Philippine GDP masks how Duterte compromises the country’s economic future


History will have a lot to tell about Rodrigo Duterte’s eventful tenure as President of the Philippines. But one of its most disturbing legacies will be rolling back an economy that was on a promising track before it arrived in 2016.

Unfortunately, Duterte has not finished. The next 209 days, his last in office, could be even more precarious for a geologically vital economy.

While there are many datasets that can be cited to illustrate this point, the most critical could come from Transparency International. On its Corruption Perception Index, Manila’s ranking fell to 115th out of 180 economies. And that’s right so far.

A year earlier, in 2019, the Philippines fell to 113, from 99 in 2018. Duterte inherited the 95th rank when he moved into the presidential palace. He has steadily and sadly dragged it lower since then.

The decline in corruption is significant and must be seen in the context of the country’s gross domestic product figures. Admittedly, the 6.2% rate at which the economy grew in 2018 – and the 6.5% rate in 2017 – sounded good to the casual news reader. When browsing Facebook or Twitter feeds, the average voter may think “hmm, not bad”. The odd foreign investor might conclude that Duterte was indeed keeping the Philippine macro story on track.

But the nation’s woes are apparent in the microeconomics. What matters about 6% or 7% growth is how much it reaches a critical mass of 110 million Filipinos. The more corruption there is, the more middlemen and rent-seeking women prosper, the less transparency there is in knowing where the GDP loot goes, the more the benefits of growth go to 1%.

Despite all the rumors that Duterte was making the Philippines great again, the clear proof is that the economic renaissance he inherited has faded under his watch.

During his 2010-2016 tenure, Duterte’s predecessor, Benigno Aquino, stepped under the hood of the economy as rarely before. When Aquino arrived, the Philippines were 134th on the tables at Transparency International.

Aquino has upped the Philippines 39 ranks by attacking a corrupt political system. It is a former dictator that Ferdinand Marcos created during his oppressive reign of the 1960s to the mid-1980s. Aquino has increased transparency and accountability. He attacked tax evaders. He dared to challenge the political interference of the powerful Catholic Church.

Simply putting more government services online, including information about contract offerings, has started to clean up swathes of the economy. In no time, Manila obtained its very first investment grade credit ratings. Waves of foreign investment rushed to the Philippines.

In 2016, voters turned to Duterte to speed up Aquino’s reforms. Duterte’s 22 years at the helm of a tight ship in the southern city of Davao have earned him great national notoriety. But Duterte spent more time monitoring drug dealers than the economy.

The resulting malfunction comes at a high cost. It is no coincidence that at the end of October, the Philippines was the worst in its category in Bloomberg’s Covid resilience ranking for its poor response to the pandemic. This placed the Philippines far behind Indonesia, Vietnam and other regional rivals.

Still, Duterte remains quite popular. These aforementioned 6% growth rates gave it a booming Filipino aura. It’s a proven strategy perfected by Aquino’s predecessors, Gloria Macapagal Arroyo (2001-2010) and Joseph Estrada (1998-2001). Each has boosted GDP to good levels through massive government spending, while doing little behind the scenes to boost Manila’s economic game. Arroyo was eventually arrested for looting; Estrada was dismissed and prosecuted for corruption.

In 2010, Aquino arrived to get the economy and government confidence back on track. Then came Duterte, who has rested largely on Aquino’s laurels as he busied himself with his war on drug trafficking and the rehabilitation of the Marcos surname – a strategy that now occupies the forefront of the scene.

One of Duterte’s first big acts as president in 2016 was to give Marcos a posthumous “hero’s funeral”. And to help the Marcos clan at large overcome the stench of a bloody chapter in Philippine history. Duterte is helping to rehabilitate Ferdinand Marcos Jr.’s fortune, including a candidacy for president in 2022. Although Marcos, known as “Bongbong”, is at risk of disqualification for tax evasion, Eurasia Group has given him to mid-November 60% chance of winning the May elections.

Journalist Maria Ressa recently won the Nobel Peace Prize for being a strong and independent voice against Duterte’s antics in an era of misinformation overload. She calls Facebook “biased against the facts” and compares the explosion of “fake news” on such platforms to an “atomic bomb” for the nation.

If investors think the fallout won’t hit their bets on Philippine stocks, real estate, infrastructure projects and other sectors, they don’t care. To count, the Marcos family could soon be back at the presidential palace with another Duterte, his daughter Sara, as vice-president.

If things turn out as observers in the Philippines fear, its hard-won economic renaissance could be history.

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