Daven Tamayo

Surge in debt payments, cut in social services spending seen in 2027 budget

Photo illustration of US dollar to PH peso exchange in this photo taken on September 30, 2022. Gigie Cruz, ABS-CBN News

Article (news)

Arthur Fuentes

ABS-CBN News

MANILA — The Philippines is set to allot more for debt payments next year compared to this year, while reducing spending on social services, a unit of Fitch Solutions said. BMI said that compared to this year’s budget, debt servicing in 2027 would have the largest increase, next only to economic services.Spending on economic services is set to rise 17.8 percent, driven by the resumption of infrastructure and flood-control projects. Debt servicing, meanwhile, will increase 16.8 percent to P1.143 trillion from P979 billion this year.In contrast, social services will face a sizeable cut of 5.5 percent, although the proposed allotment for social services will still take up the largest share of the budget.   <div> </div><div><img src="https://od2-image-api.abs-cbn.com/prod/editorImage/1786683402130Screenshot 2026-08-14 at 12.55.01 PM.png" style="width:960px" class="fr-fic fr-dib" width="960"/></div>Defense spending growth is also expected to moderate from the double-digit pace seen in the past three budgets. Despite escalating tensions and increasingly frequent maritime incidents with Beijing in the South China Sea, the easing of defense outlays underscores the difficult trade-offs imposed by the country&#x27;s limited fiscal room, BMI noted.President Ferdinand Marcos Jr. has presented Congress with a proposed P7.2-trillion budget for 2027, representing a 6.6 percent increase from the 2026 budget. The spending plan aims to narrow the fiscal deficit from 5.4 percent of GDP in 2026 to 5.1 percent in 2027. According to BMI this proposal supports continued fiscal consolidation through spending restraint and selected tax reforms, though the pace of deficit reduction remains modest.Total government expenditure is projected to decline to 20.8 percent of GDP in 2027, down from 21.3 percent in 2026. The nation&#x27;s debt burden is also set to rise quickly in 2027, driven by higher interest rates and a weaker peso, increasing the value of foreign-denominated obligations. The gross public debt-to-GDP ratio had already reached 66.0 percent by the second quarter of 2026.The Philippines has been borrowing heavily since the pandemic, as it funds its infrastructure push and social safety programs amid global economic headwinds.Marcos inherited a massive P12.79-trillion debt when it took office in 2022 from the administration of former President Rodrigo Duterte. This was already more than double the P5.95 trillion debt that Duterte inherited from the administration of former President Noynoy Aquino.To support the budget, the government has set an ambitious tax revenue target, assuming a 12.8 percent year-on-year increase in value-added tax collections. However, risks remain tilted toward a wider fiscal deficit, as BMI forecasts a 2027 GDP growth of 4.9 percent, which falls below the government&#x27;s 5 to 6 percent assumption.

BMI said that compared to this year’s budget, debt servicing in 2027 would have the largest increase, next only to economic services.

BMI said that compared to this year’s budget, debt servicing in 2027 would have the largest increase, next only to economic services.