PHL needs to grow over 6% to cut debt

  • THE Philippine economy needs to grow above 6% annually in the next 5 to 6 years to reduce the country’s debt, Finance Secretary Carlos G. Dominguez III said.
  • “The biggest challenge for the next administration is really to grow out of the debt that we incurred during the pandemic, which was natural because our revenues went down due to the lockdowns and we increased expenditures,” he told Bloomberg Television.
  • “The next administration would have to design policies and stick to very strict fiscal discipline to grow out of this debt problem.”
  • The Philippines borrowed PHP1.3tr and received grants worth PHP2.7bn to fund its pandemic response, including coronavirus vaccines. The Department of Finance (DoF) has said it would take 40 years to pay off these pandemic-related loans and grants.
  • “Some of our debt has a 40-year term, so we assumed debt at very, very favorable terms, in terms of tenor as well as interest rates,” Mr. Dominguez said. “So, we’re not worried about the repayment, but we have to really grow out of the debt.”
  • The Philippines ended 2021 with PHP11.73tr in outstanding debt, pushing the debt-to-gross domestic product (GDP) ratio to a 16-year high of 60.5%.
  • The government set a 7-9% GDP growth target this year, and 6-7% in 2023, as it expects the economy to bounce back from the pandemic. However, the Russia-Ukraine war would weigh heavily on the Philippine economy’s recovery, Mr. Dominguez said, citing the impact of the war on oil and grain prices.
  • Meanwhile, Mr. Dominguez said the Philippines would be closely watching the Federal Reserve’s monetary policy normalization before making its own policy adjustments.
  • “We don’t want to be behind the eight ball here because if the US raises their interest rates, people in the Philippines will, of course, want to follow those rates. We have to make sure we balance the need to grow, the need to fight inflation and the need to preserve our capital,” Mr. Dominguez, who sits on the Monetary Board, said.

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