By Luis Leoncio
Despite the rise in public spending due to the costly infrastructure buildup of the Duterte administration, the share of debt to the country’s economy slid further as of September this year.
Finance Undersecretary Gil Beltran said in a report to Finance Secretary Carlos Dominguez III that gross domestic product (GDP) continued to grow faster than government liabilities, citing the latest data from the Department of Finance (DOF).
The government debt-to-GDP ratio further improved to 44.2 percent by end-September from 44.7 percent in the same month last year, the data showed.
“Debt management measures led to the continuing drop in the debt-GDP ratio to 44.2 percent as of September 2016, an improvement from end-2015 ratio of 44.7 percent,” Beltran, who is the DOF’s chief economist, said in the report.
The debt-to-GDP ratio is projected to sustain the yearly decline until falling to about 35 percent by the end of the Duterte administration.
The national government debt as a proportion of GDP had continually dropped from 52.4 percent in 2010 to 44.7 percent in 2015.
The Bureau of Treasury earlier reported the national government’s outstanding debt reached P6.087 trillion as of September, higher compared to the previous year, primarily because of the weaker peso against the US dollar and other currencies.
But despite the increase in nominal terms, Beltran said he expected the debt-to-GDP ratio to remain very manageable for the final three months of the year as the economy expands at a faster pace than government liabilities.
“Strong fiscal fundamentals will continue to underpin robust economic growth during the rest of the year,” said Beltran.
In the first three quarters of 2016, Beltran noted that increased public spending contributed 0.87 percentage points or 12.4 percent of the 7.0 percent GDP growth.
The bulk of the expenditure growth went to public works construction, which rose 30.5 percent in real terms, he said.
The proportion of the government’s interest payments to its total expenditures likewise dropped to 13.4 percent during the period from 13.9 percent in 2015.
With heightened public spending, Beltran said government expenditure exceeded nominal GDP growth in the first nine months of the year.
The country’s GDP grew by 7.0 percent in January to September, but government expenditures increased by 14.1 percent during the same period.
Likewise, expenditure effort rose to 17.96 percent of GDP from 17.09 percent last year.
Meanwhile, the tax effort of the national government remained at 14.21 percent at end-September, while revenue effort slid to 15.9 percent from 16.83 percent last year.
“Excluding oil and rice taxes, revenue effort would have declined by only 0.16 percentage point,” Beltran said.
“Tax effort stood still at 14.2 percent as oil revenues continued their downward plunge. However, netting out the effects of the oil price decline and rice, tax effort rose by 0.11 percentage point,” he added.
The Bureau of Internal Revenue’s tax effort improved to 11.31 percent from 11.27 percent, while the Bureau of Customs’ figure slightly fell to 2.78 percent from 2.81 percent.