MANILA, Philippines — The Philippines’ debt ratio remains below its peers in Asia-Pacific despite the massive fiscal responses and economic contractions caused by the COVID-19 pandemic, according to Fitch Ratings.
In its latest commentary titled “Pandemic debt impact varies widely across Asia-Pacific sovereigns,” the debt watcher said the Philippines, together with same-rated peers such as New Zealand, Thailand, Indonesia, Vietnam and Bangladesh, entered the global health crisis with low general government debt-to-gross domestic product (GDP) level.
“Over 2020-2021, that gap has widened in Vietnam and Bangladesh, but has narrowed in New Zealand and the Philippines, although in neither of the latter two has debt risen above the peer median,” Fitch said.
Among emerging markets, Fitch said the strong nominal GDP growth in 2020-2021 and relative fiscal restraint are the reasons why general government debt-to-GDP ratios have risen more slowly in Bangladesh, Pakistan and Vietnam than in countries like the Philippines, Maldives and Thailand where tourism was heavily affected by the pandemic.
Fitch said new waves of COVID-19 infections continue to pose more fiscal risks, particularly in the majority of Asia-Pacific countries where vaccination programs are not well advanced.
The international rating agency recently lowered its outlook for the Philippines to negative from stable, but retained the country’s investment grade BBB credit rating.
It also sees the Philippines’ general government debt-to-GDP ratio rising to 52.7 percent this year and 54.5 percent next year from 34.1 percent in 2019.
The level, Fitch said, is modestly below the corresponding BBB medians of 57 percent and 58.7 percent, respectively.
Pandemic-induced fiscal responses and economic contractions have led to a sharp rise in public debt among rated sovereigns in Asia-Pacific, it said.
Between 2019 and 2021, general government debt-to-GDP is projected to rise by around 45 percentage points in the Maldives and 27 percentage points in Japan, but by just three percentage points in Vietnam and 1.2 in Taiwan.
Relative success in containing the pandemic has both bolstered GDP and reduced the pressure on governments to provide support, helping to limit increases in general government debt-to-GDP ratios over 2019-2021 in places like China, Hong Kong, South Korea, Singapore, Taiwan and Vietnam, according to Fitch.