PHL may struggle to bring debt ratio below 60%

THE PHILIPPINES might struggle to bring its debt-to-gross domestic product (GDP) ratio back to the internationally accepted threshold of 60% as global uncertainties and slower growth weigh on fiscal recovery, analysts warned.

- By Aubrey Rose A. Inosante Reporter

"With the downgrade in growth forecasts and the sustained increase in debt levels, we may not be able to see an immediate return of the debt-to-GDP ratio to 60%," Diwa C. Guinigundo, country analyst at GlobalSource Partners and a former central bank governor, said in a Viber message.

The country's debt-to-GDP ratio rose to 62% in the first quarter, the highest since 2005 and exceeding the 60% benchmark widely recognized by institutions like the International Monetary Fund.

While the Bureau of the Treasury had cited a more flexible 70% ceiling for emerging economies, the ratio now is above the Marcos administration's target of 60.4% by yearend and 56.3% by 2028.

In response to a wider fiscal gap, Finance Secretary Ralph G. Recto recently adjusted the borrowing plan to P2.6 trillion from P2.55 trillion.

Still, some experts see potential for improvement if growth accelerates and borrowing is channeled wisely.

"If the economy sustains a growth rate of around 5.5% to 6% annually, and debt accumulation moderates, we could see the ratio ease back toward 60% within the next 18 to 24 months," Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., told BusinessWorld in a Viber message.

However, first-quarter GDP came in at a weaker-than-expected 5.4%, down from 5.9% a year earlier and below the government's 5.5% to 6.5% goal this year.