The country's outstanding debt, as a share to the overall economy, is about to break below the internationally accepted threshold in the third quarter following the stronger-than-expected economic performance.

Following the 5.9 percent gross domestic product (GDP) print in the third quarter, data from the Department of Finance (DOF) showed that the share of national debt to the country's output eased to 60.2 percent.

This is lower than the 61 percent in the previous quarter and significantly below the 63.6 percent debt-to-GDP ratio in the same period last year.

As of end-September, the national debt slightly eased to P14.268 trillion.

The current debt-to-GDP ratio is now just slightly above the internationally accepted threshold of 60 percent.

Further, the latest ratio is lower than the target of 61.2 percent level by end-2023.

??Rizal Commercial Banking Corp. chief economist Michael Ricafort said the easing of the debt-to-GDP ratio is largely attributed to the faster GDP growth that widened the denominator and reduced the ratio at a quicker rate.

It should be noted that the third quarter GDP performance of 5.9 percent is way above the market consensus of a 4.9 percent expansion.

Basically, reducing the debt-to-GDP ratio would mean that economic growth should outpace the level of borrowings of the Philippines.

'A break below the 60 percent threshold is within striking distance soon, provided that the economy continues to grow at a relatively faster rate and continue to widen the GDP denominator,' Ricafort said.

'This would, at the very least, support the favorable credit ratings of the country at one to three notches above the minimum investment grade that would help reduce the government's borrowing costs and get better terms,' he said.

Despite the easing, Ricafort said new tax measures are still needed to further bring down the ratio and make fiscal and overall debt management more sustainable for the long-term.

These should be coupled with improved revenue collections and disciplined spending to reduce the need for additional borrowings.

On the downside, the continued lowering of debt-to-GDP ratio may be offset by wider budget deficits, higher debt servicing costs due to elevated interest rates, as well as inflation.

'Also, if the peso weakens, this could increase the peso equivalent of foreign debts,' Ricafort said.

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