limited). According to the EIU’s forecasts GDP growth will average 5.9% per year over the period 2025-2028. Economic policy in the medium term will focus on improving social protection, especially for the most deprived, reducing dependence on food imports, improving infrastructure and attracting foreign direct investment. Fiscal policy will become more restrictive after the elections as the government seeks to reduce the high budget deficit and public debt. Inflation will remain within the central bank's target range over the medium term and the peso is expected to start appreciating gradually from 2026. The external trade balance will continue to show a high deficit, with widening surpluses in the services and current transfers balances contributing to a narrowing of the current account deficit. External debt will remain low over the medium term and the government will have no difficulty servicing it. High and rising foreign exchange reserves additionally mitigate financial risk. 

With the opening of the Slovenian embassy in the Philippines, we expect economic cooperation between the two countries to increase in the medium term. The volume of trade in goods is expected to remain modest, at least in the short term, but will eventually start to grow, especially Slovenian exports. The Philippine economy also offers many opportunities for Slovenian companies for higher forms of cooperation. We estimate that the number of Slovenian direct investments in the Philippines could also increase in the medium term. 

Philippines Medium-Term Country Risk Assessment can be ordered at: info@cmsr.si 

More information: darja.zlogar@cmsr.si