The economy under Duterte
Second of a series on the Duterte administration's legacy
Former President Rodrigo Duterte inherited a growing economy, which expanded 7.1 percent in 2016.
The Duterte administration aimed to continue this growth path, expecting the economy to expand 7 to 8 percent in the succeeding years. Instead, GDP grew 6.9 percent in 2017, 6.3 percent in 2018, and 6.1 percent in 2019. Then the COVID-19 pandemic struck causing the economy to shrink 9.6 percent in 2020.
The economy started recovering in 2021 and by the end of Duterte’s term, the GDP was back on a growth path.
At the Duterte Legacy Summit in May, then-Finance Secretary Carlos Dominguez highlighted the economic achievements of the administration amid the pandemic.
"The Duterte administration decisively passed and implemented the most comprehensive tax reform program ever in this country. This provided robust and recurring revenues that helped expand social services and supported our massive economic investments in modern infrastructure," he said.
Dominguez pointed to measures such as the Tax Reform for Acceleration and Inclusion (TRAIN), Corporate Recovery and Tax Incentives for Enterprises (CREATE), Rice Tariffication Law, Ease of Doing Business Act, and amendments to the Retail Trade Liberalization Act, Public Service Act and Foreign Investments Act.
"These game-changing measures and programs made the Philippines one of the economic leaders in the region, growing over 6 percent annually. The same reforms helped us gain the financial strength to weather the worst of the COVID-19 crisis," said Dominguez.
COVID-19 indeed proved to be a major challenge to the economy. Many businesses were shuttered, leaving many Filipinos jobless and needing financial aid. The government had to borrow money heavily.
The Bureau of Treasury revealed that the country's debt as of April 2022 was at P12.76 trillion. This slightly decreased to P12.5 trillion at the end of May, but was still more than double the P5.95 trillion debt when Duterte assumed power in June 2016. The debt is expected to further rise to over P13 trillion by the end of the year.
Because of Duterte’s ambitious infrastructure push, the government borrowed more money every year with the debt hitting P7.73 trillion by the end of 2019.
In 2020, around P2 trillion was added to the country’s total debt as the government borrowed heavily to finance its COVID-19 response and continue its infrastructure program. In 2021, another P2 trillion was borrowed.
For Ken Abante of the Citizens Budget Tracker, the problem isn’t just the huge debt but also how it was spent. Abante said more should have been spent on health and education.
"On the question of Duterte's legacy in terms of debt, we think a lot of money was borrowed but this was not budgeted correctly, and this was not budgeted according to the priorities that would allow for a broad-based social economic recovery," Abante said.
"It was important to borrow but one cannot just put debt in isolation from what you spent the money for. It's important to look at debt and ask the question, was money we borrowed spent correctly?" he added.
The government has said that it allocated more funds for social services like health. Loans were used to buy vaccines and fund pandemic programs, including infrastructure projects aimed at reviving the economy.
Duterte is bequeathing the administration of President Ferdinand Marcos Jr a 63 percent debt-to-GDP ratio. This was above the 60 percent ratio that was internationally accepted as a sign of good financial housekeeping.
But months before his term expired, Duterte’s economic managers played down concerns over the ballooning debt, saying this was manageable as it was mostly domestic debt.
Marcos’ economic team is not worried either.
Finance Secretary Benjamin Diokno, who was Bangko Sentral ng Pilipinas Governor under Duterte, even downplayed his predecessor Dominguez’s call for new and expanded taxes to pay the Duterte debts.
For Diokno, the Philippines can “outgrow” its debt if economic expansion was kept at 6 percent or higher.
“It will be down to 60 percent by 2025,” said Diokno said referring to the debt-to-GDP ratio.
Trade and Industry Secretary Alfredo Pascual also said in an interview prior to taking over the trade portfolio that is needed is to further expand the economy.
"Yung debt, malaki yan, pero one way to reduce that is not to reduce the absolute amount but to increase the GDP, in other words palakihin agad , palaguin agad ang economy," said Pascual.
Pascual plans to invite foreign investors to help fund infrastructure programs inherited from previous administrations.
"Yung Build Build Build na mahihirapan tayo i-sustain dahil nga lumaki utang natin. Kailangan natin imbitahin ang mga mamumuhunan dito na magtatayo ng port, airport, railway, subway, mga infrastructure na kailangan naitn para lalung lumago ang economy."
Arsenio Balisacan, Marcos’ Socioeconomic Planning Secretary, has said that the country needs to balance its pursuit of new infrastructure with social protection, health, and education.
“What do you do with world-class infrastructure, when your people are getting ranked, their children are ranked poorly, the poorest in the region? That is the dilemma,” Balisacan said.
For 2022, the last year of Duterte and the first year of Marcos Jr, many analysts expect a high GDP growth rate as the economy opens further.
Government economic managers are targeting GDP growth of between 6.5 to 7.5 percent this year. In the succeeding years, growth may even go as high as 8 percent, they said.
The challenge is hitting these growth rates amid high debt levels, the uncertainties caused by Russia's invasion of Ukraine, rising inflation, a possible food crisis, and the lingering COVID-19 pandemic.