Improved debt to GDP ratio seen this year

By Ruben Hortelano

02/27/2009

The ratio of the country’s debt to gross domestic product (GDP) is expected to improve this year even if added borrowings are undertaken to cover a higher P178-billion budget deficit target, according to the Department of Finance.

The country’s debt this year was forecast to improve to 54.8 percent of GDP or P4.416 trillion from 56.3 percent of GDP last year or P4.221 trillion.

Finance Secretary Margarito Teves said the improving debt picture highlights the continued importance of maintaining fiscal discipline. Last year’s actual debt to GDP ratio was higher than the target 50.7 percent of GDP.

Fiscal planning sought to limit last year’s debt to only P3.853 trillion but was allowed to soar to P4.220 trillion as the full impact of the global financial turmoil started to be felt.

The government had set aside P698.5 billion, equal to 8.7 percent of GDP, for debt servicing this year.

Actual debt service equaled only 8.2 percent of GDP or lower than the projected 8.4 percent of GDP as debt service last year totaled only P612.7 billion instead of P636.1 billion as expected.

Teves said interest expense this year should be around P309.7 billion from last year’s P272.2 billion.

He also set aside P388.8 billion of the nation’s budget for the year as principal payments, significantly higher than last year’s 340.5 billion.

Principal payments as percent of GDP this year were to hit 4.8 percent from last year’s 4.5 percent.

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