WITH the Philippines missing its economic growth target for the second consecutive year, this raises concerns over the country’s fiscal health. The economy expanded by 5.2 percent year-on-year in the fourth quarter of 2024. This growth rate matched the previous quarter’s but fell slightly below the 5.5 percent recorded in the fourth quarter of 2023. The overall economic expansion for 2024 reached 5.6 percent, a marginal improvement from the 5.5 percent growth in 2023. However, this remained below the government’s revised target range of 6 percent to 6.5 percent.
Debt to GDP ratio
On the other hand, the country’s debt-to-GDP ratio rose to 61.3 percent by the end of the third quarter of 2024, amounting to approximately P1.27 trillion. This figure surpasses the 2023 level and exceeds the internationally recommended threshold of 60 percent, signaling heightened risks to economic stability.
Under the Ferdinand Marcos Jr. administration, from July to December 2022, the government incurred an additional P627 billion in debt. As of the third quarter of 2024, the country’s total debt reached P15.89 trillion. The debt increased by P1.197 trillion in 2023 and by P1.27 trillion from January to September 2024. According to the Department of Budget and Management (DBM), the additional borrowing for 2024 was projected at P1.440 trillion, while for 2025, it is estimated at P1.297 trillion.
Given these substantial borrowings, a critical question emerges: How have these funds been utilized to bring tangible benefits to the Philippines and its people? Are the investments addressing long-term development needs, infrastructure improvement, or social welfare, or do they risk becoming liabilities that burden future generations? The answer will define the country’s economic trajectory in the future.
Former president Rodrigo Duterte left office with a total government debt of P12.79 trillion, which became the starting point for Marcos. When Duterte assumed office in 2016, the national debt was at P5.948 trillion. During Duterte’s term, the debt-to-GDP ratio experienced a decline from 2016 to 2019, reflecting an improving fiscal position. According to data from the Bureau of Treasury, the Philippines’ debt-to-GDP ratio was at its lowest point at 39.60 percent in 2019, reflecting fiscal stability. However, this trend reversed sharply during the Covid-19 pandemic, when the ratio surged to around the 60 percent level as the government responded to the economic and public health crisis. This historical context underscores the current Marcos administration’s dual pressures: managing debt sustainability while fostering economic growth. How the Marcos administration addresses these challenges will determine whether the Philippines can regain a lower debt trajectory and foster long-term fiscal health.
FDI inflows
Compounding the situation is the continued decline in foreign direct investment (FDI) inflows. This trend suggests that despite Marcos Jr.’s high-profile foreign visits, there has been limited tangible progress in attracting significant capital inflows.
Bangko Sentral ng Pilipinas (BSP) data highlights modest and inconsistent FDI inflows to the Philippines. In 2022, FDI net inflows dropped to approximately $9.2 billion, an 18 percent decline from $11.98 billion in 2021. In 2023, FDI net inflows fell further to $8.9 billion, a 6.6 percent decrease compared to $9.5 billion in 2022, signaling limited improvements despite the high-profile foreign trips of Marcos Jr. In 2024, FDI performance exhibited fluctuations: In June 2024, net inflows dropped by 29 percent to $394 million compared to $555 million in June 2023. In July 2024, a 5.5 percent year-on-year increase brought inflows to $820 million from $778 million in July 2023. In August 2024, FDI inflows declined by 14.5 percent to $813 million compared to $951 million in August 2023. In September 2024, a sharp decline of 36.2 percent saw inflows fall to $368 million from $577 million in September 2023.
This mixed performance underscores the ongoing challenges in attracting consistent foreign investments amidst domestic and external uncertainties. While occasional gains were recorded, the overall trend reflects a lack of sustained momentum and a generally declining trajectory. Furthermore, the annual average FDI inflows under Marcos Jr. lag behind the levels seen during previous administrations, particularly the Duterte administration, which averaged higher inflows due to infrastructure-driven policies and a more aggressive investment promotion strategy.
Maharlika Fund
Moreover, as of Jan. 28, 2025, the Maharlika Investment Corp. (MIC), a cornerstone of the administration’s economic strategy, has yet to secure foreign investments stemming from Marcos Jr.’s international trips. MIC president Rafael Consing Jr. expressed optimism that MIC will attract several significant foreign investments by the end of the year (2025), though he did not specify the sectors involved.
Note that Marcos’ travel expenditures have significantly increased since he assumed office in June 2022. In 2022, travel costs amounted to approximately P403 million, a sharp rise of P367 million compared to 2021. Specific figures for 2023 remain undisclosed, but Marcos conducted 19 foreign trips since taking office, with 11 of these occurring in 2023. For 2024, the Office of the President’s travel budget was allocated approximately P1.408 billion, a 58 percent increase from the P893.87 million requested in 2023. For 2025, the proposed budget stands at P1.054 billion, reflecting an 8 percent decrease from 2024. While complete data for August 2022 to January 2025 is unavailable, trends point to a substantial rise in travel-related expenditures of Marcos. These increasing allocations have sparked public concern, particularly given the country’s pressing challenges, including poverty, inflation and inadequate physical and digital infrastructure. Critics question whether these expenses are justifiable amidst such urgent domestic issues.
Thus, there are two critical questions that Filipinos should ask. First, can the MIC realistically attract substantial FDI by the end of 2025? This question gains urgency considering how the Philippines is facing geopolitical tensions and a host of domestic challenges, including rampant corruption, rising crime rates, peace and order issues, and inflationary pressures. These inflationary pressures are reflected in the high cost of food, basic commodities, and essential services such as electricity, communication and transportation. Additionally, the country’s limited physical and digital infrastructure and ongoing political instability further complicate the country’s investment landscape. It’s also worth emphasizing that we are only at the beginning of 2025, and these systemic issues raise concerns about the MIC’s ability to fulfill its ambitious goals within such a constrained timeframe.
Second, are there tangible results or concrete manifestations of return on investment (ROI) from President Marcos’ foreign trips? These trips were marketed as strategic efforts to bolster the country’s economic standing. Yet, questions linger about whether the benefits outweigh the costs and whether they have delivered meaningful progress for the nation.
Conclusion
As the country looks ahead to 2025, critical questions emerge regarding the trajectory of the Philippine economy under the Marcos administration. Indeed, there’s concern about the country’s fiscal and overall economic health. With economic growth struggling to meet expectations and fiscal pressures mounting, questions arise about the Marcos administration’s ability to address economic and fiscal challenges. Can the Philippines under Marcos Jr. enhance its economic resilience and meet its economic goals, or will these shortfalls continue to weigh the nation’s economic outlook?
Source: The Manila Times
https://www.manilatimes.net/2025/02/01/opinion/columns/ph-at-an-economic-crossroads-with-gdp-growth-misses-mounting-debt-and-fdi-lag/2047954
