End-Sept. debt-to-GDP pushes past 50%, first since 2010

The share of rising debt to the shrunken economy breached 50 percent at the end of September—the first time since 2010 that liabilities were equivalent to over half of the country’s gross domestic product (GDP).

Department of Finance (DOF) Undersecretary and chief economist Gil Beltran told the Inquirer last week the end-September debt-to-GDP ratio stood at 51.2 percent, which separate Bureau of the Treasury data showed was higher than the 48.1 percent a quarter ago and the record-low 39.6 percent posted at the end of last year.

The national government’s outstanding debt stood at P9.37 trillion as of end-September, up 18.5 percent year-on-year, while GDP fell by an average of 10 percent during the nine-month period following the worse-than-expected fall of 11.5 percent in the third quarter.

With some more additional borrowings in the fourth quarter programmed to finance the fight against the health and socioeconomic crises inflicted by the COVID-19 pandemic, outstanding debt had been projected to hit a new high of P10.16 trillion by yearend. This would bring the debt-to-GDP ratio to 53.9 percent, which should be the highest since 2006’s 58.8 percent.

Treasury data showed that since the government borrowed heavily from local sources, mainly through the auction of T-bills and bonds, the share of domestic debt to GDP further rose to 35.2 percent from 32.9 percent a quarter ago and 26.3 percent in 2019.

External debt as of September also increased to 16 percent of GDP from 15.2 percent in the previous quarter and 2019’s 13.3 percent.

In a report last week, Malaysian financial giant Maybank noted the Philippines posted the biggest jump in public debt among Asean-5 countries.

Estimates from Maybank Kim Eng analysts Chua Hak Bin, Lee Ju Ye and Linda Liu in a report titled “Asean Economics: The Post-Pandemic Normal” showed the Philippines’ public debt climbed to 53.6 percent of GDP as of the third quarter from 42.1 percent last year, or an increase of 11.5 percentage points (ppts).

The public debt increases in its neighboring countries were all below 10 ppts: Malaysia’s rose to 59 percent of GDP as of June from 52.5 percent last year; Vietnam’s is estimated to increase to 58.6 percent as of October from 56.1 percent in 2019; Thailand’s rose to 49.4 percent from 41.2 percent; and Indonesia’s increased to 36 percent from 30.7 percent as of September.

“The Philippines, in particular, has been the most active in central bank asset purchases, which amounted to 7.3 percent of GDP, based on the International Monetary Fund’s estimates,” Maybank said. —BEN O. DE VERA