Metro Manila (CNN Philippines, June 22) — The country’s outstanding debt relative to the size of its economy could rise further next year before going down with the expected fiscal consolidation under the incoming government of Ferdinand “Bongbong” Marcos Jr., a unit of Fitch Group said.
In its latest commentary, Fitch Solutions said it sees the Philippine debt-to-GDP (gross domestic product) ratio climbing to 60.2% by year-end and 60.9% in 2023 before “gradually declining from 2024 onwards.”
Such easing of the debt-to-GDP ratio bodes well for the country’s fiscal stability, it said.
The globally acceptable debt-to-GDP ratio ceiling is 60%.
Fitch Solutions also noted the country is “still on track for a gradual fiscal consolidation over the coming years as strong revenue growth alongside a recovering economy and positive tax reforms will likely offset expansionary fiscal spending.”
The president-elect’s economic team hopes to bring down the country’s deficit-to-GDP ratio to 3% by end of his term in 2028. As of end-2021, the ratio is at 8.6%.
Fitch Solutions itself expects the deficit-to-GDP ratio to reach 7.5% in 2022, slightly lower than the outgoing Development Budget Coordination Committee’s (DBCC) 7.6% forecast.
For 2023, the American research company projects 6.2% – a tad higher than the 6.1% pegged by the DBCC as it expects government spending to breach target. It cited the Bangon Bayan Muli stimulus package, which is targeted for passage in the incoming 19th Congress and will be part of the 2023 budget.
“However, we acknowledge there is still a high degree of uncertainty with regards to the 2023 fiscal projections as Marcos may not stick to the current fiscal projections by the outgoing Duterte administration as he looks to fund his government’s initiative,” said Fitch Solutions.
The outgoing Department of Finance (DOF) previously pitched additional taxes to help the Marcos administration settle the country’s ballooning debt without resorting to additional borrowings. However, incoming DOF Secretary Benjamin Diokno said he will be prioritizing improved tax collection and ensuring economic growth outpaces the national debt stock.