Public and private debt in the Philippines continued to diverge as households and firms remain cautious despite lower interest rates, while the government sustains massive borrowings to revive slowing economic growth, the latest Institute of International Finance (IIF) data showed.

According to the Washington-based IIF’s latest Global Debt Monitor, published Wednesday, Feb. 25, the Philippines’ government debt-to-gross domestic product (GDP) ratio rose further to 58.8 percent at end-2025, from 57.8 percent a quarter ago and 56.6 percent a year ago.

The IIF report uses 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 adopts as a core indicator for its plan to ease the country’s public debt burden.

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 plans to bring GG debt down to 54.7 percent of GDP when President Ferdinand R. Marcos Jr. steps down in 2028.

But the rising GG debt level bucked the declining trend for private-sector debts in the country, despite a slower base expansion after full-year 2025 economic growth fell to a post-pandemic low of only 4.4 percent in the aftermath of the flood-control infrastructure corruption scandal, which tempered both public and private investments as well as consumption.

The debt ratio among Filipino households eased to 11 percent in the fourth quarter of 2025, from 11.1 percent a quarter ago and 11.6 percent a year ago, IIF data showed.

Meanwhile, non-financial corporates and the financial sector saw their debts post annual declines to 25.7 percent of GDP (from 27.7 percent a year ago) and 7.5 percent (from 7.9 percent), respectively, at the end of last year.

Robert Dan J. Roces, group economist at Sy-led conglomerate SM Investments Corp. (SMIC), told Manila Bulletin that current Philippine debt levels can be summarized as “private caution, public carry.”

“In the Philippines, the divergence reflects balance-sheet behavior. Households and corporates have been cautious and are still in repair mode after the prior tightening cycle, so even with Bangko Sentral ng Pilipinas (BSP) easing, they are prioritizing deleveraging and internal funding over new borrowing, and this explains why private debt ratios edged down,” Roces said.

Since the easing cycle began in August 2024, the BSP has cut key interest rates by a cumulative 225 basis points (bps), bringing the policy rate to 4.25 percent at present after the policy-setting Monetary Board’s (MB) latest 25-bp reduction last week.

“Meanwhile, government debt continues to rise because fiscal deficits and ongoing infrastructure and social spending add to the stock,” Roces added. The Bureau of the Treasury (BTr) will borrow a record ₱2.68 trillion this year, up from the projected gross financing of ₱2.6 trillion in 2025.

Globally, IIF said bank loans picked up last year, especially commercial bank lending to private sectors.

“The rebound has been most evident in mature markets, where easing funding conditions—combined with early signs of regulatory easing—have supported lending growth. Part of this expansion has also been driven by increased commercial lending to non-bank financial institutions (NBFIs). In fact, this has been the fastest-growing segment of the United States (US) bank loan market,” IIF noted.

“Growth in overall commercial bank loans has also remained robust in emerging markets (EMs), with any moderation in the pace largely reflecting declining inflation,” it added. End-2025 Philippine inflation dropped to a nine-year low of 1.7 percent, below the government’s two- to four-percent target range of annual price hikes deemed manageable and conducive to economic growth.

In all, IIF said global debt surged by nearly $29 trillion in 2025—the fastest increase since the Covid-19 pandemic—reaching a record $348 trillion, driven largely by deficit spending in advanced economies and reflecting a broad-based rise across both developed markets and EMs.

As a share of GDP, global debt declined for a fifth straight year to about 308 percent in 2025, mainly due to improvements in advanced economies, although rising debt ratios in EMs pushed their levels to a record above 235 percent of GDP.

Similar to the Philippines, IIF noted that “where global debt ratios did decline, this was entirely attributable to the private sector, with private debt/GDP ratios now well below pre-pandemic peaks.”

“By contrast, government debt burdens continued to climb, reinforcing a persistent, structural shift in the composition of global leverage—more public, less private,” IIF said.

IIF flagged that EMs like the Philippines “face record refinancing needs of over $9 trillion in 2026, though supportive funding conditions and carry trade demand should help contain risks in the near term.”