Debt-to-GDP ratio to stay ‘manageable’ as it exceeds 65% over next two years

THE Philippine debt load is less alarming than in past crises and is expected to remain manageable with the debt-to-gross domestic product (GDP) expected to 65% over the next few years, a government think tank said.

The debt ratio is projected to hit 66% in 2026 before easing to 65.7% in 2027, the Philippine Institute for Development Studies (PIDS) said in a Feb. 9 report.

The projection indicates that “the country’s debt position today is less worrisome than during previous debt crises, and that the debt-to-GDP ratio will remain manageable despite peaking above 65% over the next couple of years,” it said.

The Bureau of the Treasury reported that government debt amounted to P17.71 trillion at the end of 2025.

This brought the outstanding debt as a share of GDP to 63.2%, the highest level since the 65.7% posted in 2005.

PIDS said a swift return to pre-pandemic debt levels is unlikely due to the need for continued government spending to curb long-term economic scarring and give the economy room to recover.

“This underscores the need for a sound medium- to long-term fiscal consolidation plan to anchor sentiment,” the think tank said.

PIDS added that returning to the pre-pandemic level of 40% would require the government’s annual primary balance to increase from 1.4% of GDP in 2020 to 3.4% of GDP in 2031.

The Development Budget Coordination Committee aims to bring the debt ceiling to 61.8% this year and 61.3% in 2027, according to its updated medium-term fiscal framework.

The rule of thumb for healthy levels of debt for developing countries is 60%, which the government has informally abandoned in favor of a new 70% benchmark of the International Monetary Fund (IMF).

Finance Secretary Frederick D. Go has clarified that the government tracks the IMF’s general government (GG) debt-to-GDP ratio rather than the narrower National Government measure.

The Philippine GG debt-to-GDP currently stands at 54% to 55%.

Mr. Go’s office has yet to release the latest GG debt-to-GDP data.

The conclusions were contained in a paper, “Fiscal Effects of the COVID-19 Pandemic: Assessing Public Debt Sustainability in the Philippines,” written by Margarita Debuque-Gonzales, Charlotte Justine Diokno-Sicat, John Paul P. Corpus, Robert Hector G. Palomar, Mark Gerald C. Ruiz, and Ramona Maria L. Miral. — Aubrey Rose A. Inosante