The share of the country’s total liabilities to gross domestic product (GDP) has declined to 60.9 percent by end-2022 but it is not considered to be an alarming level given the strong economic fundamentals, Deputy Treasurer Erwin Sta. Ana said Friday, Feb. 3.

In an interview during the Laging Handa public briefing, Sta. Ana said the country’s debt-to-GDP ratio has improved from the 17-year high 63.7 percent at the end of the third quarter of 2022, which is above the 60 percent international threshold.

He attributed the improvement to the recovery of the domestic economy, higher government’s revenue collections and payment of some of the government’s liabilities, among others.

Sta. Ana said the domestic economy expanded by 7.6 percent in 2022, higher than the government’s 6.5 to 7.5 percent growth assumption for last year, as more economic activities resumed.

Sta. Ana said the debt-to-GDP ratio rose significantly during the pandemic given the need to finance the heath crisis-related spending.

In end-2019, the country’s debt-to-GDP ratio was at 39.6 percent.

“Iyong 60 percent (debt-to-GDP ratio) po ngayon, at this time, and because of the pandemic, is not really seen as something that’s very alarming, especially when the fundamentals of the economy are really strong (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 said debt-to-GDP of Thailand is similar to that of the Philippines but those of Malaysia and Singapore’s are higher.

“So ang tingin po naming, since and debt-to-GDP is a measure of your ability to service your debt or yong 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 call debt sustainability, the Philippines is in a good position,” he added.

During the same briefing, Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort said the country’s debt-to-GDP ratio is expected to improve further as the economy continues to recover from the pandemic.

Among others, this development provides the necessary leeway for the country to keep its investment grade ratings, which are currently at one to three notches above the minimum investment grade, he said.

This, he added, will also allow the government to take out loans at a lower cost.

Ricafort said disciplined spending and continued implementation and push for additional fiscal reform measures will also help lower than debt-to-GDP ratio of the country.

From around 70 percent level in 2004-2005, he said the share of liabilities on the growth of the domestic economy has declined and this showed a good track record for the government.

Ricafort said that while there is still a need for the government to borrow more to address its fiscal deficit, it is worth noting that government spending has improved, as priority has been given to infrastructure investments, among others, which has long-term economic impact.PNA