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Philippines debt may ease this year
MANILA, Philippines — The Philippines‘ debt may ease this year as the economy continues to bounce back from the impact of the COVID-19 pandemic, according to Moody’s Investors Service.
In a report, the debt watcher said it believes the debt burden of the Philippines has peaked, but the scope for significant reduction is limited.
“For only and few sovereigns, including Fiji, Maldives, and the Philippines, debt burdens will decline by several percentage points in 2023, driven by high nominal GDP growth. But their debt burdens will still hover far above pre-pandemic levels,” Moody’s said.
Latest data from the Bureau of the Treasury (BTr) showed that the outstanding debt of the Philippines hit a record high P13.64 trillion as of end-November last year as the peso slumped by as much as 16.7 percent to an all-time low of 59 to $1 in October due to the aggressive rate hikes delivered by the hawkish US Federal Reserve.
The Philippines borrows heavily from both onshore and offshore creditors to finance its widening budget deficit as the country continues to spend more than what it earns from revenue collections.
The debt stock was 14.3 percent higher than the P11.93 trillion recorded as of November 2021.
Domestic borrowing accounted for the majority or 69 percent of the debt pile as of end-November 2022, while 31 percent came from external sources.
Total domestic debt at P9.43 trillion slightly inched up by 0.78 percent on a monthly basis, but jumped 11.7 percent from the P8.44 trillion year-on-year.
External obligations, on the other hand, decreased by 1.62 percent to P4.22 trillion month-on-month, but surged 21 percent from the P3.49 trillion in the same period in 2021.
The lower external debt was attributed to the P106.98 billion impact of local currency appreciation and P13.38 billion net repayment. This was tempered by the net impact of third-currency fluctuations against the dollar amounting to P50.78 billion.
According to Moody’s, debt sustainability and financial stability are relatively well anchored in Asia-Pacific, with contained government liquidity risks, broadly stable debt dynamics, and generally sound external positions.
Moody’s said gross domestic product (GDP) growth would stabilize close to potential levels and outperform other regions despite higher global inflation and tighter financial conditions.
“APAC economies will confront a dynamic set of hurdles and support drivers in 2023. Growth will be lower than in 2022, but close to potential in most cases, underpinning broad credit stability. Slowing economic activity in large export markets such as the US and EU will weaken a major engine of growth for the region, although a modest upturn in China will provide support,” it said.
The debt watcher said it expects output gaps to continue to close in a number of countries where service-sector rebounds are underway, “particularly tourism-oriented economies such as Fiji and Thailand, and those that are midstream in their post-pandemic recoveries such as India, Malaysia and the Philippines.”
It pointed out that financing conditions for sovereigns would be tighter in 2023 than 2022 overall, but the pace of interest-rate hikes in the US and Europe would likely decelerate as inflation peaks, reducing pressure on Asia-Pacific central banks to tighten policy or to mitigate currency depreciation.
“Investment-grade sovereigns will be able to tap global markets opportunistically, as exhibited by sovereign bond issuances by Indonesia and the Philippines in the second half of 2022, and Indonesia again in early January 2023,” it said.
Source: https://www.philstar.com/business/2023/01/10/2236429/philippines-debt-may-ease-year