THE government’s increased capacity to spend on infrastructure was reflected in the declining share of interest payments in its spending, creating “fiscal space” to invest in key facilities, a University of Asia and the Pacific (UA&P) economist said.

Professor Victor A. Abola said that the share of government spending set aside for interest payments has declined to 10% from 30% in 2005.

Speaking at UA&P’s 2019 Yearend Business Economics Briefing, Mr. Abola said the government has maintained a low debt burden as seen in the current debt- to-gross domestic product (GDP) ratio of 41.8% in 2018.

According to the Bureau of the Treasury (BTr), interest payments as a percentage of total spending dropped to 10.96% in the third quarter from 11.94% a year earlier.

The debt-to-GDP ratio has been declining since 2005, when it peaked at 70%.

“It’s low now because our debt burden is lower. In 2005, our debt to GDP was 77% we’re now down below 42%,” he said.

However, according to the BTr, debt as a share of GDP inched up to 43.3% at the end of September.

With the infrastructure push, Mr. Abola said that the government may not be able to sustain the downtrend of debt-to-GDP ratio but keeping it below 45-50% is manageable.

The Development Budget Coordination Committee (DBCC) has set a 41.4% debt-to-GDP target for this year and an even lower target for 2022 at 38.6%.

Mr. Abola said that the fiscal room created was a cumulative effort by previous governments, coupled with the declining borrowing costs here and overseas.

“The other thing is interest rates have gone down, not only abroad but also locally. As late as 2002, your 10-year bond yields were around 13% now it’s about four and a half,” he said.

Public Works Undersecretary Maria Catalina E. Cabral said infrastructure development has always had a multiplier effect on growth but the current administration’s “Build, Build, Build” program has had an outsized impact.

“Infrastructure has always been a major driver of economic growth. Nahi-highlight lang ngayon kasi napakalaki ng investment na nailalatag para matapos itong mga ‘to (It’s just highlighted because the investment is now supersized to complete the works),” Ms. Cabral said at the forum.

To sustain the “Build, Build, Build” program, she said the next government must be willing to continue on the same track, while expanding private-sector participation.

The Department of Finance reported that the government spent P889 billion on infrastructure development in 2018, the equivalent of 5% of GDP.

The economy grew 6.2% in the third quarter, picking up from the muted 5.5% average growth in the first half. — Beatrice M. Laforga