“A future of sufficiency, even plenty of readily available ways and means to get done what needs doing – by you, by me,” President Ferdinand Marcos Jr promised during his inauguration speech last year. Cognisant of growing economic woes among his compatriots, who have lamented the Philippines’ economic backwardness relative to immediate neighbours in Asia, he emphasised his commitment to ensuring rapid economic development.
In particular, he spoke of a new era of “food self-sufficiency”, which deserves “the most serious thought” by the government. “Food is not just a trade commodity. Without it, people weaken and die; societies come apart. It is more than a livelihood; it is an existential imperative and a moral one,” he said in his first major speech after entering office.
In his second year on the hot seat, however, Mr Marcos Jr is confronting stark economic realities.
Food inflation remains a major concern, while a looming energy crisis could further dampen medium-term economic prospects. According to Pulse Asia, a leading Philippine survey agency, the President suffered a 15-point decline in his trust ratings in September. The vast majority of disapproval came from “Class E”, which is composed of the poorest Filipinos reeling from high food prices.
Crucially, the Philippines is also bracing for the full impact of the Fourth Industrial Revolution, with AI threatening the country’s key growth sectors such as business process outsourcing.
His cautious temperament has, so far, served him well, but the notoriously conflict-avoidant President will need to step up his game in the coming years. Accordingly, he should adopt a proactive national economic strategy to, first, insulate his country from external shocks and, second, tap into new opportunities brought about by next-generation technologies.
In his first year in power, Mr Marcos Jr defied all critics by adopting a distinct style of politics.
Throughout the election period last year, the namesake son of the former Philippine strongman consciously cast himself in his father’s image. He glorified Mr Marcos Sr’s legacy, claiming that the country would have been in a better place had it not been for his overthrow after ruling the country with an iron fist for almost two decades.
At times, Mr Marcos Jr even replicated his father’s rhetorical style and sartorial aesthetes. By trafficking in nostalgia, and promising a new golden future, he managed to win over broad section of the voters, especially the youth. In a classic populist fashion, he also promised to halve the price of staple foods such as rice to as low as half a US dollar for every kilogram.
Crucially, he also teamed up with the powerful Duterte dynasty, which is notorious for its illiberal brand of populism. No wonder, then, that several observers expected Mr Marcos Jr to push the Philippines’ besieged democracy over the cliff after he entered office.
Once in power, however, he was anything but an authoritarian demagogue. Not only did he shun polarising political rhetoric, but he also tried to reach out to various camps, including those in the opposition, to bolster his ranks. The upshot was the appointment of a coterie of world-class technocrats, including some who worked under reformist-liberal presidents.
There were even rumours of the appointment of former opposition leader, Manuel Roxas, a Wharton-trained economist, as a possible trade and industry chief. Crucially, Mr Marcos Jr personally took up the cudgels for Filipino farmers by appointing himself as the acting agriculture secretary.
Just weeks later, he made economic development and agricultural productivity a centrepiece of his first state of the nation address, in which he laid down his legislative and policy priorities. Over the succeeding months, he travelled around the world, attending global forums from New York to Davos, to “reintroduce” his country as a new economic star and top investment destination.
The upshot of his aggressive commercial diplomacy was $62.93 billion in investment pledges, easily eclipsing any of his predecessors. Mr Marcos Jr also oversaw high economic growth during his first year in office. This was less due to the macroeconomic management skills of the government than the fortuitous outcome of post-pandemic “revenge spending” by consumers, tourism boom and overall cross-sectoral economic recovery.
Beyond his first “honeymoon” year in office, however, he is confronting several economic headwinds.
To begin with, food inflation remains stubbornly high, thus undercutting his earlier promise of food security.
This year, the Philippines has become the world’s largest importer of rice, underscoring the abject failure of agriculture policies in the country. Worse, the price of rice in global markets has been on the rise in the past year, thanks to a combination of climate change and protectionist policies by food-exporting nations.
Despite efforts by the government to cap the price of rice, prevailing prices in the market are, at least, twice higher than Mr Marcos Jr’s campaign promise. This is extremely crucial since authoritative surveys suggest that inflation is atop “the most urgent national concerns” among Filipino voters.
Meanwhile, the country is also facing a looming energy crisis. The Malampaya gas field, the Philippines’ main local source of energy, is expected to be fully depleted before the end of Mr Marcos Jr’s term in 2028. Efforts to tap into alternative sources have been hampered by maritime disputes in the South China Sea.
The Reed Bank off the coast of Philippine island of Palawan is suspected to hold large reserves of natural gas, but China, which also claims the area, has blocked Manila’s energy exploration efforts.
As if that weren’t enough, the Philippines is also grappling with the impact of AI, especially in the BPO sector, which has been the country’s main engine of growth in the past decade.
According to the Asian Development Bank, the advent of AI could displace almost a quarter of workers in the millions-strong BPO industry in the Philippines by 2030. An earlier study by the International Labour Organisation showed that as many as 137 million jobs – or 56 per cent – throughout South-East Asia are at the risk of full automation within the coming years.
In fairness, AI has created new job opportunities around the world. But so far, the Philippines has become a host to so-called digital sweatshops, with millions of underpaid, overworked people doing labour-intensive, back-office work for major tech companies.
Blessed with a large, educated workforce, the Philippines is in a great position to attract high-quality investments. Geographically, it is extremely close to highly industrialised Taiwan, a global semiconductor production hub, as well as South Korea and Japan.
This makes it ideal for more high-quality investments, including for design and production of increasingly sophisticated semiconductors and electronic products. But a combination of poor infrastructure and chronic corruption has kept investors at bay.
Despite Mr Marcos Jr’s proactive commercial diplomacy, foreign direct investments fell by 34 per cent over the past year. The Philippines is also facing stiff competition from neighbouring Vietnam, Indonesia and Thailand, which have aggressively positioned themselves as alternative manufacturing hubs to China.
To make the country more competitive, the President will not only need to expand infrastructure spending, but also cut on red tape, corruption and monopolistic practices by business oligarchs.
It goes without saying that this will be an uphill battle, but Mr Marcos Jr risks long-term economic stagnation if he doesn’t step up to the challenge.