Philippine Debt-to-GDP Ratio Hits 22-Year High Amid Slowing Economic Growth

The Philippine debt-to-gross domestic product (GDP) ratio reached 66% in the second quarter, the highest level since 2004, data from the Bureau of Treasury showed. This figure surpasses the 65.2% recorded at the end of the first quarter and the 63.2% ratio at the end of 2025. The increase is attributed to a rise in the National Government’s outstanding debt, which climbed by 2.8% to P19.07 trillion at the end of June from P18.55 trillion at the end of May. Ruben Carlo O. Asuncion, Chief Economist at Union Bank of the Philippines, noted that this rise reflects not only the government's financing needs but also a slower pace of economic growth. He specifically pointed to the weaker-than-expected GDP growth of 2.3% in the second quarter, which mechanically raises the debt-to-GDP ratio as economic expansion slows. The Philippine economy grew by 2.3% in the second quarter year-on-year, a slowdown from the 5.4% expansion in the same quarter last year and the 2.8% growth in the first quarter. This marks the slowest growth since the 3.8% contraction in the first quarter of 2021 during the COVID-19 pandemic, and excluding pandemic years, it is the weakest pace since the 1.8% expansion in the fourth quarter of 2009. While Asuncion acknowledged that the Philippines continues to benefit from a deep domestic funding market and access to external financing, he cautioned that the latest debt ratio suggests fiscal space is becoming more constrained. Policymakers, he advised, will need to carefully balance growth-supportive spending with fiscal consolidation objectives. Domestic debt accounted for the bulk of the debt stock at 67.3%, with external sources making up the rest. Domestic debt stood at P12.84 trillion and external debt at P6.23 trillion at the end of June. Despite the elevated debt-to-GDP ratio, Asuncion stated that debt levels remained manageable, provided economic growth recovers and fiscal consolidation stays on track. He identified stronger economic growth as the most sustainable way to improve the ratio, as it supports revenue generation, improves debt dynamics, and creates greater fiscal flexibility. Restoring business confidence, encouraging private investments, and accelerating productive public investments are deemed critical in this regard. However, Jonathan L. Ravelas, Senior Adviser at Reyes Tacandong & Co., warned that debt is becoming a growth issue. He expressed concern that without a credible plan to expand revenues, improve spending efficiency, and accelerate private-sector investment, the burden of current debt will increasingly fall on future generations. The debt stock at the end of June already slightly exceeded the P19.06 trillion level projected for the end of 2026 under the 2026 Budget of Expenditures and Sources of Financing. According to the Philippine Development Plan 2023-2029 Midterm Update, the government expects the debt-to-GDP ratio to be between 60%-63% in 2026, declining further to 59%-62% in 2027 and 58%-61% by 2028.