The country’s foreign debt last year was tempered by government and private sector borrowings due to a weaker peso against the US dollar, an economist told Malaya Business Insight on Sunday.
The real problem behind it, however, was the budget deficit, which led to more domestic and foreign borrowings and higher outstanding debt, RCBC chief economist Michael Ricafort said.
While the country’s budget deficit fell slightly to P1.506 trillion from P1.512 trillion in 2023, government data showed, there remains a huge gap that needed to be plugged with additional borrowings.
The external debt ratio as a percentage of the gross domestic product (GDP) remains at a prudent level, settling at 29.8 percent from 30.6 percent in the third quarter of 2024, the central bank earlier said.
The 29.8 percent debt-to-GDP ratio was still higher compared with 28.7 percent as of end-2023.
The improvement quarter-on-quarter was driven by a decline in external debt levels in conjunction with the Philippine economy’s 5.2 percent real GDP growth in the fourth quarter of 2024, and 5.6 percent for the full year 2024, the central bank said.
Although the external debt-to-GDP ratio went up as of end-2024, year-on-year it was relatively better compared with countries of similar credit rating in recent years, Ricafort said.
Countries borrow from foreign lenders to finance infrastructure projects as well as repay previous external debts and the government budget deficit.
