[Vantage Point] BBM Year 2: Hits and misses

The seed of President Ferdinand “Bongbong” Marcos Jr.’s return to Malacañang was planted way before the May 9, 2022, elections. Whoever engineered his rebranding –  widely believed to be Cambridge Analytica – took advantage of the early days of social media. Facebook, YouTube, X (formerly Twitter), and other platforms which had yet to gain entry in the Filipino psyche, were peppered with messages of revisionism with the end view of rebranding the image of the Marcos family.

It was in 2013 when I first stumbled upon a YouTube video titled “The Truth About Hacienda Luisita” about the alleged “sins” of the late president Cory Aquino. The video was viewed a million times by Filipinos who many analysts suspect were made up mostly of millennials or Generation Y, who were born between 1981 and 1996. It was obvious that the rebranding campaign targeted the Aquino family which was blamed for whatever ills – imagined or otherwise – the country was suffering from. The campaign also exalted the late dictator Ferdinand E. Marcos who was painted to be “the best president” the Philippines ever had. It was Marcos Sr. who signed Proclamation No. 1081 on September 21, 1972, marking the beginning of a 14-year period of one-man rule which effectively lasted until he and his family were exiled from the country on February 25, 1986. 

Marcos Jr. may have lost his bid for the vice presidency in 2016, but the seed had grown. The hate campaign against Marcos Jr.’s political adversaries was relentless, so much so that the Liberal Party had to change its signature Cory Aquino “yellow” to “pink” during the 2022 presidential campaign which pitted former vice president Leni Robredo against Marcos Jr. The combined political war chest  of the camps of former president Rodrigo Duterte and the Marcoses dwarfed that of Robredo’s who suffered unimaginable vitriol from paid trolls. Her 15 million votes were not enough to overcome Marcos Jr.’s 31 million votes.

Former Cambridge Analytica employee-turned-whistleblower Brittany Kaiser revealed to Rappler that the Marcoses had approached the now-defunct consulting firm to rebrand the family’s image. In her book Targeted, she talked about rampant microtargeting or “the practice of manipulating an individual’s thoughts and sentiments through disinformation tactics and the use of available personal data.” She described the Marcoses’ efforts to rebrand their family as “historical revisionism fueled by the use of online data.” Kaiser’s revelation was vehemently denied by the Marcos camp.

Marcos Jr. retook Malacañang as the country’s 17th president, parrying all talks of a rigged election. He faced a complex and multifaceted landscape during his first two years in office, all the while navigating through an alley of suspicion among those who believe that he was not duly elected by the Filipino people.

When he ran for the presidency, one major concern raised was how he, the son of an autocrat, would manage his relationships with political elites both here and abroad. Would he attempt to fulfill his father’s ideological goals? Did he have any ill will towards the families and conglomerates that could have acted against him, or had abandoned his family in the 1980s? Would the issue of the “unexplained” Marcos wealth continue to hound him?

The answer eventually proved to be in the negative. Marcos Jr. has seemingly avoided controversy. To bring the political elites over to his side, he abandoned – and probably never even considered – the violent and controversial drug war of Duterte, and swung Philippine foreign policy towards its traditional western allies. 

For Roberto M. Herrera-Lim, managing director of New York-based global CEO advisory firm Teneo, it was a key move. He told Vantage Point, “Apparently, many urban and upper-income Filipinos, as well as the traditional institutions such as the press, were more uncomfortable and disdainful of the Duterte administration’s worst impulses compared to the faded and now somewhat diffused history of the Marcos family.” 

In short, Duterte had set the bar so low for the president who would come after him that he is now proving to be Marcos Jr.’s best public relations (PR) agent.

Economic policies and performance

One of the central pillars of President Marcos Jr.’s agenda has been economic revitalization. Like many countries, the Philippines faced severe economic disruptions due to the COVID-19 pandemic. He prioritized economic recovery through infrastructure development, investment in technology, and agricultural sector support. His administration’s push for infrastructure development is part of the “Build, Build, Build” program initiated by his predecessor. Under Marcos Jr., this initiative has seen continued expansion, aiming to improve transportation networks, digital infrastructure, and urban development. These projects are expected to stimulate job creation and economic activity in the country.

