Public debt in the Philippines moved closer to the 60-percent level at the end of the first quarter of 2026, as the government continued to ramp up borrowings while the private sector remained cautious amid risks stemming from the war in the Middle East.

The latest Global Debt Monitor of the Washington-based Institute of International Finance (IIF) showed that the Philippines’ general government (GG) debt-to-gross domestic product (GDP) ratio rose further to 59.6 percent in the first quarter from 58.8 percent a quarter ago and 57.2 percent a year ago.

The IIF uses the GG debt ratio, which the updated Philippine Development Plan (PDP) 2023-2028—the Marcos Jr. administration’s socioeconomic blueprint—adopted last year as a core indicator for its plan to ease the country’s public debt burden.

GG debt is also the metric that credit rating agencies monitor for their ratings actions, as it excludes intra-governmental debt holdings.

The current administration plans to bring GG debt down to 54.7 percent of GDP by the time President Ferdinand R. Marcos Jr. steps down in 2028.

IIF data also showed that debt of non-financial corporates in the country inched up to 26.8 percent of GDP from 25.8 percent a year ago and 25.7 percent a quarter ago.

The rest of the Philippine private sector saw declining debt ratios year-on-year—households’ debts eased to 10.8 percent of GDP from 11.4 percent a year ago, while the financial sector saw a lower ratio of 7.3 percent from 7.8 percent.

“The IIF report shows Philippine debt is becoming more concentrated in the government sector, while households and banks are actually deleveraging,” Robert Dan J. Roces, group economist at Sy-led conglomerate SM Investments Corp. (SMIC), told Manila Bulletin on Wednesday, May 6.

For Roces, this means that “the economy is not overheating from excessive private borrowing.”

“That matters because it suggests the economy is still being supported more by public spending than by excessive consumer credit,” Roces said.

According to Roces, “the risk is manageable for now, but over time the focus has to shift from borrowing more to growing faster.”

“The bigger question now is not the debt level alone, but whether growth, investment, and fiscal credibility can keep pace with the increase in borrowing,” Roces added.

The IIF noted that emerging markets (EMs) like the Philippines are posting higher debt-to-GDP ratios, although EM debt has remained resilient, with spreads hovering near record lows amid a weaker United States (US) dollar, sound economic fundamentals, and continued access to international capital markets.

Globally, IIF data showed that debt climbed for a fifth straight quarter at end-March this year, hitting an all-time high of almost $353 trillion. This quarter-on-quarter increase was the fastest recorded since the second quarter of last year, the IIF said.

Global debt has largely held steady at about 305 percent of GDP since early 2023, the IIF added, noting that debt ratios have continued to decline in advanced economies while steadily increasing across EMs.

According to the IIF, structural pressures such as aging populations, higher defense and energy security spending, cybersecurity risks, and artificial intelligence (AI)-related investments are expected to drive government and corporate debt levels higher over the medium to long term, with the Middle Eastern war likely to worsen these pressures.

In the near term, rising energy and food prices are expected to fuel inflation and force many governments—particularly energy-importing EMs like the Philippines—to provide fiscal support, resulting in wider deficits, increased borrowing, and higher debt levels, the IIF warned. Philippine headline inflation already soared to a 37-month high of 7.2 percent in April.

“While higher inflation may temporarily help reduce debt ratios, the relief won’t be sustained if inflation becomes entrenched. If the Middle East conflict persists, prolonged price pressures will feed through to borrowing costs, particularly at the long end of the curve, even if central banks—increasingly constrained by rising public debt—do not act aggressively to rein in inflation,” according to the IIF.