RCBC chief economist Michael Ricafort (File photo)
MANILA – The national government’s (NG) outstanding debt as of end-December 2021 rose to PHP11.729 trillion, up by 19.7 percent year-on-year, but an economist considers this level relative to domestic output still sustainable.
Data released by the Bureau of the Treasury (BTr) on Tuesday showed that as of end-2021, outstanding government debt accounts for around 60.5 percent of gross domestic product (GDP), slightly above the international debt-to-GDP threshold of 60 percent and higher than the 54.6 percent in end-2020.
In a report, Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort said repayments of liabilities and continued reopening of the domestic economy contributed to the drop in the national government’s debt compared to end-November 2021’s PHP11.93 trillion.
Ricafort said the higher-than-expected growth of the domestic economy in the last quarter of 2021 at 7.7 percent contributed to the improvement of the debt-to-GDP ratio for the full year.
He added that while the level of government debt relative to the domestic economy’s output increased, especially compared to the low of 39.6 percent in end-2019, this is understandable given the pandemic-related expenses.
“The country's debt-to-GDP ratio is still expected to be around the international acceptable threshold of 60 percent of GDP, especially if GDP continues to recover in the coming months/years, thereby giving the government greater leeway to increase spending, budget deficits, and overall debt to pump-prime the economy,” Ricafort said.
Although the Omicron variant of the coronavirus disease 2019 (Covid-19) is a risk to the continued recovery of the domestic economy, Ricafort said the government’s decision to implement the alert level system and the granular lockdowns are “great ways” to ensure the safe reopening of the economy.
He said these measures will allow more economic activities and bring in additional revenues to both the businesses and the government, as well as lessen the government’s social amelioration expenditures.
“Further reopening of the economy as justified by the significant reduction in new Covid-19 cases with increased vaccinations vs. Covid-19 towards herd immunity as early as before the May 2022 elections would help further narrow the budget deficit and reduce the need for additional government borrowings/debt,” he added. (PNA)
