PH debt-to-GDP ratio seen to stay above 60%

The Philippines’ debt trajectory is expected to remain above the 60-percent level over the medium term as the oil-driven inflation shock and weaker growth outlook continue to weigh on the country’s fiscal position, according to the Congressional Policy and Budget Research Department (CPBRD).

In its recent report, the CPBRD projected that the debt-to-GDP (gross domestic product) ratio could rise to 63.8 percent in 2026 from 63.2 percent last year, assuming growth of 3.7 percent for the full year, above the 60-percent level considered to be sustainable.

Both figures are seen to miss the government’s targets, with the debt-to-GDP still elevated compared with the 56.6-percent goal under the medium-term fiscal framework (MTFF), while GDP growth remains below the 5-percent to 6-percent target for the year.

By 2028, CPBRD said the ratio could reach as high as 64.3 percent.

“The oil-driven inflation shock and slower-than-expected economic growth have significantly altered the Philippines’ debt dynamics,” CPBRD said.

“These shocks have shifted the debt-to-GDP trajectory away from the post-pandemic normalization path under the original MTFF and toward a higher and more persistent debt profile under the International Monetary Fund’s debt sustainability analysis baseline,” it added.

Debt watchers have already flagged the country’s high debt levels, thus the recent downgrade of their outlook for the Philippines.

Observers say that at the rate at which the debt level is rising, it would be increasingly difficult for the Philippines to achieve its goal of securing an A credit rating.

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The local economy’s first-quarter growth slowed to 2.8 percent from 3 percent in the previous quarter, dragged by the double whammy from the ongoing oil crisis and lingering fallout from last year’s graft scandal.

Meanwhile, as of end-March, the government’s outstanding debt climbed to a fresh record high of P18.49 trillion. This is already 97 percent of the Marcos administration’s P19.06-trillion programmed ceiling for 2026.

As a result, the debt-to-GDP ratio in the first quarter stood at 65.2 percent.

Aside from oil crisis-induced fiscal pressure and GDP risks, CPBRD said persistently high gross financing needs are also a concern due to pandemic-era amortization and rising interest burdens.