Debt-to-GDP ratio seen to boost PH credit rating

A Roman Catholic nun puts a symbolic padlock on the main gate of the Philippine Central Bank during a rally against foreign debt in Manila in this 1999 file photo. The country may further gain an edge in its efforts to secure an investment grade once the government’s outstanding debt as a proportion of the country’s gross domestic product (GDP) falls below the 50-percent mark in 2012. AFP PHOTO/ROMEO GACAD

MANILA, Philippines—The country may further gain an edge in its efforts to secure an investment grade once the government’s outstanding debt as a proportion of the country’s gross domestic product (GDP) falls below the 50-percent mark this year.

First Metro Investments Corp. and the University of Asia and the Pacific announced their joint projection in the latest issue of “The Market Call,” where they claimed that the government’s debt-to-GDP ratio would drop to just 48 percent by the end of 2012.

Both institutions also expect economic growth to be faster than the increase in the government’s outstanding debt which, in turn, will trigger the drop in the debt-to-GDP ratio to below the international threshold of 50 percent.

The government’s debt-to-GDP ratio currently stands at about 50.5 percent. The ratio has been falling steadily since the mid-2000s, when it hovered at just above 70 percent.

The country’s economic officials have been working to secure a better credit rating for the Philippines, saying the country is the most underrated in the world. They cited the Philippines’ favorable macroeconomic indicators, including the declining debt burden.

The Market Call said the economy could grow by nearly 6 percent this year over a year ago. At this pace of economic growth, it said, the debt-to-GDP ratio should fall to 48 percent.

According to the publication, the government’s budget deficit for the full year would likely amount to just P240 billion or less—way below the ceiling of P279 billion set by the government.

“This, together with favorable interest rates and [economic] growth close to 6 percent, would make it possible for the debt-to-GDP ratio to fall to the 48-percent range,” The Market Call said.

A debt-to-GDP ratio of 48 percent would be the lowest in over 30 years, it added.

The government’s outstanding debts, both to local and foreign creditors, earlier this year hit the P5-trillion mark.