A January 12 research note by think tank Fitch Solutions see the next Philippine president walking a fiscal tightrope this year with public debt likely to surge to 62.9 percent of the country’s total economic output.
“We are Fitch Solutions flag the challenge the next president will face from the deterioration in the Philippines’ fiscal position during the pandemic. While there is a need to support the Philippine economic recovery given the loss of employment and economic output due to the pandemic, the prioritization of growth over deficit consolidation in 2022 could leave the next president facing fiscal challenges,” it said.
In 2019, before the pandemic caused health and economic crises, the country’s public debt to gross domestic product ratio was just 39.6 percent. Last year, the target was to cap the public debt at 59 percent of GDP even as government borrowed more to fund COVID-19 intervention measures.
Fitch Solutions projected that the Philippine government’s budget deficit could narrow from an estimated 8.3 percent in 2021 to 7.9 percent this year. However, that would still be much higher than the pre-pandemic average of 2.4 percent from 2015 to 2019.
It expects the country’s economic growth to accelerate from an estimated 4.5 percent in 2021 to 6.5 percent this year. While the Omicron variant remains a prominent threat to the economy, growth is expected to be stronger and economic activity to broadly normalize over the course of the year.
Fitch Solutions said risks remain from the continued pandemic threat to revenues. It believes the government could come under some pressure to speed up fiscal consolidation plans given the sharp rise in public debt levels during the pandemic.
Whoever will take over the reins of the country will have to contend with the challenges of leading it to recovery from the crippling COVID-19 pandemic and the impact of various emergency measures deployed to contain it. Public debt is one of those factors that must be managed as competently as possible and hopefully whoever wins the presidential elections will have the right team in place, one that prioritizes the country and its people over private interests and the infamously Filipino “utang ng loob” that can make our debt situation worse instead of better.*