In the first quarter of 2024, the national economy grew by 5.7% from 5.5% in the previous quarter. Instead of the previously set 6.5% to 7.5%, the government adjusted its 2024 economic growth targets downward, aiming for 6% to 7%. This also falls below the median forecast of economists at 5.9% and the slowest start of the year growth rate since the pandemic (Q1 2021 at -3.8). 

Government spending on the demand side rallied in Q1 2024, increasing by 1.7% after a contraction of -1.0% in the previous quarter. There was a slowdown, however, in household spending, from 4.6% compared to 5.3% last quarter. Investment (gross capital formation) contracted substantially to 1.3% from 11.6% in Q4 2023. On the other hand, exports of goods and services showed positive growth at 7.5%, while Imports of goods and services expanded to a more moderate 2.3%. On the supply side, services grew by 6.9%, industry by 5.1%, and agriculture by 0.4%. 

Although these results were lower than expected, National Economic and Development Authority (NEDA) Secretary Arsenio Balisacan noted that the Philippines’ gross domestic product (GDP) growth rate is still in a good position regionally. Asian Development Bank (ADB) Philippines Country Director Pavit Ramachandran even described the Philippines as “one of the frontrunners in the growth leaderboard in the region, anchored on strong macroeconomic and fiscal policy effectiveness.” 

The stock market

Philippine Stock Exchange (PSE) chairman Jose T. Pardo told Vantage Point that the local market had a total of seven initial public offerings of primary and secondary shares since June 30, 2022, that generated a total of ₱18.41 billion capital.

“We expect macroeconomic fundamentals to continue flourishing under President Marcos and his economic team, which should redound to higher growth of our listed companies” he said, expressing hope that “these will encourage and translate to even more companies considering to raise capital through the stock market, which will help further accelerate their expansion while fostering greater inclusive growth through the creation of more jobs and additional investment opportunities in the Philippines.”

The local bourse registered ₱2.63 earnings per share (EPS) in the second quarter of 2023, compared to ₱2.09 of the same period in 2022. In the first quarter of 2023, EPS was ₱2.50, compared to ₱2.51 in the same quarter in 2022. For the full year of 2022, EPS was ₱9.12, compared to ₱11.33 in 2021.

In 2023, the PSE reported around 1.91 million market accounts, which is an increase from the previous year. About 80% of these accounts were online trading accounts. Earnings of Filipino listed companies grew by 23% per year over the past three years, while revenues have grown 17% per year. At the beginning of the current year, the main index (PSEi), was down by 151 points, or 2.34%

In a phone interview, First Metro Securities vice president Andoy Beltran said that one of the upsides of the local market moving forward is the growing popularity of Real Estate Investment Trusts or REITs among investors. The Real Estate Investment Trust Act of 2009 established the legal and regulatory framework and provided an enabling market environment for the development of Philippine REITs. It was one of the landmark pieces of legislation approved during the 14th Congress, aimed primarily at allowing both small and large investors to participate in the direct ownership of real estate – an alternative investment instrument to foreign and local investors. It also provides real estate companies a cheaper source of capital, while promoting economic development, growth in tourism, and liquidity in the capital markets.

Beltran called the successful launch of REITs in the Philippines as a boon to the property market and the Philippine economy in general since it will likely attract local and foreign investments. He explained that REITs should also stoke the construction sector which has significant multiplier effects on the economy because “the REITs segment is going to provide additional support to the country’s economic growth beyond the pandemic.”

REIT also places the Philippines on par with other Asian economies that have fully developed capital and real estate markets. Its continued implementation will result in the further differentiation and innovation of property development projects which should eventually benefit Filipino investors and end-users. 

Economy by sector

US-based Institutional Investor fund manager Eric Jurado and Vantage Point analyzed key areas where Marcos Jr. has succeeded and failed so far.

