{"id":20051,"date":"2024-08-06T03:08:38","date_gmt":"2024-08-06T03:08:38","guid":{"rendered":"https:\/\/energybuzz.ph\/staging\/6915\/economy-on-track-to-outgrow-debt-dof\/"},"modified":"2024-08-06T03:08:38","modified_gmt":"2024-08-06T03:08:38","slug":"economy-on-track-to-outgrow-debt-dof","status":"publish","type":"post","link":"https:\/\/energybuzz.ph\/staging\/6915\/economy-on-track-to-outgrow-debt-dof\/","title":{"rendered":"Economy on track to outgrow debt \u2014 DoF"},"content":{"rendered":"
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ECONOMIC GROWTH is on <\/span>track to outpace the rise in the National Government\u2019s (NG) debt, with borrowing costs expected to go down as global central banks cut interest rates, the Department of Finance (DoF) said on Monday.<\/p>\n

During the Development Budget Coordination Committee\u2019s (DBCC) briefing before the House Committee on Appropriations, Finance Secretary Ralph G. Recto said the cost of borrowing remains manageable as it is \u201cmuch lower\u201d than the country\u2019s gross domestic product (GDP) growth.<\/span><\/p>\n

\u201cIn fact, our ef<\/span>fective interest rate for next year is only 5.3%, which is very cheap considering that the average term of our debt is 7.5 years. If we remove inf<\/span>lation, our real interest rate is only 2.3%, far lower than our expected real GDP growth of 6.5%, which means we are on track to outgrow our debt,\u201d he said.<\/p>\n

A country\u2019s debt is more appropriately measured on the size of its economy as this identifies its capacity to pay its obligations, Mr. Recto said.<\/span><\/p>\n

\u201cFrom 60.9% (debt-to-GDP ratio) in 2022, it fell to 60.1% in 2023. And we are determined to continue pushing it below 60% so we have enough buffer in case another crisis hits us,\u201d he said.<\/span><\/p>\n

According to the Bureau of the Treasury, the debt-to-GDP ratio is expected to inch up to 60.6% by end-2024. It sees the debt-to-GDP ratio falling to 60.4% in 2025, 60.2% in 2026, 58.4% in 2027 and 56.3% in 2028.<\/p>\n

\u201cThe continuous decline in our debt-to-GDP ratio since the pandemic is one of the reasons why our credit ratings remain high\u2026 This means that we not only have the capacity to pay our debts, but we can have more access to cheaper financing,\u201d he said.<\/p>\n

The DBCC is targeting 6-7% GDP growth this year and 6.5-7.5% GDP growth in 2025.<\/span><\/p>\n

As of end-June, the NG\u2019s outstanding debt rose to a fresh high of P15.48 trillion, up 9.4% from a year ago. Debt is expected to reach P16.06 trillion at the end of 2024 and P17.35 trillion by end-2025.<\/p>\n

\u201cMukha mang patuloy na lumalaki ang ating utang ngayon, pero patuloy naman na mas lumalago ang ating ekonomiya<\/i>. Ibig sabihin, kayang kaya nating bayaran ang ating mga obligasyon<\/i> (Even if it looks like our debt is growing now, but our economy is also expanding faster. This means we can repay our obligations),\u201d Mr. Recto said.<\/p>\n

Mr. Recto said the government is now paying off the \u201cpandemic borrowings\u201d inherited from the previous administration.<\/p>\n

\u201cWe are now refinancing the large borrowings contracted during the low-interest rate period in 2020 to 2022 with new debts that bear higher interest rates. This is the reason why our interest payments for next year are higher by around 11%,\u201d he said.<\/span><\/p>\n

For 2025, the NG set its borrowing program at P2.55 trillion, 0.97% lower than this year.<\/p>\n

The government is also allotting P2.05 trillion for its debt servicing program next year, up 1.19% from this year. Of this, P848.03 billion will go to interest payments.<\/p>\n

Mr. Recto said he expects the growth in interest payments to moderate as central banks begin cutting policy rates.<\/p>\n

Last week, the US Federal Reserve kept its key policy rate at the 5.25-5.5% range last week, but could start easing by September.<\/p>\n

The Bangko Sentral ng Pilipinas has signaled a potential 25-basis-point cut at its Aug. 15 meeting.<\/p>\n

Mr. Recto reiterated that the government\u2019s current debt level is not a cause for concern.<\/p>\n

\u201cThere is nothing inherently wrong with a country having debt, as long as the money\u2019s used for the right purposes, such as growing the economy, which in turn creates more jobs, increases income and provides more revenues for the government,\u201d he said.<\/p>\n

\u201cIn our case, we are using debts to spur our stronger economic recovery by investing in more infrastructure and human capital development projects which have the highest multiplier effect on the economy.\u201d<\/p>\n

Meanwhile, Mr. Recto said that the country\u2019s budget deficit is also still manageable.<\/p>\n

\u201cAs a percentage of GDP, our deficit remains very manageable, at 4.5% in the first quarter,\u201d he said.<\/p>\n

The government set the budget deficit ceiling for this year at P1.48 trillion or equivalent to 5.6% of GDP. For next year, the budget deficit ceiling is at P1.54 trillion or 5.3% of GDP. \u2014 BMDC<\/b><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

ECONOMIC GROWTH is on track to outpace the rise in the National Government\u2019s (NG) debt, with borrowing costs expected to go down as global central banks cut interest rates, the Department of Finance (DoF) said on Monday. During the Development Budget Coordination Committee\u2019s (DBCC) briefing before the House Committee on Appropriations, Finance Secretary Ralph G. [\u2026]<\/div>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","footnotes":""},"categories":[1],"tags":[14644,4000,14912,9853,19057,6919,11],"class_list":["post-20051","post","type-post","status-publish","format-standard","hentry","category-uncategorized","tag-bworldonline","tag-debt","tag-dof","tag-economy","tag-outgrow","tag-track","tag-years"],"yoast_head":"\nEconomy on track to outgrow debt \u2014 DoF - Energy Buzz<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/energybuzz.ph\/economy-on-track-to-outgrow-debt-dof\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Economy on track to outgrow debt \u2014 DoF - Energy Buzz\" \/>\n<meta property=\"og:description\" content=\"ECONOMIC GROWTH is on track to outpace the rise in the National Government\u2019s (NG) debt, with borrowing costs expected to go down as global central banks cut interest rates, the Department of Finance (DoF) said on Monday. 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