While government debt continued to pile up, private businesses and individuals in the Philippines held back on borrowings amid conditions not too conducive to debt accumulation.

The latest data from the Washington-based Institute of International Finance (IIF), released on Thursday, Sept. 25, showed that the share of Philippine government debt to gross domestic product (GDP) rose to 57.8 percent at the end of the second quarter of 2025 from 56.7 percent a year ago.

“Governments keep borrowing to fund health, defense, and climate needs,” Robert Dan Roces, group economist at Sy family-led conglomerate SM Investments Corp. (SMIC), explained to Manila Bulletin.

The IIF data, published in its latest Global Debt Monitor report, reflected the general government (GG) debt ratio, which the midterm update on the Philippine Development Plan (PDP) 2023-2028—the Marcos Jr. administration’s medium-term socioeconomic blueprint—also adopted as a core indicator for its plan to lower the country’s public debt burden.

The historically used national government (NG) debt-to-GDP ratio has been replaced by the GG debt ratio “as it presents a more holistic view of the government’s liabilities,” according to the updated PDP 2023-2028.

The GG debt ratio is also the metric that credit rating agencies monitor for their ratings actions, as it excludes intragovernmental debt holdings.

Under PDP 2023-2028, the current administration targets to gradually lower the GG debt ratio to 54.7 percent by the time President Ferdinand R. Marcos Jr. steps down in 2028.

On the other hand, IIF data showed that household debt as a share of the Philippine economy declined to 11.3 percent at end-June 2025 from 12.1 percent a year ago.

As for non-financial corporates in the country, their debt ratio dropped to 25.7 percent in the second quarter from 26.8 percent last year.

The domestic financial sector, meanwhile, saw its debt-to-GDP ratio ease to 7.2 percent from 7.6 percent during the same period.

“Private borrowers are pulling back because higher rates and tighter bank standards make loans less attractive, while balance sheet repair and weak demand curb appetite for new debt,” Roces noted.

After the Bangko Sentral ng Pilipinas (BSP) paused in February from its monetary policy easing started in August last year, the central bank’s policy-setting Monetary Board (MB) later slashed key interest rates by a total of 75 basis points (bp) in April, June, and August. The policy rate currently stands at five percent, and BSP Governor Eli M. Remolona Jr. has hinted at a minimum of one more 25-bp cut before year-end.

On the positive side, “the drop in private leverage suggests stronger financial discipline and healthier household and corporate balance sheets, which can serve as buffers against shocks,” Roces said.

Globally, the IIF reported that total debt jumped to a new record high of almost $338 trillion at the end of the second quarter.

“The scale of this increase was comparable to the surge seen in the second half of 2020, when pandemic-related policy responses drove an unprecedented buildup in global debt,” said the IIF, the global financial industry association.

“Easing global financial conditions—supported by a softer United States (US) dollar and a more accommodative stance from major central banks—have been key drivers of the increase this year,” it added.