IN 2019, just before the pandemic struck, the Philippine national debt was P7.7 trillion. At the same time, our Gross Domestic Product (GDP) was P19.5 trillion.
The ratio of national debt to GDP was therefore P7.7 trillion divided by P19.5 trillion. This ratio, 39.5 percent, is a measure of how feasible it is for us to repay our indebtedness. The lower the ratio, the greater our ability to repay.
The government’s need to try to mitigate the adverse economic effects of COVID has caused a sharp increase in our national debt to GDP ratio. This ratio is now approximately 63 percent, a very rapid increase in our indebtedness at a time when our GDP was, understandably, increasing only very slowly.
Specifically, our indebtedness has increased from P7.7 trillion in 2019 to a predicted debt of P13 trillion during this year. In contrast, our GDP, P19.5 trillion in 2019, will barely exceed P20 trillion this year.
In other words, our debt has increased by almost 70 percent since 2019 whilst our gross domestic product has remained virtually stationary. This is the price we pay for the government’s efforts to offset the problems created by the pandemic.
The election season is upon us. We hope that serious presidential candidates, instead of making empty promises, will explain to the electorate what it will do to handle the problems created by the pandemic.
We, or rather the government, cannot keep borrowing. It should explain how we are going to handle the rapidly increasing indebtedness. For example, the government has just received a loan of P30 billion from the World Bank.
At the same time, other problems are becoming more serious. For example, after many years of slowly reducing poverty levels, we are beginning, once again, to lose ground.
In 2000, 33 percent of our population was adjudged to be below the poverty line. The Philippines then signed the relevant United Nations Millennium Development Goal which targeted a reduction of poverty by one half by 2015. We were not successful in achieving this goal, but poverty was reduced somewhat. Sadly, our present poverty level is 24 percent, and rising. Presidential aspirants should be challenged as to how they shall reduce poverty (currently, 26.4 million Filipinos are suffering).
Our objective must be to increase our growth rate and, despite the difficulties posed by the pandemic, to ensure that our growth exceeds our indebtedness./PN
