PH economy needs to grow 6% to cut pandemic-related debt

MANILA – The Philippine economy needs to grow faster than its pre-pandemic level of around 6 percent for the government to reduce debt incurred because of the coronavirus disease 2019 (Covid-19).

In an interview over Bloomberg television on Thursday, Finance Secretary Carlos Dominguez III said there is no issue regarding the repayment of the debt incurred during the pandemic since these have favorable interest rates and terms, which is around 40 years.

“We’re not worried about the repayment. We have to really grow out of the debt. In other words, expand our economy by better than 6 percent per year, over the next five or six years,” he said.

The Department of Finance (DOF) earlier said it has raised around USD22.55 billion in budgetary support financing from the Asian Development Bank (ADB), the World Bank (WB), the Asian Infrastructure Investment Bank (AIIB), among others, and USD3.25 billion in grants and loans financing for projects and programs targeted to address the virus-induced crisis.

The inter-agency Development Budget Coordination Committee (DBCC) has set the gross domestic product (GDP) target for this year to between 7 to 9 percent, while it is between 6 to 7 percent for 2023-2024.

Dominguez said the volume of borrowings accumulated due to the pandemic is understandable given the need to boost financing amidst the drop in revenues because of the lockdowns.

“So the next administration will have to design policies and stick to very strict fiscal discipline to grow out of debt,” he said.

Dominguez, however, said “everything is in place in the Philippines to achieve that”, citing the recovery of the domestic economy, which beat the government’s 5.5-percent target for 2021 after it expanded by 5.7 percent.

He said risks for this year include the impact of the Ukraine-Russia war.

Dominguez said that while the Philippines is not directly affected by the war, it is affected by the rise in the prices of oil and commodities in the international market.