Debt-to-GDP ratio drops slightly in 2015

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The ratio of general government debt to the country’s gross domestic product (GDP) dropped slightly to 36.3 percent in 2015 from 36.4 percent a year earlier, although the absolute level of debt increased, the Department of Finance (DOF) said on Friday.

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The DOF claimed that the 2015 general government debt-to-GDP ratio was the lowest in 18 years or since the 51.1 percent in 1998.

However, in absolute terms government debt increased, rising to P4.82 trillion in 2015, 4.3 percent higher than the P4.6 trillion posted in 2014.

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

Favorable comparison

The record low general government debt-to-GDP ratio compares favorably against the ratios posted in 2014 by similarly or higher rated peers, the Finance department stated.

The DOF said among emerging economies, the Philippines tops Slovenia with 97.3 percent, Mexico (45.1 percent), Malaysia (52.7 percent), Brazil (57.2 percent), South Africa (48.9 percent), and India (67.1 percent). The country also outperforms even top-tier economies like Germany (82.2 percent), the United Kingdom (117.1 percent), and the United States (123.3 percent), according to data from the Organization for Economic Cooperation and Development (OECD).

“Instilling fiscal sustainability in government operations ensures predictability in a volatile world looking for stability. We can keep our healthy fiscal position for so long as good governance remains top of mind in the public sector,” Finance Secretary Cesar Purisima said in a statement.

Components of the debt include the outstanding debt of the national government, the Central Bank Board of Liquidators, social security institutions and local governments, less the intra-sector holdings of government securities, including those held by the Bond Sinking Fund (BSF) and social security institutions in national government securities.

The outstanding national government debt stood at P5.95 trillion, with the domestic component taking a 65 percent share and foreign debt making up the rest.

Meanwhile, local government debt stood at P71.4 billion. Social Security institutions raised their holdings of government securities by 2.1 percent or P10.1 billion from last year’s level.

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