Philippines foreign debt-to-GDP ratio still lowest in ASEAN

MANILA, Philippines — The Philippines still has the lowest ratio of foreign debt against domestic output despite posting the third largest expansion in the external debt ratio among five Southeast Asian nations.

In a report, Department of Finance chief economist Gil Beltran said the Philippines has the lowest external debt as a ratio of gross domestic product (GDP) at 27 percent among ASEAN economies in 2021.

“In Southeast Asia, the external debt-to-GDP ratio of the Philippines remains the lowest among five ASEAN countries,” he said.

In comparison, Malaysia and Thailand’s foreign debt ratios hit 69.3 percent and 39 percent of their respective GDPs last year. The external debt-to-GDP ratio of Vietnam reached 38.6 percent while that of Indonesia stood at 35 percent.

However, the Philippines registered the third largest growth in offshore debt as a measure of GDP at 4.8 percentage points during the pandemic. Thailand’s turned up the highest, by 7.4 percentage points, while Malaysia’s jumped by 6.7 percent.

During the period, Vietnam’s external debt-to-GDP only went up by 1.5 percentage points, while Indonesia’s even dipped by 1.1 percent.

As external debt picked up to 27 percent of GDP in 2021, from just 22.2 percent in 2019, Beltran said the government should practice discipline in adding debts moving forward.

“At 4.8 percentage points, the Philippines is higher than Indonesia and Vietnam, but lower than Thailand and Malaysia; this implies continued prudence in debt management,” he said.

Beltran added he sees no need to press the emergency button, attributing the debt buildup to the government’s pandemic response. He also pointed out that the external debt-to-GDP ratio in 2021 is less than half of the level in 2005, when the government started computing its foreign obligations using a new methodology.

In 2005 the external debt was posted at 57.3 percent of GDP, of which public debt was 34.1 percent and private debt was 23.2 percent. In 2021, government and corporate debt amounted to 16.2 percent and 10.8 percent of GDP, respectively.

The offshore debt of the Philippines increased by eight percent to $106.43 billion last year, from $98.49 billion in 2020, according to the Bangko Sentral ng Pilipinas.

Broken down, government debt widened by 10 percent to $63.93 billion, from $58.12 billion, as private debt grew by five percent to $42.5 billion, from $40.37 billion.