RP has highest debt level among peers

The Philippines has the highest debt level among its economic peers, with external debts equivalent to 76.1 percent of gross domestic production (GDP) with little support from its international reserves.

Data from Moody’s Investor Service revealed that the Philippines had the highest external debt to GDP ratio among similarly-rated economies, a group of medium-risk countries that includes Colombia, Costa Rica, Egypt, India, Panama, Peru, Romania and Russia.

In this group, the only other country with external debt to GDP ratio of over 50 percent is Panama, followed by Russia at 49.4 percent and Peru at 49 percent.

In contrast, however, both Panama and Russia have high revenue collections of 19.1 percent and 37.1 percent of GDP, respectively. This indicates that despite their huge debts, both economies are still able to service their external debts from internally-generated funds.

The Philippines, in comparison, collected revenues equivalent to only 14 percent of GDP in 2002 and this is expected to decline further to 12.7 percent in 2004.

In the group, only Peru had a lower revenue to GDP ratio of 7.2 percent, although its total external debt was only $27.8 billion compared to the Philippines’ $59.3 billion.

Russia and India both have significantly higher external debt levels than the Philippines at $171.2 billion and $110.6 billion, respectively. However, both countries also had significantly higher international reserves in 2003 of $73.2 billion and $98.9 billion respectively.

The Philippines’ international reserves stood at $13.5 billion in the same year.

Russia and India are also growing significantly faster than the Philippines, with a GDP growth rate of 7.5 percent and 7.4 percent in 2003. That same year, the Philippines grew by 4.5 percent.

Although the Philippines has often been compared to Argentina, analysts reason out that the country is nowhere near the Argentinian fundamentals and credit status.

Argentina’s total foreign debt was $148 billion and the government has been in default for over two years. Even now, Argentina has not renewed talks with its creditors.

Like the Philippines, however, analysts said Argentina had the same propensity to break private contracts and it also faced an energy crisis.

The Philippines and Argentina also have similar levels of gross international reserves at $15 billion and $16 billion, respectively.