Marcos Year 1

[ANALYSIS] The economy during Marcos’ first year

JC Punongbayan

This is AI generated summarization, which may have errors. For context, always refer to the full article.

[ANALYSIS] The economy during Marcos’ first year


A bigger risk could be the Marcos administration’s lack of commitment to sit down and tackle some of the country’s most pressing long-term concernss. Moving forward, how can stellar economic outcomes be expected from bad, lazy governance?

As with any administration’s first year, the economy’s performance will necessarily be a mixed bag. There are good things, there are bad things.

But when it comes to mitigating economic problems as well as steering the economy to a better place, President Ferdinand Marcos Jr.’s first year in office was marked by an abysmal lack of achievements – especially given his huge mandate and political capital. (When asked, even the President could not cite major achievements and just agreed that his work is indeed “incomplete” and “there is still a great deal more to do.”)

For instance, his government did few, half-hearted attempts to stop runaway inflation, and he is also far from achieving his main campaign promise (which he later called an “aspiration”) of bringing down rice prices to P20 per kilogram.

True to his campaign promises, though, Marcos aggressively revived many of his father’s old and failed policies (like Kadiwa, Masagana 99, and the “golden age of infrastructure), likely in a bid to rehabilitate his family’s image.

He also aggressively pushed for the Maharlika Investment Fund, a strategic investment fund that poses all manner of risks to the public coffers and the economy.

Let’s break it down here.

Runaway inflation

Perhaps the most defining characteristic of the economy in Marcos’ first year is the runaway inflation rate, which meant that prices accelerated.

Inflation peaked at 8.7% in January 2023, the highest in 14 years, and more than double the 4% upper inflation target of government. A March 2023 survey showed that 63% of Filipinos cited inflation as the most pressing concern, and a majority (52%) disapproved of the Marcos government’s response to inflation.

The last time inflation skyrocketed was in September and October 2018, during the Duterte administration. But inflation then peaked at just 6.9% (Figure 1).

Figure 1.

Food accounted for nearly half of inflation over the past year. Some food items like onions and sugar came to symbolize the Marcos government’s inability to tame inflation. (Onions, for example, had a whopping 200% inflation rate by end-2022.)

Amid sky-high prices, Marcos tended to rely on stopgap measures like importation and the reintroduction of Marcos Sr.-era Kadiwa stores. But Kadiwa catered to only a small portion of the population (those close enough to reach the few Kadiwa stores).

Meanwhile, Marcos messed up with the importation schedule of some agricultural items. And when importation was allowed, it did not translate to lower prices, especially in the case of sugar. Poor management of agricultural supplies belies the President’s claim that a large part of inflation was “imported.”

Lack of competition also marred importation: in Sugar Order 6, for instance, import permits were handed to three traders handpicked by the Palace – raising suspicions of “government-sponsored smuggling.” Anomalous importation led to a string of resignations by some agriculture officials.

Failure to address food inflation is even more disappointing given that Marcos appointed himself agriculture secretary. He seems intent to hold on to the post, saying there are no other takers. Really?

Marcos created an “Inter-Agency Committee on Inflation and Market Outlook,” tasked to closely monitor factors driving inflation. But this was formed only in late May 2023, just when inflation was already going down by itself.

Speaking of prices, Marcos touts that we’re on the way to his “aspiration” of bringing down rice prices to P20 per kilogram. But data show rice prices are still firmly more than double that, and in fact, rice prices have even been inching up of late.

It’s not just food that drove inflation (Figure 2). Inflation of non-food items like electricity also shot up. Rent and restaurant inflation also rose, likely due to strong demand – therefore part and parcel of the economy’s recovery.

Figure 2.

As a result of high inflation, the Bangko Sentral ng Pilipinas saw fit to increase its policy interest from 2% in May 2022 to as much as 6.25% in May 2023 – a whopping 425 basis point increase over a year. Higher rates tend to discourage borrowing and spending, but the effect comes with a lag, and we may only be starting to see the effects of this policy rate hike.

Output, employment

Economic performance is also measured using the growth of production, captured by gross domestic product or GDP.

By this metric, the economy fared a little bit better. Marcos’ first year started off with a seemingly high GDP growth of 7.7%, coupled with an unemployment rate that dipped to 4.2% in November 2022 – the lowest since earliest comparable data in 2005.

But here are the caveats.

First, both these figures cannot really be attributed to Marcos, since they’re the byproduct of an economy that is firmly recovering from the pandemic recession (recall that in 2020, the economy collapsed by nearly 10%, the worst recession in ASEAN).

