Lower borrowings, faster growth trim debt-to-GDP ratio to 60.2%

MANILA  -Government debts, as a share of the economy, fell in the third quarter on the back of lower borrowings and a faster-than-expected gross domestic product (GDP) growth, the Bureau of the Treasury reported Thursday.

Data showed the debt-to-GDP ratio improved to 60.2 percent in the third quarter, from 61 percent in the second quarter.

The debt-to-GDP ratio is a closely-watched indicator of the government’s ability to settle its obligations.

Economists believe that debt would stay at manageable levels as long as the economy grows faster than state liabilities. The idea is that a healthy economic expansion means more revenues would be generated by the government to pay for its borrowings.

Despite the improvement, the debt-to-GDP ratio in the third quarter remained above the 60-percent threshold deemed manageable for emerging economies like the Philippines.

READ: Economic team of Marcos Jr. admin aims to lower deficit-to-GDP ratio to 3% by 2028

But the good news is the figure is now ahead of the government’s target of bringing the ratio down to 61.4 percent this year. At the same time, the Treasury said the ratio is on track to fall below 60 percent before 2025, or earlier than expected.

In a Viber message to reporters, National Treasurer Sharon Almanza explained that the easing of debt-to-GDP ratio was due to “lower borrowings” as the government remains relatively safe from breaching its fiscal deficit ceiling, and “higher GDP”.

READ:  PH economy grew by 5.9% in Q3

Data released Thursday showed the economy grew 5.9 percent year-on-year in the third quarter, stronger than the 4.3 percent annual expansion in the preceding three months.

Meanwhile, figures from the Treasury showed the government’s deficit-to-GDP ratio stood at 5.71 percent in the third quarter, still below the 6.1 percent cap for this year.