US debt crisis and the Philippines

On August 2 or just five days from today, the US federal government’s debt ceiling of $14.3 trillion will be breached. US government debt are so huge that they also pay a lot both in principal and interest payment. If Congress will not pass a law that will increase the debt ceiling by August 2, the US government will not have enough money to pay some of its debt. The result is a debt default, a bad scenario coming from the world’s biggest economy, or the world’s biggest government.

The implication for the Philippines and other small developing economies is not direct. The Philippine government and corporations are not big creditors to the US government; China’s are. But the effect is indirect. The cost of credit and new borrowings will rise due to this huge economic uncertainty. Since the Philippine government is a net borrower every year because  of its own budget deficit every year and a high public debt, then the cost of Philippine borrowings will rise. We shall be watching this development.

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One Comment on “US debt crisis and the Philippines”

  1. […] how is America’s debt crisis going to affect the Philippines? This source gives the following observation: The implication for the Philippines and other small developing […]

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