As the economy fully opened up (mask requirements lifted, face-to-face classes resumed), boosted by so-called “revenge spending,” it’s natural to see output growth bounce back (and unemployment dip).

Second, growth slowed down to 6.4% in the first quarter of 2023, possibly due to high inflation and interest rates.

Third, although GDP has exceeded its 2019 levels, we have yet to go back to the pre-pandemic trajectory of GDP. To do that by 2028, or the end of Marcos’ term, we need growth in excess of 9% yearly. The 6% or 7% growth rates we’re seeing just won’t cut it: if we settle for those rates, we will never be able to go back to the economy’s pre-pandemic trajectory – as in ever (see Figure 3).

Some people say 9% growth is just impossibly high and unfair to ask of Marcos. But that tells you how deep the economy’s scars were due to the pandemic, and how much lost ground we need to regain.

For Marcos, all this means that he needs to put in place policies that will boost growth a lot more.

Figure 3.

As for unemployment, a lot of the newly employed are actually unpaid family workers. In fact, the ranks of unpaid family workers rose to 4.8 million in February 2023. We want to see instead the growing ranks of people who are in regular work, paid with wages and salaries.

Finally, the underemployment rate – which includes those with work but insufficient pay – is still in the double digits (it was 12.9% in April 2023).

Debt, deficits

The national debt reached a record high of nearly P14 trillion as of April 2023, and lots of people are worried by this.

But economists tend to look not at the absolute level of debt, but at the debt-to-GDP ratio: total debt divided by national income. That comes down to 61% as of end-March 2023, which is about the same as end-2022 (Figure 4).

Marcos and his economic team have a modest, if not amorphous, goal of bringing the debt ratio “less than 60%” by 2025. But the real test is to bring it all the way down to about 40%, the pre-pandemic level. We’re still far from that, obviously. In fact, it may be impossible to reach that by 2028.

Figure 4.

Debt is mounting because government is spending more than it’s earning. The public sector deficit reached P1.6 trillion in 2022, equivalent to 7.33% of GDP. The economic managers want to bring that down to 3% by 2028 – a tall order.

To reduce the deficit and ease the strain on the public coffers, expect increasing pressure on the Marcos administration to levy new taxes. But this will prove difficult since the President has failed to pay at least P203 billion of unpaid estate taxes that his family owes the government.

One year on, Marcos has yet to put in place a comprehensive tax reform program beyond the carry-over agenda of the Duterte administration. According to Finance Secretary Ben Diokno, “We discussed this with the President and he said, ‘Continue to look into it…’”

To its credit, the economic team of Marcos is trying to reform, if not overhaul, the military and uniformed personnel (MUP) pension system, which, with status quo, poses significant risks to the public coffers. However, finding a compromise with MUPs has proven difficult.

By the way, apart from the public sector deficit, we also have a current account deficit, which in 2022 widened to its largest level since the early 2000s (Figure 5). This essentially means that the country is increasingly a net borrower from (not a lender to) the rest of the world.

Figure 5.


The Marcos administration likes to boast that the President was able to get about P3.48 trillion worth of investments in his several foreign trips, as of February 2023.

The operative word, though, is “pledges.” We have yet to see if such investment pledges will push through.

Unfortunately, there are many longstanding problems that deter foreign investments. These include the difficulties of doing business, the lack of good infrastructure, the high cost of power, poor competition in many sectors, and weak rule of law.

As pointed out by UPSE Professor Emeritus Solita “Winnie” Monsod in a series of pieces, “The Philippines has the lowest score, and the lowest rank, among the ASEAN-5 as far as the Rule of Law is concerned.” Moreover, “The Philippines has the lowest score (higher is better) and the lowest rank among the ASEAN-5, i.e. it is perceived to be the most corrupt.”

Nonetheless, Marcos is desperately selling the country as an investment destination, to the point of spewing false information. As recently as May 27, for example, Marcos said in Cebu City that the Philippines is the “fastest growing country in the world.” Totally false.

The Marcos government also launched its own infrastructure spending program called Build Better More (a play on the President’s initials). However, this is largely a carry-over of the Duterte government’s Build, Build, Build. There’s also little indication that the government wishes to veer away from car-centric infrastructure.

Marcos certified as urgent a bill that will strengthen and expedite public-private partnerships (PPPs). This is a departure from the Duterte government’s reliance on official development assistance for infrastructure. But Congress has yet to pass this bill.

