The Philippines’ external debt is in a position of strength to cushion the impact of the coronavirus pandemic that continues to wreak havoc globally, the Department of Finance (DOF) said yesterday.
In a DOF economic bulletin, Finance Undersecretary Gil S. Beltran said the country’s external debt had fallen to 19.67 percent of gross national income (GNI) as of the end of the first quarter this year from 20.98 percent in the same period in 2019.
As a percent of goods and services and primary income, Beltran said it also dropped to 54.4 percent from 54.8 percent last year, which primarily due to public sector debt that dropped from $40.13 billion to $38.3 billion.
“The Philippines’ prudent debt policy has enabled the country to strengthen its defenses against external shocks like the COVID-19 pandemic. This is one of the reasons for the strong confidence of investors in the Philippine economy,” Beltran said.
Compared with two decades ago when the country was recovering from the Asian financial crisis, external debt ratios in 2020 were 41.4 percent of the debt-GNI ratio and 51.2 percent of the debt-exports ratio in 2000.
Against the Philippines’ Asian peers, external debt ratios of the country are lower in 2018, the latest data from the World Bank showed.
As a percent of GNI, the Philippines’ external debt ratio is only 19.9 percent, compared to the 33.6 percent average for nine Asian economies.
“The country’s ratio is the third lowest behind China and India,” Beltran pointed out.
Finance Secretary Carlos G. Dominguez earlier assured that the Philippines has ample buffers to cushion its fallout from the coronavirus pandemic.
Last week, the debt-watcher Moody’s Investors Service affirmed the Philippines’ credit rating of “Baa2” with a “stable” outlook due to the ability of its economy to cushion the effects of COVID-19 and to post a solid recovery over the near term.
But Moody’s also noted the country’s economy would contract by 4.5 percent this year, while the national government’s debt ratio would suffer an “acute shock” after falling from 50.2 percent level in 2010 to 39.6 percent last year.
However, Moody’s expects the Philippines to bounce back with a robust growth of 6.5 percent in 2021, to be followed by a solid growth of around 6.0 percent in the succeeding years.
Moody’s said the recovery projection comes on the back of favorable demographics and improving investment climate.
“The Philippines has wielded enough fiscal space ahead of the deepening coronavirus crisis,” Dominguez said, noting this allowed the government to “spend big” on its strategy to beat the COVID-19 pandemic.