Happy New Year! Before we dive into 2025, let me take stock of the Philippine economy in 2024, and offer some ideas about where we’re headed this year.
Slower growth
I’m quite sad to note that the economy grew quite slowly in 2024 — certainly much slower than what we need to go back to the pre-pandemic trend.
Average quarterly growth for the first nine months of 2024 was just 5.8%. For context, we need more than 10% growth per year if we are to go back to the pre-pandemic trajectory by 2028, the end of President Ferdinand Marcos Jr.’s term. In February, I projected that we may, in fact, never get back to the old trajectory. Figure 1 shows that the economy now seems to be on a permanently different path than the one before the pandemic.
Figure 1. Source: PSA
Slower growth also means that, yet again, the Philippines failed to graduate into an upper-middle income country — a promise that has been broken yearly since 2018. The economic managers revised their projection for the nth time, and said we might finally attain that coveted status by 2025. Let’s see.
Various institutions project the Philippines to grow by around 6.1% in 2025, which is at the lower end of the government’s target range of 6-8%. Note that the projections already likely include the usual boost in spending seen in election years. That means that if it were not an election year, total growth in 2025 could very well be below 6% — a shame.
Slower inflation
Thankfully, inflation continued to abate in 2024. It’s down to 2.5% in November 2024, comfortably within the government’s 2-4% target range (Figure 2).
But that doesn’t mean at all that prices have gone down. Lower inflation does not mean lower prices. For instance, food prices in November 2024 were almost 15% higher compared to the middle of 2022. I highly doubt that over the same period wages have increased that much for the vast majority of Filipinos. Thus, the not-so-happy holidays for most Filipinos, according to the Social Weather Stations.
Figure 2.
Failure to manage rice supplies made inflation a lot higher in 2024 than it needed to be. Marcos’ failure to plan and prepare properly for the brutal El Niño season also contributed to unstable rice prices.
In case you missed it, Marcos signed in May a new law that gives back to government greater power to control rice supplies and prices. This does not bode well for the future. Government did a bad job managing rice supplies in past decades, and we refuse to heed the lessons of history. Prepare for more rice troubles.
Lower inflation in 2024 led the Bangko Sentral ng Pilipinas to reduce its policy interest rate for the first time in four years. The raging fire that was inflation has died out, and there’s no need for a firehose anymore.
Speaking of prices, the National Economic and Development Authority drew tons of flak in 2024 for saying that P63 was enough to feed a person a day (at least to meet daily required caloric intake). This is utterly unrealistic, and I suggested that NEDA ought to seriously update its poverty methodology. There are talks that this might happen in 2025, and I suspect official poverty figures to rise.
Economic charter change
For the rest of this piece let me focus on troubling policies pursued by the Marcos Jr. administration — policies that are harmful to the country’s development agenda.
First is the administration’s attempt at economic charter change. They branded it as “necessary” to attract foreign direct investments. But, in fact, study after study showed that other things are much more crucial: promoting ease of doing business and rule of law, reducing the cost of power, easier taxes, and combatting corruption.
In April, some of my colleagues and I published a discussion paper on the economic charter change debates, which were fraught with too much hand-waving and too little empirical evidence.
Speaking of investments, Marcos signed the CREATE MORE Act in November, a law meant to improve the country’s standing as an investment destination. However, it might prove to be nothing more than a bonanza for big firms in the country and a huge drain on the already limited fiscal space of government.
POGO ban
In July, Marcos ended his State of the Nation Address with a firm declaration that he’s banning POGOs or Philippine offshore gaming operations — an industry that flourished during the time of former president Rodrigo Duterte. This announcement was met with thunderous applause, but I cast doubt as to its effectiveness. Bans never truly work, and true enough, many POGOs have since disguised as restaurants, resorts, and BPOs or business process outsourcing outfits to evade authorities.
The intense public scrutiny of POGOs in 2024 led me to think: Are POGOs the only kind of foreign direct investments we can attract in droves? Did POGOs go to the Philippines precisely because of our weak rule of law, which they thought they might exploit? If so, that’s quite a tragic thought.
Cash sweep of government corporations
The 2024 budget is the first national budget that allowed the government to take money away from government corporations and treat them as surpluses that can be used to fund budget items in the so-called “unprogrammed appropriations.”
This led to the Department of Finance’s extortion of nearly P90 billion in funds from the Philippine Health Insurance Corp. or PhilHealth. PhilHealth remitted P60 billion so far, and was stopped by a temporary restraining order from the Supreme Court. But, in fact, I discovered from the Bureau of the Treasury’s spreadsheets that the Marcos administration also swept at least P30 billion from the Philippine Deposit Insurance Corp. or PDIC in May. We don’t know if other transfers from PDIC were made since then.
The cash sweep of government corporations is a troubling development for many reasons. The government’s development projects aren’t supposed to be funded this way, and government corporations need that money for their own purposes.
This calls to mind 2023’s Maharlika Investment Fund, which was funded by extorting capital from state-owned banks and even the profits of the Bangko Sentral ng Pilipinas. I’m also reminded of the way Ferdinand E. Marcos abused government banks and other financial institutions to fund crony capitalism in the 1970s and 1980s, leading to the ruin of the economy back then — a phenomenon I discussed in loving detail in my book, False Nostalgia.
Pork fiesta in the 2025 budget
Finally, Marcos and Congress crafted a budget for 2025 that promises to bring about an explosion of patronage-driven local infrastructure projects and transfers in aid of the 2025 electoral bids of many politicians. Many other economists, budget analysts, and I called it the worst and most corrupt budget in years.
Right at the very end of 2024, on December 30, Marcos signed the budget law which removed state subsidies to PhilHealth, reduced by P50 billion the budget for 4Ps or the government’s flagship anti-poverty program, cut by P10 billion the computerization budget of the Department of Education, and so on. In short, the 2025 budget that Congress created and Marcos approved is a big f*ck you to the Filipino people.
Too bad for Marcos, since he and his government will likely face tons of cases in 2025 concerning this disastrous budget he approved. A fundamental flaw is that the 2025 budget is unconstitutional, because it’s the first budget ever that did not allocate the lion’s share to the education sector (the Department of Public Works and Highways took the more than P1-trillion cake).
All in all, 2024 is a wake-up call to Filipinos that the Marcos administration is brazenly and shamelessly corrupting and playing around with taxpayers’ money. May the 2025 polls be a chance to exact accountability from all who bastardized public funds — but given our voting history, I’m not too optimistic this will happen. – Rappler.com
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. In 2024, he received The Outstanding Young Men (TOYM) Award for economics. Follow him on Instagram (@jcpunongbayan) and Usapang Econ Podcast.