THE national government ended 2020 with a record-high outstanding debt of P9.795 trillion and a 14-year-high debt-to-GDP ratio of P54.5 percent as the government had to borrow more money to fund its response to the Covid-19 pandemic.
The outstanding level of the government debt last year ballooned by 26.7 percent from P7.73 trillion by end-2019, latest data from the Bureau of the Treasury showed.
However, this was below the government’s earlier projection of P10.16 trillion. It was also lower compared to P10.13 trillion recorded as of end-November last year, due to the net redemptions of domestic loans.
The size of the national government’s debt to the country’s GDP in 2020 also jumped to 54.5 percent, its highest in 14 years since it recorded a debt-to-GDP ratio of 58.8 percent in 2006.
This, after the country recorded a historic low debt-to-GDP ratio of 39.6 percent at end-2019.
The actual debt-to-GDP ratio in 2020 was also slightly higher than the government’s projection of 53.5 percent and pre-pandemic target of 40.2 percent.
The Treasury attributed the significantly bigger debt-to-GDP level in 2020 to “higher financing requirement to address the pandemic alongside a 9.5-percent contraction in the economy for the year.”
Broken down, the country’s domestic debt grew by 30.6 percent to P6.69 trillion by 2020, coming from P5.128 trillion in 2019.
Because of the repayment of P540 billion in provisional advances from the Bangko Sentral ng Pilipinas, the domestic debt as of December last year was trimmed down by 6.9 percent from end-November level of P7.19 trillion.
On the other hand, the Philippines’s external debt rose by 19.1 percent to P3.1 trillion as of end-December last year from P2.6 trillion in the previous year. This was also up by 5.4 percent from P2.94 trillion in November 2020.
UnionBank Chief Economist Ruben Carlo O. Asuncion told the BusinessMirror this development is expected with every other country in the region increasing debt levels to combat the impact of a once-in-a-lifetime pandemic.
“PH is a little over the average for emerging economies [35-54 percent of GDP] of debt level, according to the IMF [International Monetary Fund]. In my opinion, this is still a comfortable level considering the country’s standing coming into 2020. Appropriate fiscal policy expansion is still a major factor for eventual full recovery of the PH economy,” Asuncion told the BusinessMirror via SMS.
Rizal Commercial Banking Corporation Chief Economist Michael Ricafort said the increase in the country’s outstanding debt largely reflects the government’s increased spending on Covid-19 programs that widened the country’s budget deficit partly due to lower tax revenue collections.
“The latest rise in the country’s debt-to-GDP ratio to 54.5 percent in 2020, from the record low of 39.6 percent, is still within/below the international acceptable threshold of 60 percent of GDP, thereby giving the government greater leeway to increase spending, budget deficits, and overall debt to pump-prime the economy,” Ricafort said in a message to the BusinessMirror.
He also said the country’s debt-to-GDP ratio has been lower compared to many Asean/Asian countries in recent years and recently amid much bigger economic stimulus and wider budget deficits that entailed more debt to deal with the adverse economic effects of Covid-19.
“Despite the rise in the country’s debt levels, the country’s credit ratings were affirmed by Fitch, S&P and Moody’s; even upgraded by Japan Credit Rating Agency despite the Covid-19 pandemic/lockdowns that caused downgrades in some countries around the world,” he said.
Meanwhile, the Treasury also reported that the country’s total guaranteed obligations went down by 6.2 percent to P458.35 billion by end-2020 from P488.75 billion in 2019.
Compared to end-November level of P442.825 billion, total guaranteed obligations in December posted a 3.5-percent increase attributed to the net availment of domestic guarantees and third currency adjustment adding to the peso value of external guarantees.
The Treasury said these more than offset the P0.29-billion effect of local currency appreciation and the P13.18-billion net repayment of external guarantees.
For this year, Finance Secretary Carlos G. Dominguez III said they expect the country’s debt to further rise to 57 percent of GDP as the country aims to borrow a total of P3.03 trillion, roughly the same amount it borrowed in 2020.