PH has ‘limited fiscal space’ as debt rises, AfDB says
MANILA – A study by the Asian Development Bank said the Philippines had “limited fiscal space” after the country’s debt levels soared during the COVID-19 pandemic.
The AfDB study titled “Asian Debt Sustainability” does not mention the Philippines as having an unsustainable debt problem, but ranks it among other countries that have limited capacity to meet unforeseen expenditures in a sound manner.
Other nations in this category include several other ASEAN nations, namely Indonesia, Vietnam, Thailand, and Myanmar.
The Philippines ended 2021 with a debt of 11.73 trillion pesos and a debt-to-GDP ratio of 60.5%, which was higher than the 54.6% in 2020. It was also above the 60% threshold set by the government.
Finance Secretary Carlos Dominguez said earlier that the main task of the next administration will be to reduce the country’s debt level.
Economists say Asia’s debt levels are sustainable, for now, and that Asian countries have done a much better job than the rest of the world in managing debt levels amid the pandemic. of COVID-19.
However, the authors of the AfDB study also noted that the pandemic has had a serious impact on these debt levels, and that there are risks that could tip the continent into “unsustainable” circumstances.
If Asian countries are not careful, they could face a real debt crisis, according to Marcelo Giugale, a professor at Georgetown University and former director of the World Bank’s country, regional and global departments.
“You have a very heavy and rapidly increasing debt burden,” Giugale said.
The AfDB study noted that India, Pakistan, Sri Lanka and several other countries will be above the International Monetary Fund (IMF) “high watch” threshold for monitoring public debt, with debts worth 70% of their GDP or more.
“Asia is no worse than other regions, but it is still extremely unpredictable. You have a very heavy debt burden that is growing rapidly,” Giugale said.
He also noted that while debt management in Asia appears to be world-class, the region as a whole is still quite behind in terms of risk management.
These risks include the persistence of the COVID-19 pandemic, its impact on the global supply chain, and climate change, to name a few.
“Growth prospects are quite uncertain. In the very short term, the pandemic is not over as we would like,” said Juan Pradelli, senior fiscal policy and debt management expert and former World Bank staff member.
Pradelli said growth needs to pick up for many Asian countries to repay their pandemic-inflated debt levels.