By Aubrey Rose A. Inosante, A reporter
THE Philippines’ debt sustainability is not a concern at present, the World Bank (WB) said, but noted that the government still needs to rebuild. fiscal buffers to prepare for future shocks.
“There is no reason to worry too much (about debt sustainability … Many countries would dream of having the kind of debt-to-GDP (gross domestic product) ratios we have here,” World Bank Senior Economist Jaffar Al-Rikabi told reporters last week on the sidelines of the event.
Philippine debt-to-GDP was 63.1% at the end of the third quarter, up from 60.1% last year.
The rule of thumb for healthy debt levels for developing countries is 60%, which the government officially abandoned in favor of a new rating of 70%.
Asked if the record P17.65-trillion debt at the end of November is causing concern about debt repayment, Mr. Al-Rikabi said it was “normal” for such rates to increase with inflation and deficits.
The Bureau of Treasury will release the fourth quarter debt-to-GDP ratio when the Philippine Statistics Authority (PSA) reports GDP for the full year and the fourth quarter.
“We don’t have Q4 data yet, but in our estimation, if you look at the slides, we are generally assured that the financial situation is very stable,” he said.
In revitalizing the Philippine economy, the World Bank said it expects gross debt to start declining after 2026.
National Government Debt is expected to rise to 62.5% of GDP in 2026 before falling to 61.4% in 2028.
Mr. Al-Rikabi also noted that public debt remains “inviting,” noting that most of the debt is long-term and peso-denominated.
“Because if the debt is held (not) peso-denominated or short-term, it tends to be more volatile and exposed to external shocks instead of only domestic shocks,” he said.
He also pointed out that the number of loans was 40% lower leading to the COVID-19 pandemic, where the government had to take more loans to finance the pandemic and stimulate the economy.
“What we want to see in the public debts, in the service costs, is a financial stabilization plan,” he said.
“We want to rebuild the financial space so that the country can face future problems. You had a big financial space then. You will have a great financial space in the future,” he added.
Mr Al-Rikabi said the government should control the rise in interest rates to avoid stifling profitable spending.
“You want to spend more budget on education, health, and successful implementation of infrastructure projects.
For the year 2026, the government has budgeted P2.01 trillion for debt servicing, while P1.06 trillion will be reduced in principal and P950 billion in interest payments.
Mr Al-Rikabi said the bank expects the economy to grow by 5.3% in 2026 and 5.4% in 2027.
“We’re seeing a slowdown this year. We’re doing about 5.1% (in 2025). Maybe with the fourth quarter data, it ends up being weaker. I don’t know. Or maybe the same,” he said.
The government’s revised target is 5-6% for 2026 and 5.5-6.5% for 2027.
Jonathan L. Ravelas, senior consultant at Reyes Tacandong & Co., projected the Philippines’ fastest economic growth of 5.3% by 2025.
“Mainly because we are a consumption-driven economy. We have a very long Christmas. People tend to forget that when the calendar starts the month is Christmas,” said Mr. Ravelas at the event of John Clements Consultants, Inc. on the 8th of Jan.
“People are talking about spending. This has been a big driver in the last two weeks of December. I think that may support the fourth quarter,” he said.
Mr. Ravelas sees the economy growing by 5.6% in 2026 and 5.8% in 2027.
Economy Secretary Arsenio M. Balisacan said GDP growth may drop to 4.8-5% in 2025 due to corruption in flood control, prompting economic managers to lower their targets for 2027.
“It is possible that we have seen negative emotions, unless someone is arrested (due to corruption),” he said.
Mr. Ravelas said the peso may remain between P61 and P65 for the next three years, after the currency fell to a record low of P59.35 on Jan. 7.
“A weak peso should be good for the Philippines even though we are an importing country, because we need to sell the Philippines as an investment destination,” he added.
