MANILA — Moody's Ratings maintained a stable outlook for the Philippines’ banking system saying strong economic growth, further rate cuts and stable inflation in 2025 will  drive credit demand and support loan quality.

Moody's Ratings said it sees the Philippines remaining as one of the fastest growing economies in Asia with real GDP growing 6% in 2025 and 2026.

"Although global uncertainties pose upside risks to inflation, we expect it to remain between 2% and 4%, which will support further policy rate cuts in 2025. As a result, domestic consumption and investments will improve, giving further stimulus to the economy," the agency said in a outlook report released on Wednesday.

It said US President Donald Trump's possible imposition of higher tariffs on the country will have a "muted" effect on the economy compared to its peers given the Philippines' consumption-led model.

Banks' profits will remain broadly stable while capitalization will remain strong, Moody's said.  

"Strong credit growth and the increasing share of higher-yielding retail and small and medium enterprise (SME) loans will also support yields. Credit costs will increase modestly in line with retail and SME loan growth, but remain low as banks run down their existing loan loss reserves," it added.  

Last year, Moody's Investor Service affirmed the Philippines' investment grade BAA2 rating with a stable outlook.

It noted the country's reforms to liberalize the economy, fiscal consolidation efforts, and robust macroeconomic fundamentals. The credit rating firm gave the Philippines the same grade in September 2022.