Successes

1. Philippine market’s performance (259 companies) from June 30, 2022, to June 21, 2024:

• Revenue: ₱13.0 trillion (up 35.4% from ₱9.6 trillion on 6/30/22)
• Profits: ₱1.1 trillion (up 30.3% from ₱844 billion on 6/30/22)
• Market Value: ₱12.7 trillion (up 2.4% from ₱12.4 trillion on 6/30/22)
• 3-year Annual Profit Growth Forecast: +11%

2. Consumer Discretionary (28 companies)

This sector includes industries such as automotive, luxury goods, entertainment, retail, restaurants, and leisure products. Companies in this industry tend to be more sensitive to economic cycles, thriving in times of economic prosperity when consumers are more willing to spend on non-essential items, but often struggling during economic downturns as consumers prioritize essential spending.

• Revenue: ₱534.7 billion (up 62.1% from ₱329.8 billion on 6/30/22)
• Profits: ₱HP37.1 billion (up 144% from ₱15.2 billion on 6/30/22)
• Market Value: ₱1.4 trillion (up 47.4% from ₱950 billion on 6/30/22)
• 3-year Annual Profit Growth Forecast: 20%

3. Hospitality (17 companies)

The hospitality industry is a broad category of fields within the service sector that focuses on providing services to guests and includes lodging, food and beverage, event planning, theme parks, travel, and tourism. It encompasses hotels, restaurants, resorts, cruise lines, and other businesses that provide comfort, entertainment, and customer service. The industry is highly reliant on customer satisfaction and experience, often requiring a high level of service and attention to detail. The hospitality industry plays a crucial role in the economy, contributing significantly to employment and economic growth, and is heavily influenced by factors such as economic conditions, seasonality, and global travel trends.

• Revenue: ₱415.2 billion (up 71.6% from ₱242.1 billion on 6/30/22)
• Profits: ₱23.7 billion (up 265% from ₱6.5 billion on 6/30/22)
• Market Value: ₱514.1 billion (up 39.1% from ₱369.5 billion on 6/30/22)
• 3-year Annual Profit Growth Forecast: 22%

4. Technology (9 companies)

The technology industry comprises businesses and organizations involved in the research, development, and distribution of technologically based goods and services. This sector includes companies specializing in electronics, software, computers, artificial intelligence, cloud computing, telecommunications, and internet-related services and products. 

• Revenue: ₱101.4 billion (down 0.3% from ₱101.7 billion on 6/30/22)
• Loss: ₱6.92 billion (down from a profit of ₱315.2 million on 6/30/22)
• Market Value: ₱14.8 billion (down 48.6% from ₱28.8 billion on 6/30/22)

Failures

However, while Marcos Jr.’s administration has undertaken various initiatives to promote economic prosperity, there have been several challenges and areas where it has faced criticism or fallen short. Some of the notable failures or criticisms include:

1. Inflation and rising prices

• High inflation rates: The Philippines has experienced significant inflation, with prices of basic goods and services increasing, which has put a strain on household budgets. This has been a major concern for many Filipinos, especially those in lower-income brackets.
• Food price instability: Notwithstanding efforts to boost agricultural productivity, the country has faced issues of food supply and price stability, particularly with essential items like rice, sugar, and onions.

2. Slow bureaucratic reforms

• Regulatory challenges: Businesses have reported ongoing issues with bureaucratic red tape and inefficient regulatory processes which hinder economic activity and investment.
• E-Government implementation: The implementation of e-government services and digital infrastructure has been slower than anticipated, affecting efficiency and public service delivery.

3. Public debt and fiscal deficit

• Rising debt levels: The administration has faced criticism over the growing national debt, which has raised concerns about fiscal sustainability and the burden on future generations.
• Fiscal deficit: Managing the fiscal deficit remains a challenge, with expenditures outpacing revenues despite tax reforms and efforts to improve revenue collection.

4. Agricultural sector struggles

• Underperformance: Despite initiatives to support the agricultural sector, productivity and growth have been underwhelming. Issues such as inadequate infrastructure, climate change impacts, and insufficient investment continue to plague the sector.
• Farmers’ welfare: There have been ongoing problems related to farmers’ welfare, including inadequate support systems and slow implementation of promised subsidies and assistance programs.

5. Persistent poverty and inequality

• High poverty rates: While there have been efforts to alleviate poverty, a significant portion of the population continues to live in poverty, and economic benefits have not been evenly distributed.
• Social inequality: Issues of social inequality and uneven economic development across different regions persist, with rural areas often lagging behind urban centers.

