The sustained rise in Philippine public debt continued to buck the trend of declining debt holdings among Filipino households and firms at the end of the third quarter of 2025, the latest Institute of International Finance (IIF) data showed.

According to the Washington-based IIF’s latest Global Debt Monitor published on Tuesday night, Dec. 9 (Manila time), the Philippine government’s debt-to-gross domestic product (GDP) ratio rose to 57.8 percent in the third quarter of this year from 56.6 percent a year ago.

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The historically used national government (NG) debt-to-GDP ratio has been replaced by the GG debt ratio “as it presents a more holistic view of the government’s liabilities,” according to the updated PDP 2023-2028.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

The year-on-year increase in the GG debt ratio contrasted with the declines in household, non-financial corporates, and financial sector debt ratios for the Philippines.

Household debt-to-GDP declined to 11.1 percent in the third quarter from 11.9 percent a year ago.

Non-financial corporates saw their debt drop to 25.5 percent of GDP at the end of the third quarter of 2025 from 26.3 percent in the third quarter of 2024.

Meanwhile, the Philippine financial sector also trimmed its debt ratio slightly to 7.1 percent in the third quarter from 7.2 percent last year.

“The Philippines’ debt mix in the third quarter of 2025 reflects a ‘public-up, private-down’ dynamic typical of economies with post-tightening recoveries: the state as borrower of last resort, supporting growth while households and firms rebuild confidence,” Robert Dan Roces, group economist at Sy-led conglomerate SM Investments Corp. (SMIC), told Manila Bulletin on Dec. 9.

“The challenge for 2026 will be to transition from fiscal to private-sector-led momentum without jeopardizing debt sustainability as rates normalize, while keeping an eye out for developments in governance-related issues,” Roces added, referring to the flood-control scandal that exposed billions, if not trillions, of pesos wasted on “ghost” and substandard infrastructure projects in recent years.

Interest rates are expected to go down further, with a 25-basis-point (bp) Bangko Sentral ng Pilipinas (BSP) rate cut widely anticipated on Thursday, Dec. 11, amid low inflation and sluggish economic growth resulting from tempered spending on public goods and services in the aftermath of the uncovered flood-control corruption.

Across emerging markets (EMs), the household and financials sector posted lower debt ratios, while governments and non-financial firms increased the share of their debts to GDP.

Worldwide, “over $26 trillion was added to global debt stockpiles in the first three quarters of 2025, marking a fresh high of near $346 trillion,” the IIF said. “Driven largely by government borrowing, debt in both mature and EMs has hit new records.”

“Non-financial corporate debt is fast approaching $100 trillion, with borrowing by artificial intelligence (AI)-linked and clean energy sectors accelerating—a trend that is set to reshape global credit markets over the next several years. Growth in private credit markets remains under scrutiny, but the sector is still small, and risks remain contained,” according to the IIF.

In the case of households, the IIF noted that “debt has grown more slowly than GDP, reducing global household debt-to-GDP ratios to 57 percent—[the] lowest since 2015.”

“While this may point to healthier balance sheets, it also reflects households’ diminishing capacity to take on new debt amid such high policy uncertainty,” the IIF explained, pointing to a flurry of elections held globally from 2023 to 2025.

“With fewer elections ahead following the 2023 to 2025 super-cycle, easing funding conditions could support a modest pickup in borrowing. Even so, cost-of-living pressures and affordability constraints remain the key forces shaping consumer sentiment and loan demand, with upcoming election outcomes likely to add another layer of uncertainty,” the IIF said.