The Bureau of the Treasury (BTr) reported on Thursday that the Philippines’ national debt rose to 61.3% of gross domestic product (GDP) at the end of the third quarter, exceeding the government’s target of 60.6% for 2024. The increase marks a significant jump from the 60.1% ratio at the end of 2023 and 60.2% a year earlier, sparking concerns about the nation’s fiscal stability amid sluggish economic growth.
The debt-to-GDP ratio is an important metric for financial stability, with multilateral lenders generally recommending a threshold of 60% for developing economies. To maintain manageable debt levels, the government aims to reduce this ratio to below 60% by 2028.
Rising Debt Levels and Economic Challenges
According to the BTr, the national debt reached a record P15.89 trillion by the end of September, reflecting a 2.2% increase from the previous month. The treasury attributed the rise to a larger borrowing program to fund 2024 expenditures, with 89.5% of the borrowing target already met.
Economists point to the slow economic growth exacerbating the debt burden. The Philippine economy grew by only 5.2% in the third quarter, marking its weakest performance since the second quarter of 2023. Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort noted that a higher borrowing level and disappointing economic growth contributed to the rising debt-to-GDP ratio.
Impact on Fiscal Stability and Credit Ratings
Despite the debt increase, the deficit-to-GDP ratio fell to 5.1% at the end of September, below the government’s ceiling of 5.6% for the year. The budget deficit narrowed to P970.2 billion in the first nine months, down 1.35% from the previous year, which could ease some fiscal pressures.
Ricafort emphasized that reducing the debt-to-GDP ratio below 60% is essential for sustaining the country’s credit ratings, which remain a few notches above the minimum investment grade. “Achieving this target will require tighter budget deficits, improved tax revenue, and disciplined government spending,” Ricafort added, stressing the need for long-term fiscal discipline to secure the nation’s financial future.
The government faces mounting pressure to stabilize its debt levels amid slowing economic growth, raising questions about the sustainability of its borrowing and fiscal policies.
Jaja has a degree in journalism and took classes in international law and business communication. Her career spans roles at prominent international media outlets, including International Business Times, Celebeat and Delightful Philippines. As a news editor, Jaja covered a wide range of beats, including legal, business, economy, cryptocurrency, personal finance, gaming, technology, and entertainment.