Debt-to-GDP Ratio's Impact on GDP Growth in the Philippines

Strategic Insights -

Research conducted by the University of San Jose-Recoletos has shed light on the complex relationship between the debt-to-GDP ratio and GDP growth in the Philippines. The study analyzed data from 1986 to 2020, employing regression and correlation analyses to determine the optimal debt ratio. The findings suggest a U-shaped non-linear relationship between debt and growth, with an optimal debt-to-GDP ratio of 57.64% when including extraordinary events and 60.23% excluding them.

Key Takeaways:

  • The study found a significant negative correlation between debt and growth at lower debt levels, indicating that high debt levels can hinder economic growth.
  • The relationship between debt and growth at higher debt levels was inconclusive, highlighting the influence of external shocks and domestic policies.
  • The study identified periods characterized by varying debt and growth dynamics, illustrating the complex interplay of natural disasters, financial crises, fiscal policies, and global economic conditions.
  • The research concluded that the findings emphasize the context-dependent nature of the debt-growth nexus, advocating for nuanced policy responses tailored to the Philippines' specific economic environment.
  • The study's insights inform more adaptive fiscal policymaking in the Philippine context and offer implications for other emerging economies dealing with similar debt sustainability challenges.
  • The optimal debt-to-GDP ratio was found to be 57.64% when including extraordinary events and 60.23% excluding them.
  • The research suggested that policymakers should consider the complex interplay of various factors when making fiscal policy decisions.

Statistics:

  • The study analyzed data from 1986 to 2020.
  • The debt-to-GDP ratio was found to be 57.64% optimal when including extraordinary events and 60.23% excluding them.
  • The regression model demonstrated the highest adjusted R2 and lowest MSE, revealing a U-shaped non-linear relationship between debt and growth.
  • Spearman's correlation indicated a significant negative correlation between debt and growth at lower debt levels.

Sources:

  • The Impact of Debt-to-GDP Ratio on the GDP Growth Rate of the Philippines, Recoletos Multidisciplinary Research Journal, 2025,13(1):211-220, Center for Policy, Research and Development Studies.
  • Edgar Detoya, School of Business and Management, University of San Jose-Recoletos, Cebu City, Philippines.
  • Jonecis Dayap, Joey Estorosos, Ma. Kresna Mansueto, Randy Salazar, Jesse Susada, Maria Teresa Vito, Jessica Magallon-Avenido, University of San Jose-Recoletos.