THE PHILIPPINES and Thailand saw the biggest rise in government debt-to-gross domestic product (GDP) ratios in the world from end-2019 to end-2021, Moody’s Analytics said in a report on Thursday.
In a commentary “Global Debt: Asia’s High Debt-to-GDP,” Moody’s Analytics said debt-to-GDP ratios in the Asia-Pacific region are still above pre-pandemic levels.
“Thailand and the Philippines experienced the largest government debt-to-GDP increase across Southeast Asia and across the globe between the end of 2019 and the end of 2021,” it said.
The Philippines’ debt-to-GDP ratio stood at 60.5% at the end of 2021, beyond the 60% threshold prescribed by multilateral lenders for developing economies. It was also much higher than the 39.6% at the end of 2019 or before the pandemic.
“Both countries were the slowest-growing economies in the region last year and required substantial expansionary fiscal policy to support economic recovery,” Moody’s Analytics said.
The Philippine economy contracted by 9.6% in 2020, but bounced back with a 5.7% GDP growth in 2021.
Despite the increase, Moody’s Analytics said the Philippines and Thailand still have “rather low” debt-to-GDP ratios.
At the end of the first quarter of 2022, the Philippines’ debt-to-GDP ratio stood at 63.5%, the highest since 65.7% in 2005.
The country’s outstanding debt stood at P12.5 trillion at the end of May.
Moody’s Analytics noted other Southeast Asian countries such as Singapore, Malaysia, and Indonesia have seen a decline in debt-to-GDP ratios in 2021, bringing the region’s average lower than in 2020.
“On the other hand, Thailand, Vietnam and the Philippines had trouble containing total debt in 2021 due to tightened COVID-19-related restrictions through much of the year,” Moody’s Analytics said.
The Philippines incurred about P3.2 trillion in additional debt to fund the government’s pandemic response.
“During the pandemic, Southeast Asian governments raised debt ceilings to accommodate higher borrowing and spending to support the economy. Post-pandemic, fiscal consolidation is expected to begin in 2023 as countries move toward endemic-COVID-19 policies, including an easing of social distancing measures,” the think tank said.
Finance Secretary Benjamin E. Diokno this month said the government seeks to bring down the debt-to-GDP ratio to 61.8% by end-2022. It is expected to steadily drop to 61.3% by next year all the way to 52.5% by 2028.
“This kind of debt structure is nothing to worry about. This is one of the lowest among emerging markets… The way out of this is by growing at a faster rate. We simply outgrow our debt,” Mr. Diokno has said.
He added that it is not “crucial” to return to the pre-pandemic debt-to-GDP ratio.
“We have to prioritize growth first rather than going back to that number,” he said. — D.G.C.Robles
