Government targets 52% debt-to-GDP ratio by 2028

MANILA, Philippines — The economic team of President Marcos is targeting to bring down the share of national debt to the country’s gross domestic product (GDP) to 52.5 percent by the end of the administration in 2028.

Finance Secretary Benjamin Diokno said the debt-to-GDP ratio would start to normalize from the current 17-year high of 63.5 percent.

For this year, the debt-to-GDP ratio is expected to decline to 61.8 percent and further go down to 61.3 percent in 2023. By 2024, the ratio is seen at 60.6 percent.

This will reach the internationally accepted threshold by 2025 at 59.3 percent. Further declines are seen by 2026 and 2027 at 57.7 percent.

Once the term of Marcos ends in 2028, the debt-to-GDP ratio is targeted to be at 52.5 percent.

“By the end of Marcos years, we expect the national debt-to-GDP to be below 60 percent, which is the threshold,” Diokno said.

“This kind of debt structure is nothing to worry about, we’re still one of the lowest even in emerging economies,” he said.

Despite the expected decline, Diokno maintained that returning to the pre-pandemic level is not a priority.

It was in 2019 under then president Rodrigo Duterte that the Philippines saw its lowest debt-to-GDP ratio at 39.6 percent.

“Given where we came from, it would be wrong for us to shoot for that level. I think we have to prioritize growth first and the needs of our people rather than going back to that number,” Diokno said.

“It is not crucial for us to go back to the 39 percent. We need to prioritize the needs of the Filipinos,” he said.

Diokno argued that the way out of the country’s debt is by simply growing the overall economy at a much faster rate.

Apart from robust economic expansion, the government will also bank on improved tax administration.

Diokno earlier said the Marcos administration will not lean toward slapping new or additional taxes amid the still ongoing pandemic.

“The bigger source of revenue growth will be economic growth. We will focus on making sure that growth will be faster and broad-based. That’s where most of tax revenues will come from,” Diokno said.

“The faster the economic growth, the faster the revenue effort. We are confident that it will be enough,” he said.

For the next few years, Diokno emphasized that the government will increase the domestic share in terms of financing mix.

The government plans to borrow 80 percent from local lenders and the remaining 25 from abroad. The current mix is a 75:25 ratio.