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DEBT as a share of gross domestic product (GDP) is expected to reach 45.6% this year due to large loans during the pandemic, with gradual reductions expected by 2023, S&P Global Ratings said.
General government debt as a proportion of GDP is expected to rise slightly from the S&P 2020 estimate of 45.5%, the S&P said in a note issued Wednesday.
In 2019, the Finance Department estimated the proportion at 34.1%.
The debt / GDP ratio measures the capacity of an economy to absorb debt, comparing it with the available resources.
S&P said its “BBB +” rating with a stable outlook for the Philippines influences its estimates of debt in the coming years. A stable outlook indicates that a rating is likely to remain in place for the next 18-24 months.
“Our government debt projections for the end of 2023 reflect contingent liabilities limited to public balance sheets due to the current difficulties that banks and nonfinancial corporations are experiencing,” S&P said.
“The good news for most rated sovereigns is that they face the current fiscal shock with historically low financing costs,” he added.
In the Philippines, key policy rates such as reverse buyback, loans, and deposit facilities are at historic lows of 2%, 2.5%, and 1.5%, respectively. The monetary authorities undertook a series of policy easing measures worth 200 basis points last year to support the economy during the economic recession.
S&P warned that a rating downgrade could be in the works if the economy “suffers a more severe and prolonged recession than we expect, leading to a material deterioration in the Philippines’ fiscal and debt positions.”
He expects the economy to grow 9.6% and 7.6%, in 2021 and 2022 respectively.
GDP fell by a record 9.5% in 2020. – Luz Wendy T. Noble
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