Philippines accrues a total debt of 16.05 trillion pesos by the year 2024, as the government increases its borrowings.
The Philippines' economy witnessed a growth of 5.2% in 2024, falling short of the government's growth target. Despite this, the country added P522.55 billion in foreign debt, bringing its external obligations to a staggering P5.12 trillion.
The debt-to-GDP ratio, an important indicator of a country's ability to pay back its obligations, improved from the 17-year high of 63.7% in 2022, but still remains above the internationally recognized threshold of 60%. This threshold, established by the European Union's fiscal rules, is crucial as it serves as a benchmark to assess a country's fiscal sustainability and economic stability.
Domestic debt comprises P10.93 trillion of the government's total obligations. The debt-to-GDP ratio was slightly above the revised Medium-Term Fiscal Framework estimate of 60.6%. The Philippines' debt-to-GDP ratio in 2024 stood at 60.7%.
The total national debt of the Philippines in 2024 was P16.05 trillion. The stronger greenback made obligations in other currencies slightly cheaper, but the depreciation of the Philippine peso against the US dollar added an additional P208.73 billion to the total debt value, as the peso ended 2024 at P57.847 against the dollar.
The government borrowed an additional P1.31 trillion in 2024 as part of its deficit program. Rizal Commercial Banking Corporation's chief economist, Michael Ricafort, suggested that the government needs to implement tax and fiscal reforms to bring the debt-to-GDP ratio back to international thresholds. He emphasized the need for intensified tax collections from existing tax laws and encouraging compliance with the payment of correct taxes.
This is the second year in a row that the GDP growth target has not been met. The national debt grew by 9.8% in 2024 compared to the previous year. Ricafort also mentioned the importance of running after tax cheats to improve the debt-to-GDP ratio.
It's worth noting that staying below the 60% debt-to-GDP ratio is associated with lower risks of fiscal crises, more confidence from investors, and better economic outcomes. When countries exceed this threshold, as seen in Greece (161%), Italy (137%), and France (111%), concerns about debt sustainability increase, which can lead to higher borrowing costs and financial market instability.
In summary, while the Philippines' economy showed signs of growth, its debt-to-GDP ratio remains a concern, highlighting the need for careful fiscal management and adherence to international standards to ensure long-term economic health.
The government needs to focus on implementing tax and fiscal reforms, such as intensified tax collections and encouraging compliance with the payment of correct taxes, to bring the debt-to-GDP ratio back to international thresholds, as suggested by Rizal Commercial Banking Corporation's chief economist, Michael Ricafort. In the finance industry, staying below the 60% debt-to-GDP ratio is crucial for personal-finance health and economic stability, as it is associated with lower risks of fiscal crises, more confidence from investors, and better economic outcomes, while exceeding this threshold, as seen in countries like Greece, Italy, and France, can lead to higher borrowing costs and financial market instability in the banking-and-insurance sector.
