Debt-to-GDP ratio drops to 45.3% in September

The country’s debt-to-gross domestic product (GDP) ratio as of the end of September dropped to 45.3 percent, slightly lower than last year’s ratio of 46.4 percent.

Department of Finance (DOF) Undersecretary and chief economist Gil S. Beltran said the continuing drop in the debt-to-GDP ratio indicates the country’s stable financial situation to pay off its debts while funding economic and social projects.

Domestic debt-to-GDP ratio is at 29.6 percent, while external debt-to-GDP ratio is at 15.7 percent.

The debt-to-GDP ratio is an economic indicator which shows, among others, a country’s ability to pay off its debt from wealth generated by the economy itself, instead of merely borrowing more money to pay off maturing debts. The fiscal space generated by the government’s higher revenue collection has brought down the debt-to-GDP ratio. This year the budget deficit remained below the target of 2 percent of GDP.

“Compared with the target deficit equivalent to 2 percent of GDP, the end-September actual deficit of 0.27 percent shall enable the government to provide fiscal space to push economic growth to higher levels in the last quarter, even with the ongoing global financial volatilities and threats of El Niño phenomenon,” Beltran said in an economic bulletin.

The DOF said that, despite the lower budget deficit for this year, which amounted to P25.5 billion as of September, government expenditures continued to pick up, especially for projects that have economic and social impact, like infrastructure and social services.

This is expected to continue through 2016, with the government’s proposed budget, including provisions for infrastructure spending next year, equivalent to 5 percent of GDP, while budgets for social services going up by 471 percent from the budget allocated for such services in 2010.

From January to September, total expenditures amounted to P1.63 trillion, or 12 percent higher than comparable figures last year.

Source: by David Cagahastian / http://www.businessmirror.com.ph/debt-to-gdp-ratio-drops-to-45-3-in-september/