The Philippines has the lowest gross external debt position among the major Southeast Asian economies, placing the country in a much stronger position to cushion the blow of the coronavirus-induced crisis, the Department of Finance (DOF) assured.
In his latest economic bulletin, Finance Undersecretary Gil S. Beltran, said the country’s external debt-to-gross national income (GNI) ratio stood at only 20.11 percent as of last year, lower than the ratios of Indonesia, Maylasia, Thailand and Vietnam.
Thailand is closest behind the Philippines at 34.07 percent, followed by Indonesia at 36.85 percent, while Malaysia registered 64.59 percent. Vietnam did not have available data for 2019 but recorded a 47.86 percent external debt ratio in the previous year.
As a percent of exports of goods and services and primary income, the Philippines’ external debt ratio has dropped to 54.4 percent in the first quarter of 2020 from 54.8 percent in the same period last year.
The decline is due to public sector debt which fell from $40.13 billion to $38.3 billion, the finance official cited.
Compared with two decades ago, when the Philippines was recovering from the Asian financial crisis, the external debt ratio in 2020 was significantly lower at 51.2 percent of the debt-exports ratio in 2000.
Amid a slowing global economy and dampening of investment activities due to the COVID-19 pandemic, Beltran said that countries, like the Philippines, have scrambled for funds to fuel economic recovery.
“This is where countries' overall debt scenario is crucial,” he said.
While uncertainties abound, Beltran explained that debt metrics are among the important indicators being watched by both domestic and international investors, along with credit rating agencies.
“In the case of the Philippines, the relatively low external debt-to-GNI ratios attest to the government's policy of sustaining its prudent borrowing activities,” Beltran said.
"While the realities brought about by the health crisis has significantly changed the global economic and financial landscape, the government is steadfast in pursuing various reforms to raise much needed revenues to stimulate the economy,” he added.
Finance Secretary Carlos G. Dominguez III said the ongoing economic downturn is a test of fiscal stamina for the Philippines, as no one really knows how long the public health crisis will persist.
“There is no magic wand to wave away the virus. We must be prepared for a long battle. We must therefore exercise fiscal prudence to ensure that we do not run short of resources in this long game,” Dominguez said.
Despite uncertainty, the finance chief said that they remain confident that the country will win back its growth momentum by next year.
“A lot will depend on whether the government and the business sector can work together to revive consumer confidence and domestic demand,” Dominguez said.