Debt-to-GDP ratio down in H1

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The ratio of general government debt to the country’s gross domestic product (GDP) has been reduced to 43 percent in the first half of 2016 compared with 44.9 percent a year ago, which the government attributed to its debt management measures.

The Department of Finance said in an economic bulletin released on Tuesday, that the June 2016 debt ratio was also an improvement from end-2015 ratio of 44.7 percent and the 2016 first quarter ratio of 44.3 percent.

However, an analyst pointed out that the debt-to-GDP could start climbing, as the Duterte administration would need greater funding to improve infrastructure and human development.

Bank of the Philippine Islands (BPI) associate economist Nicholas Antonio Mapa said in an e-mail that the latest ratio showed the country’s GDP continued to outpace the growth in debt as the country’s economic growth model has been driven mainly by factors outside debt and deficits.


“This, however, may not be the case for long as the current administration appears to be intent on running budget deficits to shore up decaying infrastructure and bridge the inequality gap through social services spending,” he said.

With the government seen to run a 2.7 percent of GDP deficit spending target followed by 3 percent in 2017, the government may have to see this debt-to-GDP ratio increase with the Bureau of Treasury issuing new bonds to fund expenditure, he said.

“Although spending on investment for infrastructure and the overall improvement in human capital is welcome, it must not come at the expense of our fiscal health,” he pointed out.

“Either revenues need to keep in step with the spending or spending will need to slow to ensure that the gap doesn’t widen too much and too quickly,” he said.

The government debt-to-GDP ratio is an indicator used by debt watchers to assess the creditworthiness of sovereigns.

The national economy grew 6.9 percent in the first semester, higher than the 5.5 percent a year ago. At the same time, government debt in the first six months rose 2.24 percent to P5.94 trillion in end-June 2016.

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