By Justine Irish D. Tabile, Senior Reporter
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 was higher than the 65.2% recorded at the end of the first quarter and the 63.2% ratio at end-2025. It was also the highest level in 22 years or since the 71.6% recorded at end-2004.
The increase came as the National Government’s (NG) outstanding debt climbed by 2.8% to P19.07 trillion at end-June from the P18.55 trillion end-May level.
“The increase reflects not only the government’s financing requirements but also the slower pace of economic growth,” said Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion in a Viber message.
“The weaker-than-expected GDP growth of 2.3% in the second quarter likely contributed to the higher ratio, as slower economic expansion mechanically raises debt relative to GDP,” he added.
The Philippine economy grew by 2.3% in the second quarter from a year earlier, slowing from the 5.4% expansion in the same quarter last year and the 2.8% growth in the first quarter.
This was the slowest growth since the 3.8% contraction in the first quarter of 2021, during the coronavirus pandemic. Excluding the pandemic years, it was the weakest pace in over 16 years or since the 1.8% expansion in the fourth quarter of 2009.
“The Philippines continues to benefit from a relatively deep domestic funding market and access to external financing,” Mr. Asuncion said.
“However, the latest debt ratio suggests that fiscal space is becoming more constrained, which means policymakers will need to carefully balance growth-supportive spending with fiscal consolidation objectives,” he added.
Domestic debt continued to account for the bulk of the debt stock at 67.3%, while the rest came from external sources.
Domestic debt edged up by 2.74% to P12.84 trillion at end-June from P12.5 trillion at end-May, while external debt rose by 2.92% to P6.23 trillion at end-June from P6.05 trillion.
Despite the elevated debt-to-GDP ratio, Mr. Asuncion said debt levels remained manageable.
“The 66% debt-to-GDP ratio warrants close monitoring, but it remains manageable, provided economic growth recovers and fiscal consolidation remains on track,” he said.
He said the most sustainable way to improve the debt-to-GDP ratio was through stronger economic growth.
“Faster growth supports revenue generation, improves debt dynamics, and creates greater fiscal flexibility. In this regard, restoring business confidence, encouraging private investments, and accelerating productive public investments will be critical,” said Mr. Asuncion.
“The challenge is that slower growth and weak investment activity can make debt reduction more difficult over time, underscoring the need to strengthen the economy’s growth drivers,” he added.
However, Reyes Tacandong & Co. Senior Adviser Jonathan L. Ravelas said debt was starting to become a growth issue.
“Debt is no longer just a fiscal issue. It is becoming a growth issue,” he said in a Viber message.
“Without a credible plan to expand revenues, improve spending efficiency, and accelerate private-sector investment, the burden of today’s debt will increasingly be passed on to future generations,” he added.
The end-June debt stock was already slightly above the P19.06-trillion level projected for end-2026 under the 2026 Budget of Expenditures and Sources of Financing.
Under the Philippine Development Plan 2023-2029 Midterm Update – Results Matrices posted on May 20, the government expects the debt-to-GDP ratio at 60%-63% in 2026.
The ratio is expected to decline further to 59%-62% in 2027 and 58%-61% by 2028.
