Philippines' debt-to-GDP ratio shrinks to 60.2% as of end-September 2023

The level of the country’s debt stock relative to the size of the economy as measured by debt-to-gross domestic product (GDP) ratio subsided as of end-September 2023, data released by the Bureau of the Treasury (BTr) on Thursday showed.

As of the third quarter of the year, the country’s debt-to-GDP ratio stood at 60.2%, down from 61% as of end-June 2023.

This is also an improvement from the 63.6% debt-to-GDP ratio seen as of the third quarter of 2022 and 60.9% seen for the entire 2022.

The better debt-to-GDP level as of July to September 2023 came after the faster economic growth seen in the same period of 5.9%, from 4.3% in the second quarter. 

Moreover, the country’s sovereign debt saw a slight decline as of end-September this year to P14.27 trillion, down 0.6% from P14.35 trillion debt stock as of end-August 2023.

Debt-to-GDP ratio measures the amount of the national government’s outstanding debt proportionate to the value of the economy during a specific period.

A lower debt-to-GDP ratio indicates that the country can pay off its debt without having adverse impacts on the economy.

“With the latest development, the national government’s end of year debt ratio is likely to be lower than the 2023 Medium Term Fiscal Framework (MTFF) target of 61.4%,” the Treasury said. 

“Moreover, the debt-to-GDP ratio is on pace to fall below 60% earlier than the 2025 MTFF commitment,” it said.

Under the administration’s MTFF, the government aims to bring down the debt-to-GDP ratio to less than 60% by 2025 and further shrink it to 51.1% by 2028.

Finance Secretary Benjamin Diokno earlier said that the country’s debt management strategy prioritizes the domestic market over external sources to protect the country against foreign exchange risk as fluctuations in exchange rates run the risk of increasing debt service payments each time the peso depreciates.

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