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Debt-to-GDP in the Philippines is still below worrisome levels.

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According to Deputy Treasurer Erwin Sta. Ana, the ratio of the nation’s total liabilities to GDP has decreased to 60.9% by the end of 2022, however, this level is not regarded as concerning given the sound economic fundamentals.

The debt-to-GDP ratio of the nation has decreased from the 17-year high of 63.7 percent at the end of the third quarter of 2022, which is beyond the 60 percent international benchmark, according to Sta. Ana in an interview during the Laging Handa public briefing.

He ascribed the improvement, among other things, to the domestic economy’s revival, improved tax collections, and the settlement of some government debt.

In 2022, the domestic economy grew by 7.6 percent, exceeding the government’s forecast of 6.5 to 7.5 percent growth for the previous year, according to Sta. Ana.

According to Sta. Ana, the debt-to-GDP ratio dramatically increased during the pandemic as a result of the necessity to pay for spending associated with the health issue.

The nation’s debt-to-GDP ratio was 39.6 percent as of the end of 2019.

The 60 percent debt-to-GDP ratio now, as a result of the pandemic, is not really seen as something that’s very alarming, especially when the fundamentals of the economy are really strong, he said.

Sta. Ana stated that while Malaysia’s and Singapore’s debt-to-GDP ratios are greater, Thailand’s is comparable to the Philippines’.

Therefore, he continued, “since debt-to-GDP is a measure of your ability to service your debt or what you refer to as debt sustainability, nasa magandang posisyon po ang Pilipinas (We think that since debt-to-GDP is a measure of your ability to service your debt or what you refer to as debt sustainability, the Philippines is in a good position).”

Michael Ricafort, chief economist of Rizal Commercial Banking Corporation (RCBC), stated during the same briefing that the nation’s debt-to-GDP ratio is anticipated to continue to decline as the economy continues to recover from the epidemic.

According to him, among other things, this development gives the nation the room it needs to maintain its investment grade ratings, which are currently one to three notches over the minimum investment grade.

This will also enable the government to obtain loans at a more affordable rate, he continued.

According to Ricafort, fiscal restraint, ongoing implementation of existing fiscal reform measures, and advocacy for new ones will all contribute to a decrease in the nation’s debt-to-GDP ratio.

He said that the percentage of obligations on the expansion of the domestic economy has decreased from a level of almost 70 percent in 2004–2005, demonstrating the government’s success.

Although the government still has to borrow more money to reduce its budget deficit, Ricafort said that government spending has improved as a result of prioritizing investments in infrastructure, among other things, which have a long-term economic impact.

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