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PHL debt now at 62.1% of GDP

THE National Government’s (NG) outstanding debt as a share of the gross domestic product (GDP) eased to 62.1% at the end of June.

Data from the Bureau of the Treasury showed the latest quarterly debt-to-GDP ratio was lower than 63.5% as of end-March.

The debt level in GDP terms was 1.4 percentage points lower than the previous quarter’s 63.5%, the highest since 65.7% in 2005.

However, this still exceeded the 60% threshold considered manageable by multilateral lenders for developing economies.

At 62.1%, the debt-to-GDP ratio was higher than 60.4% at the end of 2021, and 39.6% at the end of 2019 or before the pandemic.

Outstanding NG debt rose by 2.4% to a record P12.79 trillion at the end of June, “due to the net issuances of domestic and external loans as well as currency adjustments.”

The debt stock was equivalent to 59.4% of the gross national income. The debt service bill was equivalent to 2.7% of GDP.

“The quarterly easing of the debt-to-GDP ratio was partly due to relatively faster economic growth that widened the GDP base and also effectively reduced the debt-to-GDP ratio, as seen in previous economic cycles,” said Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort.

“The faster growth in the government’s tax revenues as the economy reopened further towards greater normalcy also partly helped the debt-to-GDP ratio,” he added.

The Philippine economy grew by 7.4% in the second quarter, slower than 12.1% a year earlier and 8.2% in the previous quarter.

Mr. Ricafort attributed the reduction of the debt to the lack of large-scale lockdowns, which lessened the need for the government to ramp up borrowings.

“Large-scale lockdowns during the pandemic, were very expensive for the government in terms of foregone tax revenues, more spending on financial assistance, healthcare system, and other COVID-19 programs,” he said.

Asian Institute of Management Economist John Paolo R. Rivera said the lower debt-to-GDP ratio might have been brought about by fluctuating foreign exchange rates.

Finance Secretary Benjamin E. Diokno last month said the government seeks to bring down the debt-to-GDP ratio to 61.8% by end-2022. It is expected to steadily drop to 61.3% by next year all the way to 52.5% by 2028.

“This kind of debt structure is nothing to worry about. This is one of the lowest among emerging markets… The way out of this is by growing at a faster rate. We simply outgrow our debt,” Mr. Diokno has said. — Diego Gabriel C. Robles

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