THE Department of Finance (DoF) plans to focus on debt management as it transitions to the next administration after the national elections in May 2022, its top official said.
Finance Secretary Carlos G. Dominguez III said the Duterte administration plans to address four key economic issues during the transition.
“These include ways on how to prudently manage the debt we have accumulated and grow our GDP (gross domestic product) at a rate of higher than 6% per annum as we have done,” he told the BusinessWorld Virtual Economic Forum 2021 on Thursday.
Outstanding government debt ballooned to P10.2 trillion last year from P8.2 trillion in 2019 as the state ran big deficits to battle the coronavirus pandemic.
The country’s debt-to-GDP ratio was 63.1% as of September, the highest in 16 years, government data showed.
“Nevertheless, this (debt-to-GDP ratio) remains eminently sustainable — especially as more than two-thirds of our borrowings are being sourced from our very liquid domestic market. The stability of the peso indicates this. We expect to begin working down our debt by next year,” Mr. Dominguez said.
Although borrowings rose, the Finance chief said the average annual interest rate on domestic and external debt fell to 3.9% in September this year from 6.3% in 2010.
Fitch Ratings has warned that rising public debt could lead to a credit rating downgrade for the Philippines in the next few years.
Mr. Dominguez said the department will also assist with managing inflation brought about by global shortages.
Headline inflation last month eased to 4.6% from 4.9% in September amid a slower increase in food prices. Still, this was the third straight month inflation exceeded the 2-4% target of the central bank for the year.
“We need to manage the inequalities exacerbated by the COVID-19 pandemic — both within the country and among countries,” Mr. Dominguez said.
“And finally, we need to address climate change without stretching the fiscal space of the country.”
At the virtual event, Mr. Dominguez said the Duterte administration will also continue to modernize governance, speed up the rollout of the infrastructure program, and develop reforms to attract more investments.
“To maximize the impact of these interventions, we are urging our entrepreneurs to continue innovating sustainably by shifting to the circular economy and using more renewables,” he added.
Meanwhile, Mr. Dominguez said the Philippines’ full-year GDP growth will likely reach the high-end of the government’s 4-5% target, after a better-than-expected third-quarter growth of 7.1%.
“Our year-to-date growth is presently at 4.9%. There is now a greater likelihood that our full-year growth will hit the higher end of our 4-5% GDP target for this year,” he said.
The Finance chief said the government will continue easing restrictions as the coronavirus disease 2019 (COVID-19) infections decline and vaccinations increase.
“With brightening prospects for the economy, we expect to do even better in the fourth quarter as we continue to relax mobility restrictions,” Mr. Dominguez said.
“With current trends, we expect to achieve the full reopening of the economy by the onset of the New Year. We are ready for a strong recovery.” — Jenina P. Ibanez