Philippines External Debt

[JJReyes]

The external debt rose in 2022 to $111.26 billion as the national government and private sector borrowed money.  The excuse given was a need to borrow large sums due to the pandemic.  But with the government announcing ambitious new projects in 2023, the external debt will continue to rise.  This can have an effect on the Philippine peso.  The current projection is 60 to 1.  

[RBM]

23 minutes ago, JJReyes said:

The external debt rose in 2022 to $111.26 billion as the national government and private sector borrowed money.  The excuse given was a need to borrow large sums due to the pandemic.  But with the government announcing ambitious new projects in 2023, the external debt will continue to rise.  This can have an effect on the Philippine peso.  The current projection is 60 to 1.  

What about the internal debt, is not around 11 Trillion.

[Joey G]

Actually 111 billion isn't that bad compared to other countries. 

[BrettGC]

The raw number means nothing anyway, the key figure is as a percentage of GDP.  Philippines currently has a GDP between 360 - 401 billion USD according to the latest figures from the IMF, World Bank and UN.  Economists base their figures on these numbers.  It's not really a concern until the percentage goes over 100% of GDP.  So based on the OP of 111 billion USD, PI is sitting between 27-30%.  Most OECD countries are far worse off.  

A very quick Google search revealed all this. 

But yes, the rising debt in PI is good news for us for foreign exchange rates short term.  Not so great for the PI economy which can impact us negatively in other ways such as infrastructure not being able to be developed and higher inflation due to currency devaluation and the cost of imports going up which has a knock-on effect with local goods as well.  

Edited March 20, 2023 by BrettGC

[JJReyes]

1 hour ago, RBM said:

What about the internal debt, is not around 11 Trillion.

My focus is external debt because this is one of the things that has an effect on exchange rates.

[Mike J]

21 hours ago, BrettGC said:

The raw number means nothing anyway, the key figure is as a percentage of GDP.  Philippines currently has a GDP between 360 - 401 billion USD according to the latest figures from the IMF, World Bank and UN.  Economists base their figures on these numbers.  It's not really a concern until the percentage goes over 100% of GDP.  So based on the OP of 111 billion USD, PI is sitting between 27-30%.  Most OECD countries are far worse off. 

The Deputy Treasurer of the Philippines says last week that the ratio is sixty (60) percent.  I now wonder what the actual number is?  The 360 - 401 billion is GDP, but I think the ratio most used to measure financial health of a country is GNP as opposed to GDP?  The GNP number would match up with the 60% claim in the article.

https://www.ceicdata.com/en/indicator/philippines/gross-national-product

<snip>Philippines Gross National Product (GNP) was reported at 119.732 USD bn in Dec 2022<end snip>

https://www.pna.gov.ph/articles/1194369

MANILA – The share of the country’s total liabilities to gross domestic product (GDP) has declined to 60.9 percent by end-2022 but it is not considered to be an alarming level given the strong economic fundamentals, Deputy Treasurer Erwin Sta. Ana said Friday.

In an interv

iew during the Laging Handa public briefing, Sta. Ana said the country’s debt-to-GDP ratio has improved from the 17-year high 63.7 percent at the end of the third quarter of 2022, which is above the 60 percent international threshold.

He attributed the improvement to the recovery of the domestic economy, higher government’s revenue collections and payment of some of the government’s liabilities, among others.

Sta. Ana said the domestic economy expanded by 7.6 percent in 2022, higher than the government’s 6.5 to 7.5 percent growth assumption for last year, as more economic activities resumed.

Sta. Ana said the debt-to-GDP ratio rose significantly during the pandemic given the need to finance the heath crisis-related spending.

In end-2019, the country’s debt-to-GDP ratio was at 39.6 percent.

“Iyong 60 percent (debt-to-GDP ratio) po ngayon, at this time, and because of the pandemic, is not really seen as something that’s very alarming, especially when the fundamentals of the economy are really strong (The 60 percent debt-to-GDP ratio now, as a result of the pandemic, is not really seen as something that’s very alarming, especially when the fundamentals of the economy are really strong),” he said.

Sta. Ana said debt-to-GDP of Thailand is similar to that of the Philippines but those of Malaysia and Singapore’s are higher.

“So ang tingin po naming, since and debt-to-GDP is a measure of your ability to service your debt or yong debt sustainability, nasa magandang posisyon po ang Pilipinas (We think that since debt-to-GDP is a measure of your ability to service your debt or what you call debt sustainability, the Philippines is in a good position,” he added.

During the same briefing, Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort said the country’s debt-to-GDP ratio is expected to improve further as the economy continues to recover from the pandemic.

Among others, this development provides the necessary leeway for the country to keep its investment grade ratings, which are currently at one to three notches above the minimum investment grade, he said.

This, he added, will also allow the government to take out loans at a lower cost.

Ricafort said disciplined spending and continued implementation and push for additional fiscal reform measures will also help lower than debt-to-GDP ratio of the country.

From around 70 percent level in 2004-2005, he said the share of liabilities on the growth of the domestic economy has declined and this showed a good track record for the government.

Ricafort said that while there is still a need for the government to borrow more to address its fiscal deficit, it is worth noting that government spending has improved, as priority has been given to infrastructure investments, among others, which has long-term economic impact. (PNA)

[JJReyes]

We are leaving tomorrow with plans to return around Christmas.  It would be interesting to see what happens to the Philippine peso.  For planning purposes, I will use 60 to 1 until shortly before our return.  It was a great four and half month's visit.

[Mike J]

14 hours ago, JJReyes said:

We are leaving tomorrow with plans to return around Christmas.  It would be interesting to see what happens to the Philippine peso.  For planning purposes, I will use 60 to 1 until shortly before our return.  It was a great four and half month's visit.

Safe travels JJ.

[JJReyes]

3 hours ago, Mike J said:

Safe travels JJ.

Thanks Mike. 

Philippine Airlines did a last-minute screw up changing our aircraft "due to technical issues." (Probably engine problems).   The replacement a smaller airplane without long haul capability.  This will require a refueling stop in Inchon, South Korea that will add 4 to 5 hours to our flight.  They also asked us to downgrade to premium economy in exchange for $1,600 as compensation.  We said, "No." The purpose of using Philippine Airlines is their short, direct flying time of 13 hours.  The seat has to be flat for my back.  I asked them to rebook us on another carrier.  They said, "No."  The compromise is the same type of aircraft on an evening flight, same flight length, and same cabin class.  The compensation was reduced to $800 to pay for half a day rate at our hotel and another hotel once we arrive in Los Angeles.  (We cannot pick-up the RV in the evening because the storage facility is close.)  

[JJReyes]

The $800 compensation was delivered by a Philippine Airlines senior official while we waited for our flight at the lounge.  He apologized the payment had to be in pesos, but there was a money exchange booth nearby.  With the pesos we had remaining plus the over P40,000+ from PAL, it would exceed the Bangko Sentrale maximum of P50,000 allowed for export (and import upon our return).  The lousy conversion rate and fees meant the PAL payment was reduced to $747.  Oh well, at least we go some money.  Lesson - Never exchange money at the airport.