The Philippines has become one of the fastest-growing emerging economies with debt ratios lower than its Asian neighbors, from being a highly-indebted developing country in the 1980s, the Department of Finance said Wednesday.
From 324.8 percent of exports of goods and services in 1985, the country’s external debt declined to 47.9 percent in June this year, Finance said. From 64.6 percent of exports of goods and services in 1985, the country’s external debt service declined to 6.2 percent during the first half of 2018.
The Philippines compared with its fast-growing neighbors in Asia has lower average debt ratios.
As a percentage of the gross domestic product, the Philippines has external debt ratio of 20.4 percent as of June 2018, lower than those of Malaysia (74 percent), Vietnam (44.8 percent), Indonesia (37.5 percent) and Thailand (31.7 percent), but slightly higher than those of India (17.4 percent) and (China (14.5 percent).
The average for seven major Asian countries is 26.8 percent, which is more than 30 percent higher than the Philippines’.
As a percentage of exports of goods and services, the Philippines’ external debt service has dropped to 6.2 percent in 2017, half of Asia’s average of 12.5 percent.
The figure is lower than Indonesia (25.2 percent), Malaysia (13.9 percent) and India (7.9 percent), but higher than Thailand (5.8 percent) and China (6 percent).
Finance said the reversal of the country’s debt position did not come overnight. It aids it was a product of three decades of economic reforms, including fiscal consolidation, prudent economic and debt management, shift toward market-determined exchange rate as well as export and investment-friendly regime.
For one, the country reduced the fiscal deficit by increasing the tax effort from 10.1 percent in 1990 to 14.2 percent in 2017 and reining in on expenditures so that the targeted deficits averaging 2.1 percent of GDP for almost three decades are attained.
The Philippines also reduced the debt service through debt rescheduling initially, and later, debt conversion and debt exchanges, shifted to domestic borrowing to reduce forex risk exposure as domestic savings rose and domestic capital markets grew and focused on longer debt maturities.