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Philippine debt-to-GDP ratio seen to hit 50%
The share of the Philippines’ national debt to its overall economy is likely to jump in 2020, according to Capital Economics.
In a report on Monday night, the London-based research consultancy firm estimated that the country’s debt-to-gross domestic product (GDP) ratio could hit 50 percent this year.
The outlook compares with the Philippines’ revised debt-to-GDP ratio of 39.6-percent in 2019.
Despite the forecast, Gareth Leather, Capital Economics’ senior economist for Asia, said the Philppines, along with Indonesia, India, Thailand, Vietnam and Malaysia, “do not face an imminent public debt crisis.”
“Despite the prospect of weak demand, we think these countries [would] focus on bringing government debt down to more comfortable levels,” he added.
According to him, budget deficits in these countries should start to fall as a rebound in economic activity would lead to an increase in revenues and emergency fiscal funding is withdrawn, once the coronavirus disease 2019 (Covid-19) crisis is over.
In the Philippines alone, latest data showed that budget deficit in the first two months of 2020 dropped by 54.30 percent to P14.6 billion from P31.8 billion in the same period in 2019.
Thus, Leather suggested that “in order to ensure that the debt-to-GDP ratio starts to fall, debt levels [would] need to rise at a slower pace than GDP.”
Earlier, Capital Economics said the Philippine economy would contract by 4 percent this year. If true, this would be its worst performance since 1984. It would also settle settle below the government’s revised growth assumption of -0.8 to zero percent for 2020 and the 5.9-percent GDP expansion in 2019.
Leather said the Philippines, as one of the fastest-growing economies in emerging Asia, should be able to “outgrow” a rising national debt problem.
Last week, the Bureau of the Treasury reported the national government’s outstanding debt rose to a record P8.17 trillion at the end of March, fueled mainly by domestic borrowing.
Source: https://www.manilatimes.net/2020/05/06/business/business-top/philippine-debt-to-gdp-ratio-seen-to-hit-50/722960/