Debt-to-GDP ratio hits 66.9%, highest since 2004

THE PHILIPPINE debt-to-gross domestic product (GDP) ratio hit 66.9% at the end of the third quarter, the highest level since 2004, data from the Bureau of the Treasury (BTr) showed.

This was higher than the 66% recorded at the end of the second quarter and the 63.2% ratio at end-2025. It was also the highest level in 22 years or since the 71.6% recorded at end-2004.

The higher debt-to-GDP ratio came as the National Government’s (NG) outstanding debt reached P19.66 trillion at end-September, inching up 0.27% from P19.61 trillion at end-August.

This was already equivalent to about 99.47% of the government’s projected P19.77-trillion outstanding debt stock by yearend.

Domestic debt accounted for 45.1% of GDP at end-September, up from 44.2% at end-June, while external debt rose to 21.8% of GDP from 21%.

Ser Percival K. Peña-Reyes, a senior research fellow at the Ateneo Center for Economic Research and Development, attributed the higher debt-to-GDP ratio to “persistent government budget deficits, continued borrowing to finance public expenditures, and slower-than-expected economic growth.”

The Philippine economy grew by just 2.1% year on year in the July-to-September period, the slowest GDP growth in five years or since the 3.8% contraction in the first quarter of 2021.

Excluding the pandemic years, this was the weakest in over 16 years or since the 1.8% expansion in the fourth quarter of 2009.

“The weaker peso has also increased the peso value of foreign currency-denominated debt. These factors basically reinforce one another,” Mr. Peña-Reyes told BusinessWorld.

The peso closed at P62.64 versus the greenback on Sept. 30, weakening by P1.28 from its P61.36 close on June 30.

However, Mr. Peña-Reyes said the debt level remains manageable but warned the government against complacency.

“The Philippines still benefits from a relatively deep domestic capital market, a predominantly peso-denominated debt portfolio, and access to international financing,” he said.

BTr data showed that peso-denominated debt accounted for 66.8% of the NG’s outstanding debt at end-September, while foreign currency-denominated debt made up 33.2%.

Mr. Peña-Reyes said the NG’s fiscal space is becoming increasingly constrained, with higher interest payments, peso depreciation, global economic uncertainty, and potential external shocks making debt servicing more expensive.

“This means the government has less flexibility to respond to emergencies, provide economic stimulus, and fund social services without resorting to additional borrowing,” he added.

To manage the debt levels, Mr. Peña-Reyes said the government needs to accelerate economic growth while pursuing credible fiscal consolidation.

“This means improving tax collection, broadening the tax base, plugging revenue leakages, eliminating inefficient expenditures, and prioritizing projects with high economic and social returns,” he said.

He said the government should encourage private sector investment, improve the business environment, and invest in infrastructure, education, and productivity-enhancing programs.

“Austerity alone is not the answer. The economy must grow faster, generate more jobs and revenues, and reduce dependence on borrowing so that debt grows more slowly than GDP,” he added. — Justine Irish D. Tabile