Postpandemic public debt ‘less worrisome,’ says PIDS
Despite projections that public debt could exceed 65 percent of gross domestic product (GDP) in the coming years, a state-run think tank said the Philippines remained on a sustainable fiscal path under sound consolidation efforts.
In an updated research paper, the Philippine Institute for Development Studies (PIDS) said the sharp increase in public debt following the COVID-19 pandemic had been driven largely by temporary economic shocks rather than structural fiscal weaknesses that characterized past debt crises.
“The COVID-19 pandemic has evidently set back the Philippines’ fiscal and debt record. The key question is whether this setback is temporary or indicative of another debt episode,” PIDS said.
“The results suggest that the country’s debt position today is less worrisome than during previous debt crises, and that the debt-to-GDP ratio will remain manageable despite peaking above 65 percent over the next couple of years,” it added.
Data from the Bureau of the Treasury (BTr) showed that the debt-to-GDP ratio has exceeded the 60-percent international threshold for fiscal sustainability since 2021.
Although not mentioned in the PIDS paper, the ratio stood at 63.2 percent in 2025. This is below the think tank’s earlier projection of 66.4 percent, but the highest level in 20 years, or since hitting 65.7 percent in 2005.
Notably, however, PIDS’ analysis does not yet account for the unexpected economic slowdown in 2025 following the flood control corruption scandal.
In any case, PIDS said the postpandemic debt surge was driven by a temporary collapse in revenues and accelerated government relief and recovery spending.
“The most recent debt surge [is] not due to sharp interest rate shocks, excessive external debt, a buildup of hidden (nonbudget) deficits, or a steady decline in the country’s tax effort. Instead, debt decomposition shows the surge was driven by an exogenous (pandemic-induced) drop in output growth and a resultant rise in primary deficits,” PIDS said.
This surge, according to PIDS, cannot be reversed immediately.
“The results suggest that it may not be feasible to aim immediately for a low debt ratio to allow the economy time and space to recover from the pandemic shock, but they nonetheless underscore the importance of a sound medium- to long-term fiscal consolidation plan,” it said.
Outstanding debt by end-2025 already reached P17.71 trillion. The debt stock is projected to reach over P19 trillion by the end of this year on the back of a P2.6-trillion borrowing program to cover a projected budget deficit of P1.65 trillion, or 5.3 percent of GDP.
