From Stability to Vulnerability: Analyzing the Philippines’ Sovereign Debt Risks and Sustainability

The COVID-19 pandemic and subsequent global economic disruptions have altered the fiscal landscape of many lower-middle income countries, including the Philippines. Using national and international data, this study examines key debt indicators, including debt-to-GDP trends, fiscal deficits, interest payment burdens and external exposures, to assess emerging vulnerabilities. It adopts the IMF debt-sustainability analysis framework to project the Philippines’ debt trajectory under baseline and stress-test scenarios. While not facing an imminent crisis, the analysis reveals asymmetric vulnerabilities: debt sustainability is highly sensitive to growth shocks but relatively insulated from financial market volatility. This pattern reflects the Philippines predominantly domestic debt structure, which limits exposure to external financing pressures but offers limited protection against revenue contractions during economic downturns. Growth resilience and revenue mobilization, rather than external financing access, represent the primary fiscal sustainability constraints. The study recommends rule-based budgeting, enhanced revenue mobilization and efficient spending to safeguard long-term fiscal stability.