| Photo by Sander Sammy on Unsplash
Several contributing factors caused the economic crisis during the time of Philippine President Ferdinand Marcos Sr. in the 1980s. How eerily similar are the current events?
(a) National Debt Accumulation—One significant factor was the rapid increase in national debt during the 1980s, which funded large-scale infrastructure projects and military spending, resulting in a heavy debt burden on the Philippines. Today, the national debt is increasing at an alarming 20% annually. The national budget has a structural deficit of around P1.5 to P2 Trillion each year. The national debt will double to around P30 Trillion by 2028.
(b) Economic Mismanagement: In the 1980s, there were issues of economic mismanagement, including corruption and crony capitalism, which exacerbated economic problems. Funds were often misallocated or diverted for personal gain rather than used for productive purposes. As long as there is no legislation outlawing the sale of national assets such as oilfields to top political campaign donors, this form of capital cronyism will persist and adversely impact foreign investment confidence; the present will merely mimic the same practices from four decades ago.
(c) Intractable trade deficit with the world—The Philippines’ gross export earnings averaged a 3% increase between 2017 and 2022, particularly in critical sectors like agriculture and manufacturing. This decline weakened the country’s ability to earn foreign exchange and repay its debts. Exports account for 28% of GDP, while imports account for 44% in 2021.
(d) Dependence on Loans: The country became heavily reliant on loans to finance its development projects and sustain its economy. Although this loan dependence was around 70% domestic, this makes the Philippines vulnerable to fluctuations in global financial markets and economic conditions.
(e) Erosion of Investor Confidence: Mismanagement, political instability, and human rights violations continue to erode investor confidence in the Philippine economy, further straining the country’s financial situation.
“While remittances grow at 3% annually and the national debt grows at around 20% annually, it quickly becomes evident that the two will meet at a death cross at some future time. Former President Duterte acknowledged and thanked his predecessor for leaving behind a P1.4 Trillion surplus, which serendipitously helped navigate the COVID pandemic despite unconscionable anomalies that plagued the emergency purchases during that period.”
These factors, combined with external economic challenges such as the periodic global economic slowdown and rising interest rates, will contribute to a future but predictable financial crisis.
Today, the Philippines is widely believed to have allocated around $35B for military spending over the next ten years, including the purported submarine purchase.
Remittances grow at around 3% annually, barely keeping pace with inflation. But this, too, erodes the ability of overseas Filipino workers to achieve financial independence despite the personal sacrifices of family separation and the attendant social costs of expatriate labor. The compensation structure for most recent deployments is around $600 a month near the gutter. It is a significant departure from the compensation earnings of earlier waves of the diaspora, including engineers, physicians, nurses, and other professionals.
While remittances grow at 3% annually and the national debt grows at around 20% annually, it quickly becomes evident that the two will meet at a death cross at some future time. Former President Duterte acknowledged and thanked his predecessor for leaving behind a P1.4 Trillion surplus, which serendipitously helped navigate the COVID pandemic despite unconscionable anomalies that plagued the emergency purchases during that period.
Today, there is no surplus to speak of; instead, there are structural budget deficits for as far as humanly possible to anticipate. The Philippine Peso is nowhere near being a fiat currency like the U.S. dollar, Chinese Yuan, or Japanese Yen. The Central Bank can print money, but managing a more precipitous devaluation of the Philippine peso is one disaster away, likely man-made and totally avoidable.
It is never too late, and the solutions are clear and present. Are there enough patriots among our leaders who would put aside greed and aim to more equitably exploit our remaining patrimony of the people, by the people, and for the Filipino people?
Or is the next financial crisis intentionally designed to induce unrest and justify some non-democratic process to perpetuate power, as happened five decades ago?
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ABOUT THE AUTHOR: Dr. Crispin Fernandez advocates for overseas Filipinos, public health, transformative political change, and patriotic economics. He is also a community organizer, leader, and freelance writer.
