Metro Manila (CNN Philippines, June 28) — Early into his presidency, Rodrigo Duterte’s economic team unveiled a set of audacious agenda geared towards accelerating growth while making it sustainable and inclusive for the ordinary Filipino. And thus Dutertenomics—as it was coined then—was born.
Duterte’s government pursued ambitious policies in its thrust to propel the country towards the long-coveted upper middle-income status, generate jobs especially for marginalized sectors, and distribute income.
However, the Philippines hit a proverbial wall and fell rock bottom in the penultimate year of Duterte’s presidency—beginning the decade with one of the worst pandemics the world has ever faced. COVID-19 brought the economy down to its knees, tanking what was otherwise a relatively stable growth trajectory.
Now in his last days in power, Duterte will be leaving behind an economy whose expansion has defied market expectations, but not without risks emanating from overseas.
CNN Philippines takes a look at the economy in the past six years and what lies ahead.
The ups
The economy under Duterte began on a strong note—thanks to good housekeeping from previous administrations—with growth even settling slightly above 7% in 2016 based on latest Philippine Statistics Authority estimates.
Socioeconomic Planning Secretary Karl Chua also acknowledged this during his last briefing as head of the National Economic and Development Authority (NEDA) this June. “We improved upon the prudent macroeconomic and fiscal management of the previous administrations. With a stronger macroeconomy, we were able to shift our attention to addressing micro-issues,” he said.
Economic managers also pursued an expansionary fiscal policy, one that funded the state’s investments in the likes of public infrastructure. It could be said that the Build, Build, Build is among the centerpiece programs of the Duterte administration.
The Department of Finance, led by Secretary Carlos Dominguez III, has also pushed for the Comprehensive Tax Reform Program (CTRP). Consisting of multiple tax packages, it aims to achieve a “fairer, efficient and more progressive” tax system.
CTRP’s first package, the Tax Reform for Acceleration and Inclusion (TRAIN) Law, took effect in 2018 and contained features like lower income tax and higher excise tax on items like fuel, tobacco, and sweetened beverages.
Duterte also signed into law the Rice Tarriffication Law, often touted by the government as among the factors that helped arrest the surging in inflation in 2018 of which analysts said TRAIN contributed in part due to additional taxes.
Other key pre-pandemic measures include the Free Tertiary Education Law, National ID Program, Ease of Doing Business Act, Universal Health Care Law, and Pantawid Pamilyang Pilipino Program Act.
“Overall, in terms of statistics, the Duterte administration did well. Prior to the pandemic, our GDP growth rate was at 6.1%. We were among the highest in terms of growth rate in Southeast Asia. Prior to the pandemic, poverty incidence was also declining,” said University of the Philippines School of Economics (UPSE) associate professor Dr. Cielo Magno in an e-mail to CNN Philippines.
The Philippines was also on its way to hitting upper middle-income economy status before COVID-19. World Bank data showed that the country’s gross national income (GNI) per capita already stood at $3,850 in 2019, just several dollars away from the minimum $4,046 annual value this status required.
This plummeted to $3,430 in 2020, especially with the pandemic triggering the country’s harshest lockdowns and forcing many businesses to close.
All quarters of 2020 registered negative economic growth, with the second quarter logging the worst plunge at 16.9%. About 7.28 million Filipinos were out of work in April then, yielding an all-time high joblessness rate of 17.6%.
The economy contracted by a record 9.5% that year, its worst performance since World War II.
Still, Dominguez espoused an optimistic tone, counting on the “unique fiscal and macroeconomic strengths” the country had prior to the pandemic.
“The economy is in good shape to mount a strong recovery soon enough, given the positive metrics such as benign inflation, a peso that is the strongest currency in Asia, and high-investment grade credit profile that has enabled us to borrow money here and abroad—at relatively lower cost—to fund our programs for COVID-19 response and other requirements,” he said in August 2020.
From ₱7.731 trillion in 2019, the national outstanding debt stock rose to ₱9.975 trillion in 2020. The debt-to-GDP (gross domestic product) ratio hit 60.4% then, a stark rise from 39.6% the year prior.
“What is a feat for this administration is because of the pandemic, we had to halt the economy and eventually provide the necessary services—the vaccine, the ayuda—and eventually restart the economy,” BDO chief market strategist Jonathan Ravelas told CNN Philippines in an interview.
To help shoulder the impact of COVID-19 especially on the poorest households, Duterte signed two multibillion-peso Bayanihan stimulus measures into law giving him additional power to realign funds for pandemic response.
Philippine GDP eventually grew after tight restrictions were gradually eased and consumer sentiment improved, expanding slightly above target at 5.7% after the forecast-beating growth in the last three months of 2021. However, as the economy grew, so did the debt stock: as of end-2021, it already was at ₱11.8 trillion or 60.4% of GDP.
