THE Philippines’s debt-to-GDP ratio at 54.5 percent last year is “slightly higher” compared to the average debt ratio of Asean-5 at 51.5 percent, according to the Department of Finance.
Based on the 2017-2020 data provided in the economic bulletin of Finance Undersecretary and Chief Economist Gil Beltran, it was only last year that the Philippines’s debt ratio exceeded the Asean-5 average.
Aside from the Philippines, countries included in the Asean-5 are Indonesia, Malaysia, Singapore and Thailand.
Despite the Philippines debt-to-GDP ratio rising to a 14-year high last year from a record low of 39.6 percent in 2019, Beltran said the Philippines is “at the middle of the scale” within Asean.
Beltran noted, though, that lower interest rates “helped cushion” the fiscal impact of the country’s higher debt-to-GDP ratio.
He pointed out interest payments rose only by 5.4 percent to P380.4 billion in 2020 from P360.9 billion in 2019.
“The ratio of interest payments to revenues thus increased from 11.50 percent to 13.32 percent, up by 1.82 percentage points, but the ratio of interest payments to expenditures declined by 0.5 percentage point from 9.5 percent to 9.0 percent,” he said.
Average interest rate on the national government’s outstanding debt also declined from 4.67 percent in 2019 to 3.88 percent in 2020, Beltran said.
Nonetheless, the finance department expressed optimism that the risks from debt exposure are “minimized” as long as debt is managed prudently.
Apart from this, it would also help if “additional resources continue to be obtained for projects that contribute favorably to development.”
Beltran said the Covid-19 pandemic also helped widen the national government’s budget deficit to 7.6 percent of GDP, the highest in the country’s history.
However, unlike previous high deficit episodes when the government had to face both sky-high interest rates and a weakening peso, he said the national government emerged from this year’s episode with “lower debt service, low interest rates and a stronger peso.”