6. Environmental and Disaster resilience

• Environmental degradation: The administration has faced criticism for not doing enough to address environmental issues such as deforestation, pollution, and climate change.
• Disaster preparedness: With the Philippines being highly prone to natural disasters, the adequacy of disaster preparedness and response measures is a constant concern.

7. Human rights and governance issues

• Human rights problems: The administration has been criticized for its handling of human rights issues, including press freedom and the treatment of activists and opposition figures.
• Corruption and covernance: Issues of corruption and lack of government transparency continue to affect public trust and the efficiency of public services.

These challenges highlight the areas where the administration’s efforts have been insufficient or where more focused and effective measures are needed to ensure sustainable and inclusive economic growth.

Policy challenges

As far as domestic policy is concerned, managing inflation remains the foremost challenge. While the  government’s baseline forecast assumes that inflation will return to within the Bangko Sentral ng Pilipinas’ target range in 2024-2026, short-term risks remain tilted to the upside, due primarily to an unexpected increase in commodity prices brought about by the intensification of geopolitical tensions and trade restrictions. 

The prolonged episode of climate events such as El Niño and La Niña could also weigh on the domestic food supply and lead to an upswing in inflation. To effectively manage inflation, non-monetary measures must be used  to complement sound monetary policy to ensure better supply-and-demand management, and timely and adequate food imports. The government must likewise continue to provide social assistance to vulnerable groups that are disproportionately affected by high food inflation.

It is the successful containment of inflation and the transition toward a more accommodative monetary policy that will bolster private domestic demand. Despite ongoing fiscal consolidation, public investment will likely be above 5% of GDP and remain supportive of growth. Meanwhile, export demand, led by robust service exports, is projected to strengthen over the forecast horizon. Through the improvement in global growth over the forecast horizon, goods trade activity is expected to bounce back between 2024 and 2026. 

The risks to the growth outlook remain tilted to the downside. Externally, these risks stem from heightened geopolitical tensions, further fragmentation in global trade policy, and weaker-than-expected growth in China. 

Heightened geopolitical tensions could lead to higher energy prices, which would reduce households’ disposable incomes. Further fragmentation of trade policies and increased trade protectionism would weigh on trade and could lead to increased global commodity prices. 

Domestically, a prolonged episode of El Niño and a stronger than expected La Niña could lead to damaged farm output, which could place upward pressure on food prices. Persistent high inflation could lead to reduced private consumption growth. In addition, it could result in further delays in monetary policy normalization which will diminish growth prospects. Lastly, delays in passing key reforms for fiscal consolidation could dampen the medium-term outlook. 

In order to sustain poverty reduction in the country, there must be robust growth and continued  labor market improvements to boost growth in household incomes. This positive economic outlook, coupled with quality job generation, will likely further improve household welfare. In the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM), for example, progress in poverty reduction will depend on sustaining the region’s inclusive growth momentum.

Marcos Jr.’s presidency so far still lacks a defining idea or narrative. Bagong Pilipinas (New Philippines) appears to be it, but there is little clarity as to what it means in terms of tangible and real outcomes, especially for the marginalized. For many Filipinos, the path to financial security still takes them foreign shores, as they search for stable and meaningful jobs. 

Marcos Jr.’s seemingly laidback style also raises the question of whether he is willing to pursue difficult but necessary political and economic reforms, from anti-corruption to reducing the distortive power of domestic vested interests – whether they be his allies’ or those of influential business groups and conglomerates. The President has maybe two, at most three, more years, to establish his administration on rock-solid ground because breathing down his neck are the Duterte patriarch and children, who see themselves as shunned and targeted by this administration, and they are out to exact political vengeance, first in 2025 and then in 2028. – Rappler.com

This article is part of “Marcos Year 2: External Threats, Internal Risks,” a series of analyses and in-depth reports assessing the second full year of the Marcos administration (July 1, 2023, to June 30, 2024).

Val A. Villanueva is a veteran business journalist. He was a former business editor of the Philippine Star and the Gokongwei-owned Manila Times. For comments, suggestions email him at mvala.v@gmail.com.