Philippines' debt-to-GDP ratio hits 17-year high of 63.7% in Q3

The Philippines’ debt-to-gross domestic product (GDP) ratio ballooned to a fresh 17-year high as of the third quarter of 2022, data from the Bureau of the Treasury (BTr) showed.
 
As of end-September this year, the debt-to-GDP ratio—the amount of the government’s debt stock relative to the size of the economy—rose to 63.7% from 62.1% in the second quarter of 2022.

This is the highest debt-to-GDP ratio since 2005, when it hit 65.7%, well over the internationally recommended threshold of 60%.

The amount of the government’s debt relative to the size of the economy or debt-to-GDP ratio rises to a new 17-year high as of the third quarter of 2022, data from the Bureau of the Treasury showed. pic.twitter.com/PLPjI7qhib

— Ted Cordero (@Ted_Cordero) November 11, 2022

The economy as measured by GDP, or the total value of goods and services produced, grew by 7.6% during the July to September period, faster than the upwardly adjusted 7.5% GDP growth in the second quarter of the year.
 
The country’s debt, meanwhile, swelled to a new record high of P13.517 trillion as of the end of September 2022, as the government issued securities to raise funds to support the budget, coupled with the peso’s weakening against the US dollar.
 
ING Bank Manila senior economist Nicholas Antonio Mapa told GMA News Online that the “debt-to-GDP ratio inched higher despite the sterling third quarter GDP report.”
 
“This highlights the need for the government to address issues such as escalating debt and surging inflation. Third quarter GDP was stronger than expected, but other factors such as high debt and inflation could translate to headwinds that would slow growth and lead to other issues down the line,” Mapa said.

President Ferdinand Marcos Jr.’s chief economic manager, Finance Secretary Benjamin Diokno, earlier announced that the administration aims to bring down the debt-to-GDP ratio to 52.5% by 2028.
 
The debt-to-economy level is intended to decline continuously to 61.8% in 2022, 61.3% next year, 60.6% by 2024, and 59.3% by 2025.

Prior to the COVID-19 pandemic, the Philippines’ debt-to-GDP ratio reached a record low of 39.6% in 2019.

“The recent sharp increase in the national government’s borrowings through RTBs (retail treasury bonds) and global bonds to hedge or even frontload the financing requirements amid the rising trend in US and local interest rates… would likely keep the debt-to-GDP ratio at 63% to 64% for the rest of 2022, above the international threshold of 60%,” Rizal Commercial Banking Corp. chief economist Michael Ricafort said.
 
To bring down debt levels, Ricafort recommended fiscal reform measures such as intensified tax collections, higher tax rates, and even possible new taxes; as well as measures to further reduce or discipline government spending, such as the proposed rightsizing of the government, further reducing leakages or corruption in government spending, and preventing “white elephant” or very costly government projects.

However, Ricafort said raising taxes or imposing new ones is not a good idea as it could add to inflationary pressures.

“But once inflation stabilizes, there is a need to push for more tax reform measures, at the very least to intensify tax collections,” he said.
 
“Faster economic growth amid further reopening would be the biggest catalyst to help reduce the debt-to-GDP ratio, similar to the fiscal improvements seen over the past 10-20 years. Effectively expanding the GDP denominator/base, mathematically.”  — VBL, GMA Integrated News