The great thing about Moody’s Analytics calling out the Philippines for economic mismanagement is that Rodrigo Duterte’s army of internet followers have nowhere to go.
Certainly, they’re all over the Twittersphere defending their man in the presidential palace. But the misdirection and whataboutism can’t explain away how quickly the Duterte reform drive went off the road. And the extent to which his war of choice against the drug trade hurt an economy that was zooming along when he arrived in June 2016.
Most Southeast Asian leaders face challenges with illegal narcotics and addiction. Only Duterte, though, seemed to make it the raison d’etre of his presidency.
A big casualty of that decision is the progress Duterte’s predecessor, Benigno Aquino, made turning around a long-neglected economy. From 2010 to 2016, Aquino set out to devise a system focused on growing better, not just faster. He went after graft and tax cheats, increased accountability and transparency and scrutinized giant building projects and other contracts.
In short order, the Philippines scored its first-ever investment trade ratings. First, Fitch Ratings in 2013 and then Moody’s Investors Service and S&P Global. Foreign-direct investment zoomed Manila’s way as the one-time “Sick Man of Asia” enjoyed its new status among emerging-market darlings.
Duterte was elected to supercharge things. His 22 years as mayor of the southern city of Davao earned him a sort of folk-hero status. The city was reputed to enjoy faster gross domestic product growth, lower crime and less bureaucracy than the national average.
Sadly, Duterte prioritized guns over butter. The ferocity of the drug war drew rebukes from the United Nations, Human Rights Watch and even the Vatican. Few shoutouts, by sharp contrast, came from the global economic grade keepers.
This gets us back to Moody’s Analytics turning gloomy on Duterte’s economy. Thanks to skewed government priorities, the Philippines entered the pandemic with serious pre-existing conditions. The public debt burdens that Aquino worked to reduce risk returning. Corruption is continuing to be a problem. In 2019, Manila plunged 14 notches in just 12 months in Transparency International’s rankings. It managed to gain back two notches the following year.
And the growth that Southeast Asia’s fifth-biggest economy enjoyed pre-Covid-19 was largely the product of turbocharged easing by the central bank. Then came the lockdowns and Duterte’s poor handling of getting vaccinations into arms.
As a result, say analysts at Moody’s, the Philippines “isn’t forecast to return to pre-pandemic levels of output until the end of 2022. In contrast, China, Taiwan, South Korea and Vietnam have returned to previous output levels, while Indonesia and Thailand are on track to return this year.” This, Moody’s says, makes the Philippines a “regional laggard” at the worst possible moment.
To be sure, the 1,796 days Duterte has been in office aren’t time enough to make up for decades of economic neglect. As much as Aquino achieved in six years, he failed to create enough good-paying jobs to keep pace with a young and growing population.
Yet Duterte’s 59 months should’ve been enough to make a bit of progress raising the nation’s healthcare game. He also has had 18 months of experience battling Covid-19 for his team to devise basic immunization plans and tackle vaccine hesitancy.
Structural impediments abound, of course. One is that local governments have long taken the lead on creating public health networks, not Manila. Even so, Duterte’s nation of 108 million people trails Cape Verde and Paraguay in vaccinations. Poorly funded and organized testing and contract-tracing protocols aren’t helping.
“This is problematic, because it means the Philippines remains vulnerable to continued local infection spikes, inhibiting the economic recovery,” Moody’s warns.
Just as important, the nation’s delayed recovery relative to neighbors won’t just set back Aquino-era efforts to reduce inequality, but result in a new wave of families falling out of middle-class status.
Optimists will argue that Duterte has another 12 months-plus in office to make good on his “Davao City model” for national prosperity. In reality, Duterte may be distracted by helping to facilitate the political career of his daughter Sara, who currently has his former mayoral job.
Such maneuvers might leave little time for the wholesale economic retooling that Duterte was elected to execute. Odds are, the central bank will take on an even bigger role in achieving the 5.3% GDP growth Moody’s projects this year. Given Duterte’s track record of distraction, the future seems anything but bright.