Kadiwa, Masagana, Maharlika

Over the past year, there was a conscious effort by Marcos to revive old and failed programs of his father during Martial Law.

These include the Kadiwa stores (which sold cheap food and nonfood items, but proved unsustainable), Masagana 99 (a failed agricultural credit program), and even the fabled “golden age of infrastructure” (on June 23, the President said, “Let us continue the golden age of infrastructure because our countrymen really, really need it”).

But perhaps the most notable of these would be the Maharlika Investment Fund, which poses huge risks to the economy and especially the public coffers. (It’s not really an old program by the elder Marcos, but it was named after a fake guerrilla unit that he supposedly led during World War II. This has since been debunked by historians.)

As discussed in a paper released by UP School of Economics faculty members (myself included), Maharlika’s rationale remains unclear even as it now just awaits the signature of Marcos.

Risks from it abound, from the fact that it diverts scarce funds from state-owned banks and even the Bangko Sentral ng Pilipinas, to the fact that it lacks independence and therefore is prone to political interference – a no-no in these types of funds (think of what happened to Malaysia’s 1MDB). 

Unfortunately, the establishing law of Maharlika was railroaded from November 2022 (when it was first submitted by six lawmakers in the Lower House) to end-May 2023 (when it was approved by all but one senator).

The proposal was also greenlit and backed by Marcos’ team of PhD-wielding economists, who turned a blind eye to all the risks and problems raised by all other non-government economists and analysts. This is very much reminiscent of the time Marcos Sr. used his technocrats – specifically their veneer of legitimacy and credibility – to cover up the mismanagement of the economy and railroad many flawed and even deleterious programs and policies.


What’s next for the Philippine economy in Marcos’ second year?

Well, global growth is expected to flag in 2023, and risks to inflation remain. As said by the BSP itself in its June 22 statement, higher inflation may arise “due to the potential impact of additional transport fare increases and minimum wage adjustments, persistent supply constraints of key food items, El Niño weather conditions, and possible knock-on effects of higher toll rates on agricultural prices.”

But a bigger risk could be the Marcos administration’s lack of commitment to sit down and tackle some of the country’s most pressing long-term concerns, including the education crisis, agricultural stagnation, stagnant real wages, and the impending energy crisis (when Malampaya runs out by 2027).

There are also government decisions that call into question the Marcos government’s sincerity in addressing economic problems.

These range from the railroading of the overly risky Maharlika Investment Fund (certified as urgent under false pretenses) to questionable appointments (think of the appointment of disgraced and former lawyer Lorenzo “Larry” Gadon as “presidential adviser on poverty alleviation,” as well as the President’s own self-appointment as agriculture secretary). (By the way, it was not until early June 2023, almost a year in office, that Marcos appointed health and defense secretaries.)

Moving forward, how can stellar economic outcomes be expected from bad, lazy governance? –

JC Punongbayan, PhD is an assistant professor at the UP School of Economics and the author of False Nostalgia: The Marcos “Golden Age” Myths and How to Debunk Them. JC’s views are independent of his affiliations. Follow him on Twitter (@jcpunongbayan) and Usapang Econ Podcast.

1 comment

Sort by
  1. ET

    Thanks to Prof. JC Punongbayan for this very informative and educational article.
    Actually, if based on the “disinformation” coming from the Presidential
    Communications Office, President Marcos is projected as a hardworking, highly capable and very committed Chief Executive.
    But, the truth might be is that he is committed
    to the implementation of the Maharlika Investment Fund (as his top priority and primary vehicle of Corruption?), his fathers past (but failed) programs (to revive his family’s name),
    continuing deception of the People about those”pledges”, employment figures and presidential appointments,
    increasing government borrowings (as a way of increasing the amount to be acquired via corruption?),
    increasing taxes (to cover up increasing expenses due to his family’s
    extravagant lifestyle and his own many very expensive foreign trips?) and continued handling of
    the Department of Agriculture (for continuation of government-led smuggling of agricultural products including “shabuyas”?).
    So under President Marcos Jr., shall we expect a “better” second year?

Summarize this article with AI

How does this make you feel?

Download the Rappler App!
Boy, Person, Human


JC Punongbayan

Jan Carlo “JC” Punongbayan, PhD is an assistant professor at the University of the Philippines School of Economics (UPSE). His professional experience includes the Securities and Exchange Commission, the World Bank Office in Manila, the Far Eastern University Public Policy Center, and the National Economic and Development Authority. JC writes a weekly economics column for He is also co-founder of and co-host of Usapang Econ Podcast.