Marcos-Duterte Clash Upending Philippine Economy, Too

Aquino strengthened the national balance sheet, curbed graft, increased accountability and transparency, went after tax cheats and took on the Catholic Church's meddling in politics to stymie population control efforts.

In just six years, Aquino transformed the“sick man of Asia” into an economic growth and investment star. All major credit rating companies raised Manila to investment-grade status for the very first time.

To be sure, Aquino left much undone. He didn't create enough good-paying jobs. But then, reversing decades of neglect dating back to the days of dictator Ferdinand Marcos isn't a six-year job.

Enter Duterte , who was elected to turbocharge Aquino's Big Bang reforms. Duterte rose to national folk hero status after two decades of running the southern city of Davao. On his watch, the city developed a reputation for efficient governance with faster growth rates and better infrastructure than the national average. The hope was that Duterte would do the same nationally, taking the economy Aquino bequeathed him to new heights.

Instead, Duterte largely rested on Aquino's economic laurels . When Duterte arrived in the presidential palace on June 30, 2016, the Philippines was enjoying its fastest growth since the 1970s. It helped that, at the time, the global economy was enjoying a rare, synchronized growth spurt, one that even saw Japan producing solid growth.

Rather than take the Philippine economy to a higher level of innovation and productivity, Duterte benched Manila's reform program. Where he should have empowered technocrats to curb graft, reduce bureaucracy and ensure infrastructure projects were being done sustainably, Duterte deployed legions of trigger-happy gunmen – landing Manila in the global headlines for all the wrong reasons.

Duterte pivoted away from Aquino's public-private partnership model that reduced large-scale graft in infrastructure projects. By the time Duterte left, Manila's Transparency International ranking had worsened to 116th . In 2010, the Philippines ranked 134th, trailing Nigeria. When Aquino left office, Manila was 95th .

The Marcos-Duterte alliance was always a precarious one. Whereas the Dutertes were close to China, Team Marcos quickly pivoted back toward the US alliance. Yet, now as the Marcos and Duterte dynasties clash, there's little bandwidth left to ensure economic reform efforts get back on track. Or, at the very least, that economic backsliding is limited.

As the second half of 2025 unfolds, says Fitch Ratings analyst Krisjanis Krustins,“domestic political uncertainty could affect investment” at a moment when“global trade tensions will likely drag on growth, in particular indirectly through weaker global demand.”

The good news, Krustins says, is that

The bad news is what Krustins calls“charged domestic politics.”

One saving grace is that among Association of Southeast Asian Nations ASEAN) members, the Philippines is less dependent on exports. As economist Priyanka Kishore at Asia Decoded points out, even if US tariffs remain unchanged,“exports will likely slow as businesses and consumers fully absorb and adjust to the higher costs imposed by tariffs.”

The impact on ASEAN economies, she adds,“will be primarily felt through four main channels: a slowdown in goods and services exports, a lull in 'China plus' investments, knock-on impact of external slowdown on domestic demand and a pick-up in Chinese trade and investment inflows into ASEAN.”

The resulting disinflationary impulse, Kishore notes,“should create space for more monetary easing. Nevertheless, ASEAN's growth in 2025 is likely to be one percentage point lower than in 2024, with Singapore and Vietnam bearing the brunt of the slowdown and Indonesia and the Philippines least impacted.”

Yet the fallout from the political brawl in Manila means elected officials are less focused on spreading the benefits of Philippine growth to reduce inequality. That's marring Marcos's economic legacy.

“From then until now, poverty and hunger have remained emblems of Marcos's brand of leadership,” says Danilo Ramos, chairperson of the Peasant Movement of the Philippines.

The Social Weather Stations research group reports a significant increase in hunger among self-rated poor families. The number of households experiencing involuntary hunger rose to 20% in April.

At the same time, a distracted Philippine government has consumers, businesses and investors alike worried about the economy's prospects.

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“Uncertainty alone can prevent foreign direct investments,” says Aris Dacanay, ASEAN economist at HSBC.“For the Philippines, foreign direct investment is important; around 10%of capital formation is FDI-funded. When investors hold back, that weighs on overall investment activities.”

At present, Dacanay notes, many Philippine firms are delaying investments in capacity expansion. Also, demand from major trading partners like the US is weakening in real time.

In a note to clients, economists at ANZ Research paint an even more cautious picture.“Private investment and exports have been hindered by a lack of productivity growth, while real wage growth has been insufficient to drive a strong rebound in household spending,” ANZ argues.

Looking forward, few economies are at greater risk from the artificial intelligence revolution to come than the Philippines. Citing the International Monetary Fund's numbers, Julius Cainglet, president of labor group Federation of Free Workers,warns that 14% of the country's workforce is at risk of being replaced by AI. This is largely due to the economy's reliance on the business process outsourcing industry.

It would be grand if the Marcos administration were linearly focused on these challenges. The narrative needs to be more about economic upgrades and future prosperity and less about a“Game of Thrones” sequel playing out in Manila.

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