National debt eases to 62% of PH economy as of end-June

Metro Manila (CNN Philippines, August 10) – The country’s outstanding debt has fallen to 62.1% of the economy as of end-June, according to latest Bureau of the Treasury figures.

This is lower than the 63.5% debt-to-GDP (gross domestic product) ratio tallied by the end of the first quarter, the highest since 2005.

Despite the decline, the latest level is still above the international threshold of 60%.

Former President Rodrigo Duterte stepped down from office in June with ₱12.79 trillion in outstanding debt as the government increased borrowings amid the COVID-19 pandemic.

Domestic debt stood at 42.6% of GDP at the end of the second quarter, down from 44.4% three months prior.

However, foreign loans slightly rose to 19.5% of economic output from 19.1% from the first quarter.

RCBC chief economist Michael Ricafort said the quicker growth in revenues during the period helped bring down the ratio. The absence of large-scale lockdowns also played a part as these stricter measures cost the government more in financial aid and foregone collections, he added.

“Intensified tax collections based on existing tax laws, new taxes, and higher tax rates, as well as more disciplined government spending still needed to sustain the improvement/easing in the debt-to-GDP ratio, as well as for more sustainable fiscal/debt management over the long-term and for the coming generations,” said Ricafort.

The analyst also warned higher inflation and interest rates, along with the risk of recession in the United States, could drag domestic growth and in turn, the reduction of the debt-to-GDP ratio.

President Ferdinand “Bongbong” Marcos Jr.’s economic team expects the debt-to-GDP ratio to drop to 61.8% by end-2022, dwindling gradually through the years until it falls below 60% by 2025.

By the end of the Marcos administration in 2028, outstanding debt is expected to only be 52.5% of the economy.

Finance Sec. Benjamin Diokno said the economy must grow enough to ensure adequate resources for basic services and outpace borrowings. An expanding economy will help bring the debt-to-GDP ratio down, he recently told CNN Philippines.

Economic growth settled at 7.4% in the second quarter, slower than the revised 8.2% pace in the first three months of 2022.