With the share of the Philippines’ foreign debt to its economy relatively low compared to most of its Asian neighbors, the government could afford to borrow more in its fight against the new coronavirus disease (COVID-19), the Department of Finance (DOF) said.

In an economic bulletin on Wednesday, DOF Undersecretary and chief economist Gil Beltran said the country’s external debt as a share of gross national income (GNI) declined to 19.7 percent in the first quarter from 20.9 percent a year ago.

The GNI is the total amount of money that a country has earned—the gross domestic product (GDP) and its income from abroad combined.

“Compared to two decades ago when the country was recovering from the Asian financial crisis, external debt ratios in 2020 were [lower than] the debt-to-GNI ratio in 2000 [of 47.5 percent],” Beltran noted.

Beltran attributed the drop in share of foreign debt to the Philippines’ total earnings mainly to the decline in first-quarter public sector debt to $38.3 billion from $40.1 billion last year.

On the other hand, the private sector’s external debt as of end-March rose to $43.1 billion from a year ago’s $40.3 billion.

“Compared with those of its Asian peers, external debt ratios of the Philippines are lower in 2018, the latest data from the World Bank show. As a percent of GNI, the Philippines’ external debt ratio is only 19.9 percent, compared to the 33.6-percent average for nine Asian economies. The country’s ratio is the third lowest behind China and India [two years ago],” Beltran said.

For Beltran, “the Philippines’ prudent debt policy has enabled the country to strengthen its defenses against external shocks like the COVID-19 pandemic.”

“This is one of the reasons for the strong confidence of investors in the Philippine economy,” Beltran added.

Amid weak revenues due to COVID-19-induced recession, the government had planned to ramp up domestic and external borrowings. Outstanding debt would hit a record high P9.6 trillion by year-end, such that the projected end-2020 debt-to-GDP ratio of 49.8 percent shall be the highest since 2011.

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