Philippine debt levels as a share to the economy fell across-the-board in the first half of 2024, according to the latest data from the Washington-based Institute of International Finance (IIF), underscoring the "double-edged sword" wrought by the previously elevated interest rate environment.

The IIF's Global Debt Monitor report released on Sept. 25 showed that among households in the Philippines, the share of debt to gross domestic product (GDP) declined to 12.1 percent as of June from 13.2 percent a year ago.

Among non-financial corporates, the end-June debt ratio dropped to 26.8 percent from a year ago's 28.7 percent.

In the financial sector, debt slid to 7.6 percent of GDP in the first half of this year from 8.8 percent last year.

As for the government, its first-half debt burden slightly eased to 56.8 percent from 56.9 percent a year ago.

The Philippines bucked the trend among emerging markets, where household, non-financial and public debt ratios rose in the first six months.

Sought for comment, Security Bank chief economist Robert Dan J. Roces noted that while it was good news that the Philippine government's debt remained relatively stable, the overall declining trend across sectors "presents a double-edged sword for the economy."

"On one hand, lower debt levels can enhance financial stability and resilience to economic shocks, while also creating capacity for future borrowing if needed," Roces explained.

"However, if this decline is primarily driven by high interest rates deterring borrowing, it could signal reduced economic activity and missed growth opportunities,"  he said.

For Roces, "the Philippines' comparatively low debt ratios among emerging markets provide some economic flexibility."

"Importantly, the announced cut and signaled future cuts to the reserve requirement ratio (RRR) by the central bank are expected to help counteract the deterrence to borrowing by increasing liquidity in the banking system, potentially stimulating lending and economic activity," Roces added, referring to the reduction in mandatory bank reserves across universal, commercial, thrift, rural and digital banks as well as cooperatives taking effect on Oct. 25.

This forms part of the Bangko Sentral ng Pilipinas' (BSP) monetary policy easing cycle that started with a 25-basis point (bp) cut in the key interest rate to 6.25 percent last August, seen to enjoin more domestic borrowings.