PHL debt-to-GDP to continue declining — AMRO

PHILIPPINE DEBT as a proportion of gross domestic product (GDP) is expected to steadily decline through 2030, according to the ASEAN+3 Macroeconomic Research Office (AMRO).

In its 2026 Fiscal Policy Report, AMRO said that it expects debt ratios to gradually stabilize or decline across most ASEAN+3 economies, excluding China and South Korea.

“In both economies, debt ratios are expected to continue rising at a pace similar to that observed over the past five years, reflecting persistently high primary deficits and, in China’s case, the continuation of the hidden debt-swap program through 2028,” it said.

“By contrast, the debt ratio is projected to decline in Indonesia, Japan, Laos, Malaysia and the Philippines,” it added, while pointing out that moderate increases are expected in other member economies.

For 2026, AMRO estimates the Philippine debt-to-GDP ratio to slightly decrease to 62.8% from 63.2% in 2025.

Last year, most ASEAN+3 economies recorded higher debt ratios except Japan, Laos, and Vietnam, where debt ratios continued to fall.

“Most member economies recorded a higher debt ratio in 2025 after showing signs of stabilization in previous years,” AMRO said. 

“In several other economies, the upward trend persisted, with increases observed in China, South Korea, Myanmar, the Philippines, and Thailand,” it added.

According to the report, the Philippine debt-to-GDP ratio increased to 63.2% in 2025 from 60.7% in 2024.

“Primary deficits and higher effective interest rates were the main drivers of rising debt ratios, while real GDP growth and inflation exerted downward contributions,” it said.

The Philippine economy expanded by a weaker-than-expected 4.4% in 2025, the weakest reading since the 9.5% contraction in 2020, while the National Government’s budget deficit widened by 4.68% in 2025 to P1.58 trillion, exceeding the P1.56 trillion ceiling set for the year.

Meanwhile, AMRO said that it expects gross financing needs to remain elevated throughout 2030.

“Looking ahead, despite the government debt-to-GDP ratio stabilizing or declining, higher principal repayments on maturing debt across various tenors are expected to keep gross financing needs elevated over the medium term in most member economies,” it said.

“In addition, the interest burden is projected to remain high, reflecting the legacy effects of accumulated public debt,” it added.

For 2026, AMRO projects Philippine gross financing needs at 8.8% of GDP, lower than the 10.1% posted last year.

The report also flagged persistent near-term economic uncertainty that could weigh on growth and inflation.

“Elevated global energy prices, reflecting geopolitical developments in the Middle East, and the potential disruption to energy supply pose risks to both growth and inflation across the region,” AMRO said.

For 2026, AMRO expects Philippine GDP to expand by 5.3%, within the government’s 5-6% target for the year.

“Additional risks include financial market volatility and weaker-than-expected growth in major economies, which could compound external and domestic headwinds,” it said.

“Should downside risks materialize, fiscal policy should remain agile and flexible to mitigate adverse impacts and support economic stability — in close coordination with monetary policy,” it added.

AMRO said that fiscal measures implemented by member economies to mitigate the impact of the COVID-19 pandemic and to curb high inflation thereafter resulted in a narrowed fiscal space compared to pre-pandemic levels.

“Sustaining efforts to rebuild fiscal buffers therefore remains critical to ensure that authorities retain sufficient capacity to respond decisively to emerging shocks, while continuing to support the structural transformation to strengthen resilience,” it said. — Justine Irish D. Tabile