The economic managers expect the country’s debt to steadily decline to around 50 percent of gross domestic product before the term of President Ferdinand Marcos Jr. ends in 2028.
Before economic disruption caused by the COVID-19 pandemic, the Philippines’ debt-to-GDP ratio stood at 39.6 percent in 2019. The debt burden steadily climbed to end at 61 percent of GDP in 2022 as government resorted to heavy borrowings to fund spending to combat COVID-19 and make up for the shortfall in revenue collection as businesses activity slowed.
At the Committee on Appropriations hearing Thursday night, Nueva Ecija Rep. Rosanna Vergara sought an explanation from Finance Secretary Benjamin Diokno on why the economic managers expect the debt-to-GDP ratio will decline to below 60 percent in 2025.
“Mr. Secretary, will this (ratio) be decreasing because our debt burden will be shrinking or will our GDP be growing and therefore the percentage to GDP will be less?” Vergara asked.
“It is a combination of both. Our target is that it will be around 50 percent to 51 percent by end of President Marcos Jr.’s term. It used to be around 40 percent before the crisis (pandemic),” Diokno said.
A World Bank study in 2013 suggested that economic growth starts to fall when a country’s debt-to-GDP ratio stays over 77 percent for an extended period. Debt-to-GDP is a measure of the country’s ability to pay its borrowings.
