Delays in implementing major tax measures have proven to be a friction in the Philippines’ target of raising higher revenues in recent years, a fiscal condition further worsened by the persistent increase in national government (NG) debt.

According to Singapore-based ASEAN+3 Macroeconomic Research Office’s (AMRO) ASEAN+3 Fiscal Policy Report (AFPR) 2026, the Philippines’ fiscal health is experiencing a period of massive headwinds. Half of the member economies saw deteriorating fiscal balances last year.

Non-tax earnings shrank by nearly two-fifths to ₱376.3 billion in 2025 from ₱618.3 billion in 2024.

This decline coincides with the country’s ballooning debt pile as a share of gross domestic product (GDP). Persistent increases in the debt ratio were observed in the Philippines, alongside its ASEAN peers Myanmar and Thailand, as well as China and South Korea.

Recall that in 2025, the government’s outstanding debt climbed to a new record of ₱17.71 trillion by year-end, driven by additional government borrowing to fund projects and the peso’s continued depreciation against the United States (US) dollar and other currencies.

This pushed the debt-to-GDP ratio to 63.2 percent last year—the highest since the 65.7 percent recorded in 2005.

As of end-2025, the domestic debt-to-GDP ratio climbed to a record 43.3 percent, the highest since 1986, based on historical Bureau of the Treasury (BTr) data. Meanwhile, the foreign debt-to-GDP ratio rose to 20 percent, its highest level since 2011’s 20.5 percent.

Primary deficits and interest payments (IPs) were the main drivers pushing the debt-to-GDP ratio upward, AMRO data indicate.

Despite these current challenges, AMRO’s medium-term outlook remains rosier, as it sees a declining debt ratio in the Philippines, alongside Japan, Indonesia, Malaysia, and Laos.

Furthermore, the country’s debt structure provides a level of stability, as “the share of official creditors in external debt outstanding was 53.7 percent in the Philippines,” suggesting more favorable concessional terms compared to debt from the private market.

However, the Philippines continues to struggle with fiscal transparency, particularly regarding tax incentives.

While the government has taken steps to document these costs, AMRO flagged that among the economies in the region that have published tax expenditure (TE) reports, Japan and the Philippines “lag behind.”

In contrast, South Korea and Indonesia ranked first and second, respectively, among the highest-ranking economies in transparency.

Tax expenditures in the Philippines—largely consisting of tax incentives for businesses—account for approximately 2.5 percent of GDP. This suggests that a large amount of potential revenue remains leakage outside the immediate reach of government coffers.

Tax expenditures represent forgone tax revenue sacrificed by a government through the use of tax incentives—such as exemptions, reduced rates, and allowances—to promote specific policy objectives like investment or social support.