MANILA - A study by the Asian Development Bank said the Philippines has “limited fiscal space” after the country’s debt level ballooned during the COVID-19 pandemic.
The ADB study titled “The Sustainability of Asia’s Debt” does not mention the Philippines as having an unsustainable debt problem, but classifies it among other countries that have a limited capacity to take on unforeseen expenditures in a sound manner.
The other nations in this category include several other ASEAN nations, namely Indonesia, Vietnam, Thailand, and Myanmar.
The Philippines ended 2021 with a debt of P11.73 trillion, and a debt-to-GDP ratio of 60.5 percent, which was higher compared to the 54.6 percent in 2020. It was also above the 60 percent threshold that the government set.
Finance Secretary Carlos Dominguez earlier said that the top task of the next administration will be to reduce the country’s debt levels.
Economists believe 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 COVID-19 pandemic.
However, the authors of the ADB study also noted the pandemic has had a serious impact on those debt levels, and there are risks which could tilt the continent into ‘unsustainable’ circumstances.
If Asian countries are not careful, they could face a very real debt crisis, according to Marcelo Giugale, Professor at Georgetown University and former Country, Regional, and Global Departments Director of the World Bank.
“You have a very heavy debt burden that is growing fast,” Giugale said.
The ADB study noted that India, Pakistan, Sri Lanka and several other countries will be above the “high scrutiny” threshold of the International Monetary Fund (IMF) for public debt monitoring, with debts worth 70 percent of their GDP or higher.
“Asia is not worse than other regions, but it is still wildly unpredictable. You have a very heavy debt burden that is growing fast,” said Giugale.
He also noted that while the debt management in Asia seems to be world class, the region as a whole is still quite behind in terms of risk management.
These risks include the persisting 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 what we would like,” said Juan Pradelli, Senior Expert on Fiscal Policy and Debt Management and former staff of the World Bank
Pradelli said growth needs to accelerate in order for many Asian countries to pay off their pandemic bloated debt levels.