As the global economy battles headwinds, the International Monetary Fund (IMF) warned of the worsening global debt crisis that is expected to rise to its highest level since 1948.
The Philippines, being an emerging economy, is also seen struggling like its peers despite having lower debt levels compared to major economies.
Specifically, the global public debt is seen exceeding 100 percent of the world’s gross domestic product (GDP) by 2029, a level higher compared to projections before the Covid 19 pandemic.
“This reflects a higher and steeper path than projected before the (coronavirus) pandemic. In addition, the distribution of risks is wide and tilted toward debt accumulating even faster,” the IMF said in its Fiscal Monitor October report.
But with a 5-percent risk, global public debt is expected to reach 123 percent of GDP by 2029. Already, there are major economies that have public debt exceeding 100 percent of their GDP, according to the IMF.
Specifically, Canada, China, France, Italy, Japan, the UK and the US are among the G20 countries that have public debts exceeding 100 percent of their GDP. However, the said countries still have good access to bond markets.
“These countries typically have deep and liquid sovereign bond markets and often broad policy choices, resulting in their fiscal risk considered moderate,” the IMF said.
In contrast, many emerging economies and low-income countries. such as the Philippines, face more challenges in the fiscal space even if they have lower debt levels. The Philippines has a debt-to-GDP rate of slightly over 60 percent.
“The number of countries with public debt below 60 percent of GDP increased to more than 100 in 2021 and is projected to continue to increase, although their GDP share in the world represents less than 30 percent,” it said.
The IMF added that developing nations have lesser options for funding and policy, and even with debt ratios frequently less than 60 percent of GDP, 55 countries are either in a debt crisis or at significant risk. This will make debt structuring a necessity.
“When countries falter on debt, timely debt restructuring is critical to containing the damage,” it said.
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