Previous Quarterly Editions
Expropriation Risk: 54 54 54 54 ►Political Violence Risk:51 51 51 49 ▼Terrorism Risk:74 78 78 78 ►Exchange Transfer and Trade Sanction Risk: 44 44 44 44 ►Sovereign Default Risk:56 65 56 56 ►
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Protest intensity to date* 2022 2023 Low MediumUnrest risk in 2024**Cost of living: HighAnti-austerity: Medium
*Note: Protest intensity is calculated based on ACLED. **Risk levels are calculated by WTW. Where data are missing no risk level will be displayed. For details of 'anti-austerity' calculations, see the essays in the introduction; for details of 'cost-of-living' calculations, see the previous edition of the Index.
Although the Philippines’ debt continues to hover just above the 60% debt-to-GDP level — often considered to be the threshold for debt distress and a potential crisis — the central bank continues to insist that the situation can be managed. At the end of July 2023, total debt stood at US$260 billion in round figures. In 2023, external debt, which is 31.5% of total debt, has decreased slightly (down 0.8%), but domestic borrowing holds a greater share (68.5%) and is more difficult to address. In the short term, the government believes that robust economic growth will overshadow rising debt in the public eye.
Philippine debt is predicted to grow in the short- and mid-term, but the pace of growth is expected to slow. The administration forecasts that the debt-to-GDP ratio will sink to 50% by 2028, the year President Ferdinand Marcos Jr. will leave office. Marcos’s ambitious infrastructure plans, however, will be a wild card: His administration has reserved 6% of GDP in the budget for infrastructure, some of which will seed the Maharlika Investment Fund (MIF), which took effect July 2023. The MIF is intended to be a magnet for foreign investment, but as yet no major partners have come forward, in contrast to Indonesia’s Indonesia Investment Authority, which attracted nearly US$25 billion in foreign pledges within a year after its announcement.
Marcos’s post-election “honeymoon” period with the Philippines public is waning, primarily over the economic slowdown. At the end of the second quarter of 2023, his average approval rating in public polls was 62%, but that has fallen to an average of 55% in the third quarter. High food prices — particularly a 500% increase in the price of onions, the rise or fall of which Filipinos take as a sign of the economy’s health — are the primary cause. There is, however, little to no public discussion of the state of the national debt, and it is unlikely to cause social unrest unless the country is on the verge of falling into a “debt trap.”
The risk of expropriation remains low to moderate in the Philippines. The Marcos administration has promised to strengthen the regulatory system to make it more investor-friendly, which will likely lower the risk of expropriation. However, as with other Southeast Asian countries that are determined to expand and improve infrastructure, large-scale ambition to build new transportation networks and economic zones will likely lead to some government requisition of property and resulting unrest at the local level.
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With a history of political instability, multiple insurgencies and high crime (particularly in drugs), the Philippines continues to be at risk of political violence. In urban areas, this is usually manifested in protests against government corruption: Two major uprisings — in 1986 against President Ferdinand Marcos Sr. and in 2001 against President Joseph Estrada — overthrew presidents who were viewed as excessively corrupt.
The current Marcos is determined to avoid that fate and is attempting to project an image of moderation, mending fences with the United States, toning down prior President Rodrigo Duterte’s violent anti-drug campaign, and claiming to build a more effective and transparent bureaucracy.
However, the Marcos political dynasty is broad and deep: The president’s cousin is speaker of the House, his sister a Senator and his oldest son a member of the House of Representatives, which could increase the risk and perception of corruption. In rural areas, the risk of political violence is based more in long-standing ethnic or ideological insurgencies.
The 2023 World Global Terrorism Index, compiled by the Institute for Economics and Peace, places the Philippines 18th in the global community for terrorism, the second highest in Southeast Asia after Myanmar. Despite this rating, the Philippines has its lowest score for terrorism in 10 years, likely because COVID-19 slowed terrorist activity in South-east Asia.
However, the Bangsamoro Peace Process in the southern Philippines is behind schedule, in part because of the 2022 elections, and Marcos has yet to address it seriously. The agreement between the government and the Moro Islamic Liberation Front (MILF) stipulates that full autonomy will be granted in two years with the election of a Bangsamoro parliament. If that timetable continues to slip, it could reenergize the MILF insurgency arm.
In addition, the Communist Party of the Philippines and its New People’s Army continues to wage low-level insurgencies in rural areas, primarily Luzon. The grouping was formed four decades ago, during the administration of President Marcos Sr., and its longevity is due to the persistence of socioeconomic inequalities in the Philippines. When Marcos Sr. was overthrown in the mid-1980s, the poverty rate in the Philippines was 59%; it is presently 18%, and Marcos Jr. has vowed to cut that in half. In the short term, the existence and activities of the communists will continue to act as a barometer for socioeconomic levels in the Philippines.
Although growth in 2023 has heretofore been lower than the spectacular 7% of 2022 — a trend that had been forecast for the entire region — the Philippines’ performance was still high for Southeast Asia at 5.3% in August 2023. Of particular concern are high prices for key commodities, especially those that are imported. The U.S. Department of Agriculture ranked the Philippines as the top rice importer in the world in 2023, relying on imports for 25% of supply. The Philippines and Indonesia are particularly hard-hit by a growing crisis of food security in Southeast Asia, exacerbated by El Niño and grain shortages caused by the Russian war in Ukraine.
The Marcos administration intends to address the situation with plans to enlarge the agricultural sector, a neglected area of economic policy, and aims to have “more timely and calibrated importations.” The Philippines is also a net fuel importer, despite the fact that it consumes less energy than other large Southeast Asian countries. Nevertheless, the International Monetary Fund expects growth to average 6% per year in the run-up to 2027. In the meantime, the peso continues to take a beating, weakening three years in a row, primarily because of rate increases in the U.S. dollar.
The Philippines is not likely to face major exposure to trade sanctions from the West; however, the country’s trade relationship with China suffers occasional disruption when Beijing attempts to restrict imports from the Philippines when tensions rise in the South China Sea.
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In the short term, there is little risk of a default on sovereign debt, but the current level of debt leaves the Philippines ill-prepared to manage future economic crises that could send the debt-to-GDP ratio rising sharply.
