Domestic Bonds

Philippines debt ratio to GDP at 63.5%

ANN/HILIPPINE DAILY INQUIRER – As debt piled up at a faster rate than economic growth in the first quarter, the Philippines’ outstanding bonds as a percentage of gross domestic product (GDP) soared further to 63.5% in March.

The latest data from the Bureau of the Treasury (BTr) recently showed that the latest quarterly debt-to-GDP figure was the highest since 65.7% in 2005.

The government announced on Thursday that GDP grew by a better-than-expected 8.3% year-on-year in the January-March period, thanks to further economic reopening, and despite Omicron’s push at the start of This year.

However, outstanding national government debt jumped 17.7% year-on-year to a new high of 12.68 trillion pesos at the end of March, following two commercial borrowings through of bond issues – one in the domestic and offshore debt markets – before the first quarter ended to finance the national budget.

National government debt stock is expected to reach a new high of PHP 13.42 trillion by the end of the year. Even if the economy grew by 7-9% as expected in 2022, the debt-to-GDP ratio – a better measure of a country’s ability to repay its obligations – was still expected to rise to 60.9% of GDP. , falling from the 16-year high of 60.5% last year.

The high debt-to-GDP ratio could jeopardize the country’s investment-grade credit ratings, while putting pressure on the government’s tighter fiscal space – especially the incoming Marcos Jr administration – in the context of the prolonged COVID-19 pandemic.

Separate data from the BTr also showed on Thursday that the stock of locally issued government securities – which accounted for the bulk of outstanding domestic debt – at the end of April hit a new high of PHP 8.64 trillion. . Long-term treasury bills crossed the 8 trillion peso mark for the first time at 8,010 billion pesos, while outstanding treasury bills fell further to 622.6 billion pesos due to maturities. .

In addition, the latest data from the Local Government Finance Bureau (DOF-BLGF) of the Ministry of Finance showed that 13 local government units (LGUs) borrowed 1.8 billion pesos in April to finance their priority projects, mainly projects. infrastructure. In the first four months, a total of 86 LGU borrowers applied for a total of PHP 14.6 billion in loans from government financial services.
institutions (IFG).

In a May 10 report, Oxford Economics Deputy Economist Makoto Tsuchiya and Chief Economist Sian Fenner warned that Marcos Jr’s campaign promise to hand out more cash handouts would lead to expansionary fiscal policy, which which could lead to larger debts as well as budget deficits.

“Marcos faces a delicate balance between sustaining the economic recovery and containing the Philippines’ burgeoning fiscal deficit,” Oxford Economics said.

“Based on the latest budget, we expect it to average 8% of GDP this year, only a modest narrowing from 8.5% in 2021 amid improving incomes thanks to a stronger domestic demand,” added Oxford Economics.

“However, Marcos’ fiscal program is unclear,” Oxford Economics said.

Oxford Economics forecasts the debt-to-GDP ratio to peak at 63.8% this year, still above and well above the 60% threshold deemed manageable by debt watchers in emerging markets like the Philippines.