The ratio of public debt to economic output, as measured by gross domestic product (GDP), has increased the most in the Philippines and Thailand since the end of 2019, according to Moody’s Analytics.
Prior to the COVID-19 pandemic, the Philippines managed to reduce the public debt ratio to an all-time high of 39.6% in 2019.
However, due to increased borrowing to finance the country’s bloated budget deficit and finance pandemic response measures, the government’s debt-to-GDP ratio jumped to 63.5% at the end of the first quarter of this year. year.
That was above the 60% threshold considered by rating agencies to be manageable among emerging markets like the Philippines.
In its latest commentary, Moody’s Analytics said debt-to-GDP ratios across Asia-Pacific remain well above pre-pandemic levels, although several Southeast Asian countries have experienced some improvement last year.
However, the Moody’s Group’s research arm noted that the Philippines, Thailand and Vietnam struggled to contain total debt last year due to tightened COVID-19 quarantine and lockdown protocols.
“Public debt in Southeast Asia continued to rise in 2021, although the increase was not as steep as in 2020. Thailand and the Philippines saw the largest increases in public debt relative to GDP in Southeast Asia and the world between the end of 2019 and the end of 2021,” said Moody’s Analytics.
He noted that the Philippines and Thailand were the slowest growing economies in the region last year and needed substantial expansionary fiscal policy to support economic recovery.
According to Moody’s Analytics, both countries still have rather low debt-to-GDP ratios despite the sharp rise.
In other Southeast Asian countries, Moody’s Analytics noted that there were signs of cutbacks in fiscal spending, with Indonesia and Singapore recording modest increases in public debt-to-GDP ratios last year. unlike their aggressive deficit spending in 2020.
During the pandemic, he said Southeast Asian governments had raised debt ceilings to cope with higher borrowing and spending to support the economy.
“Post-pandemic fiscal consolidation is expected to begin in 2023 as countries adopt COVID-19 endemic policies, including an easing of social distancing measures,” Moody’s Analytics said.
Through a gradual and calibrated path of fiscal consolidation under President Marcos’ administration, Finance Secretary Benjamin Diokno said economic managers aim to bring the ratio down to 61.8% in 2022, 61.3% in 2023 and 52.5% by 2028.
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