PH’s debt ratio at 17-year high – Manila Bulletin

The country’s debt ratio hit a 17-year high in the third quarter of this year as new government loans continued to pile up, data from the Treasury Office showed.

In September 2022, outstanding national government bonds as a percentage of gross domestic product (GDP) reached 63.7%, up 1.6 percentage points from 62.1% in June. It also fell from 62.1% in the second quarter, 63.5% in the first quarter and 60.4% for the whole of 2021.

Based on Treasury data, the latest quarterly debt-to-GDP figure was the highest since 65.7% in 2005.

The debt ratio at the end of September is above the international threshold of 60% considered by debt watchers to be manageable among emerging markets like the Philippines.

A high level of debt to GDP jeopardizes the investment status of the country.

Last October, Fitch Ratings maintained its negative outlook for the Philippines amid rising consumer prices, tighter financial conditions and uncertainty in the global economic environment.

But despite the challenges, Finance Secretary Benjamin E. Diokno said the Marcos administration is determined to bring the government’s debt ratio down to 52% by 2027, below the 60% threshold.

“Right now, the national debt-to-GDP ratio, as we expect, is around 61.8%. It will fall back to 61.3% by 2023, then drop back to 60.6% by 2024, then to 59.3% by 2025, 57.7% by 2026 and 2027 to 52.5% said Diokno.

“In other words, by the end of the Marcos years, we expect the national debt-to-GDP ratio to be below 60%,” he added.

According to Diokno, a debt level above 50% is not harmful, citing the current global debt-to-GDP ratio of between 200% and 300%.

At the end of September 2022, the national government’s outstanding debt stood at 13.517 billion pesos.

“The way out of this is to grow at a faster rate, we’ve just exceeded our debt, most of our debt, incidentally, our medium to long term,” Diokno said.

Asked if the Marcos administration plans to bring back the 39.6% debt ratio seen before the pandemic hit in 2022, Diokno replied “given where we come from, I think this It will be a mistake for us to aim for this level”.

“I think we need to prioritize growth first, to meet the needs of our employees rather than going back to that number. It’s not crucial to go back to 39, we need to prioritize our growth and needs of Filipinos,” said Diokno.

Since 2019, total national government debt has fallen by just 7,731 billion pesos, or 39.6% of GDP.

Last April, former finance secretary G. Dominguez III said the new administration should avoid racking up additional debt and prioritize policies that will spur more economic activity.

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John A. Bogar