Debt as a share of gross domestic product (GDP) could come in at 63% by yearend following the growth slowdown in the third quarter, a senior legislator said, citing projections by the Development Budget Coordination Committee (DBCC).
Senator Sherwin T. Gatchalian, who chairs the Senate finance committee, said the DBCC’s estimate indicates a continued breach of the 60% threshold deemed sustainable for developing countries, despite expectations that the government will hit its budget deficit target.
“Despite the headwinds, natural calamities (and) the lower growth forecast, we will still end up with (a) 5.5% deficit and also (a) debt-to-GDP ratio of 63%,” Mr. Gatchalian said during a hearing on the 2026 national budget on Thursday.
The Department of Finance had projected a ratio of 61.3% for the year.
Mr. Gatchalian said the Philippines is thus better-situated than its ASEAN peers.
“Post-pandemic, a lot of countries… are in this slightly elevated deficit range and debt-to-GDP range,” he said. “In ASEAN, we’re slightly better compared to our peers, (who are) hovering around 70% debt to GDP.
In the third quarter, the debt-to-GDP ratio stood at 63.1%, a level Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco called “manageable.” This was the same ratio logged in the second quarter.
“The level itself is manageable, considering that a number of countries in the same stage of development as the Philippines have similar debt-to-GDP ratios,” Mr. Chanco told BusinessWorld. “What’s more concerning than the level is the trajectory, as the sustained decline in this ratio before Covid has clearly reversed.”
Mr. Gatchalian said the DBCC is still hoping to restore the debt-to-GDP ratio to its pre-pandemic levels.
“The DBCC is very mindful of our debt stock and they’re very strict in following the medium-term fiscal framework… that will slowly bring down our debt-to-GDP ratio by lowering our deficit, hopefully reaching pre-pandemic levels in the next few years.”
The DBCC maintained its budget deficit cap at 5.5% of GDP or P1.56 trillion this year.
“There are a lot of headwinds and events beyond our control, for example the typhoons,” Mr. Gatchalian said. “But regardless, we will be hitting (our) target deficit at 5.5%.” — Katherine K. Chan