By the end of first quarter this year, economic output outpaced the country’s nominal GDP during the same period in pre-pandemic 2019. But government borrowings rose to 63.5% of the economy, too.
Some other key bills also secured Duterte’s signature during the pandemic. These include the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, the second package under CTRP, but not without several vetoed provisions.
He also signed into law the Financial Institutions Strategic Transfer (FIST) Act and measures amending the Public Service Act, Retail Trade Liberalization Act, and Foreign Investments Act, among others.
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The downs
However, analysts emphasized that assessing the economy under the Duterte administration can’t be done without evaluating his governance.
“What’s underreported is that despite the accomplishments, the roads that they were inaugurating and all of those things, they were not hitting their own targets when it came to Build, Build, Build and even their own macroeconomic targets. Their tendency was to always move the goalposts,” public budget analyst Zy-za Nadine Suzara told CNN Philippines in an interview.
For instance, the Development Budget Coordination Committee (DBCC) revised its annual forecasts thrice in 2021 alone. (They slashed targets the first two times in anticipation of retightening of restrictions, then raised them the last time due to faster-than-expected third quarter growth.)
For the government’s flagship infrastructure program, 18 of 119 listed projects are expected to be delivered this month according to the Department of Public Works and Highways—a far cry from the “Golden Age of Infrastructure” pitched by Duterte in his second State of the Nation Address.
RELATED: Hits and misses of Duterte's 'Build, Build, Build'
“They keep talking about accomplishments but in government parlance, the accomplishments they are talking about are just outputs. They’re not talking about the outcome, moreso the impact of their programs,” said Suzara.
Analysts also acknowledge the free rein the President gave his economic team, particularly Dominguez whom Ravelas described as the chief architect of Dutertenomics.
“I respect President Duterte's awareness that managing the economy was not his forte and that his hands-off approach was effective to a certain extent. However, you cannot really completely insulate the economy from politics,” said Magno.
“So while there was success, we saw the effects of deteriorating institutions, problems with the rule of law, and corruption on the decline in foreign investments and decrease in demand for our products,” she added, referring to exports.
While the former Davao mayor’s bid against corruption helped catapult him to the presidency, Duterte’s administration was rife with issues ranging from the “pastillas scam” involving some Immigration officials to alleged irregularities in the Philippine Health Insurance Corp. and anomalies surrounding the state’s top medical supplies provider Pharmally Pharmaceutical Corp.
RELATED: Six years on: Did the Duterte administration deliver on its anti-corruption promise?
“It’s not enough to just improve the tax administration, hindi talaga. It’s a whole issue of good governance where you capacitate the agencies to spend efficiently, do procurement efficiently, and put in controls that will minimize corruption. Those are the issues that basically drain the public coffers,” Suzara said.
Analysts interviewed by CNN Philippines also believe the outgoing administration could have done better in specific industry reforms like in agriculture, manufacturing and mining, and attracting more investments—often touted for their ability to generate jobs for more Filipinos.
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Looking ahead
In his speech during the Duterte Legacy Summit this May, Dominguez emphasized how the reforms they passed will benefit the new leaders of the nation.
“The next administration will inherit many hard-won reforms. They will assume the office with the basic groundwork for rapid and inclusive growth already in place. President Duterte’s final legacy is a confident and hopeful Filipino people earnestly looking to a future of sustained progress,” said the outgoing DOF chief.
Ravelas agrees with this assessment, noting that Duterte is leaving behind an economy with potential to achieve the revised 7-8% target set by the outgoing DBCC.
However, he also flagged risks dangling over the economic outlook.
“The administration was able to get us out of the storm and bring to the ship into the port. But on the way to port, we’re now challenged by new headwinds. Until February 25, we were doing great. After that, the Ukraine war came. So ngayon, na-challenge ka (now, you’re challenged) with the higher inflation and then the lasting effects of the supply chain disruptions,” Ravelas explained.
But President-elect Ferdinand “Bongbong” Marcos Jr. is up to the task. Often described as a continuity candidate, he has formed an economic team full of bigwigs, including technocrats with academic backgrounds in UP.
These include outgoing Philippine Competition Commission chairman Arsenio Balisacan, who will be returning to his old NEDA post, Benjamin Diokno for DOF and Felipe Medalla to replace him as Bangko Sentral ng Pilipinas Governor, and Alfredo Pascual for Department of Trade and Industry.
Business groups have welcomed these appointments, believing the incoming officials’ expertise will bode well for an economy poised to recover from COVID-19 and state’s record-high debt.
“The incoming government has many challenges to face and has to ensure that it is capable of putting up a credible government that will not only grow the economy but will also uphold the rule of law, address high level corruption, (and) support good governance,” said Magno.
One thing’s for sure: the next administration has a lot of work to do, and its battlecry of unity will definitely come in handy to fully lift the economy out of this health crisis and bring it to greater heights.