The national government’s debt-to-gross domestic product (GDP) ratio is expected to stabilize as pandemic-related spending is wound down, according to the Department of Finance (DOF).
Fiscal consolidation and economic recovery will be very critical in preserving fiscal stability, the DOF said over the weekend.
The Bureau of the Treasury earlier reported that the national government’s total outstanding debt as of end-2021 stood at P11.73 trillion, with the debt-to-GDP ratio at 60.5 percent, rising from 54.6 percent a year ago but “still within the accepted sustainable threshold” as the economy continues to recover from the effects of the pandemic.
“The recent build-up of debt was largely in response to pandemic-related expenses.
However, the government continues to judiciously manage debt, maintaining a prudent balance between domestic and external sources of financing, with more emphasis on the former to minimize effects of external risks,” the DOF said in its economic bulletin.
It said the medium-term fiscal program shows declining trend in the deficit largely on account of expenditures rising more slowly than GDP, but that “infrastructure spending is not sacrificed.”
The medium-term fiscal program shows that from the 2021 outlook of 8.2 percent of GDP, the deficit is seen to decline to 7.7 percent this year, and 6.1 percent and 5.1 percent in 2023 and 2024, respectively.
“In the light of the Supreme Court ruling on the Mandanas-Garcia case, the devolution of pertinent functions to local government units will help ease the fiscal burden of the national government,” the DOF said.
“Furthermore, structural measures, such as reforming the pension system of the military and uniformed personnel (MUP), will prevent the further build-up of pressure around fiscal fault lines,” it added.
According to the 2021 Fiscal Risk Statement, the fiscal impact of the current MUP pension system is about P114 billion annually.
“Resuming pre-pandemic economic growth rate calls for learning to live with the virus and fast-tracking the recovery. We already have an ongoing infrastructure program and have cut corporate income taxes,” the DOF said.
“Passing the amendments to the Public Service Act and the Foreign Investments Act, together with the recently amended Retail Trade Liberalization Act, will have added a potent ingredient to the economic recovery cocktail that can deliver a big shot in the arm of the Philippine economy,” it added.
