A June 13, 2011 press release by the Department of Finance
The ratio of the country’s debt to its total gross domestic product (GDP) declined further in the first three months of the year, bolstering the chance for future credit rating upgrades for the Philippines.
The first quarter debt-to-GDP ratio, one of the main indicators being looked at by credit rating agencies, fell to 51.2 percent from last year’s revised 53.9 percent due to economic growth and debt measures that the government undertook, Finance Undersecretary Gil S. Beltran said.
Specifically, the country’s debt increased by 5.6%, P4.706 trillion from last year’s P4.458 billion, data from the Bureau of the Treasury showed.
Growth in GDP, or the value of all finished goods and services within the country, doubled during the same period to P9.193 trillion from P8.268 trillion last year.
“Your economy is growing faster than your debt because your deficit is also contained,” Beltran explained.
“This means that the country has enough space to attain its 55.5 percent debt-to-GDP goal this year,” he added. Last year’s ratio fell to 55.4 percent, lower than the 57-percent target.
Beltran said the government benefited from debt swaps it conducted since last year, after “it allowed exchanges of debts with high interest and short maturity with those having low interest and long maturity.”
Average debt maturity as of 2010 extended to 8.8 years from 7.9 years in June last year, owing to last year’s bond swaps. The last swap was conducted last December with P199 billion worth of new 2020 and 2035 securities substituted for maturing ones.
The Treasury bureau said it is planning another swap that would involve local securities soon.
“Our low deficit also that time was a factor since such will make us borrow less,” Beltran said.
First quarter deficit of P26.197 billion was well within the P111.986-billion target. This has been reversed however by a P26.258-billion surplus in April, causing the government to have a budget excess of P61 million for the first four months of the year.
Despite the remarkable fiscal performance, Finance Secretary Cesar V. Purisima earlier said the government will retain its deficit target of 3.2 percent of GDP for the year to give the state more space to spend more for the economy.
“With the pace we are going, we are confident we can have an upgrade any time sooner than later.”
Of the three main credit rating agencies—Standard & Poor’s (S&P), Moody’s Investors Service, and Fitch Ratings—S&P has so far raised the country’s credit worthiness to BB stable from BB- in November 2010; Moody’s, for its part, raised its outlook for the Philippines to “positive” from “stable” last January.