Index trend
Previous Quarterly Editions
Expropriation Risk: 54 54 54 53 ►Political Violence Risk:51 49 49 49 ►Terrorism Risk:78 78 79 81 ►Exchange Transfer and Trade Sanction Risk: 44 44 44 44 ►Sovereign Default Risk:56 56 56 56 ►
Overall Risk Temperature: 59 (Significant) TREND ►
Special topic: Relationship with the 'global rules-based order'
The Philippines’ political system would suggest adherence to international liberal norms. Yet high levels of political and economic corruption, plus extra-judicial killings during former President Rodrigo Duterte’s anti-drugs crackdown, endanger human rights and adherence to norms. The country is also emerging slowly from trade protectionism, with constitutional obstacles to free trade deals and foreign ownership at present.
In the near term, Philippine attitudes to the global rules-based order will depend partly on the Marcos-Duterte political rivalry and whether President Marcos is succeeded by his vice president, Sara Duterte, in 2028, or by another candidate.
If Marcos’s side prevails, the Philippines will likely lean more to the West in its position on data norms, to consider more seriously returning to the International Criminal Court (left in 2018 under Rodrigo Duterte, whose anti-drug campaign is the subject of legal consideration there) and to call China out for its South China Sea-related hostility. If the Duterte camp prevails, the reverse for each of these is likely.
In the meantime, the worsening internal political rivalry could make it difficult for Marcos’s administration to pursue policies that match or strengthen global norms; the Marcos-Duterte coalition holds a supermajority in the country’s Congress, and Marcos will not threaten that as he navigates sensitive political issues.
On the security and sovereignty side, the Philippines (unlike many regional neighbors) has been willing to invoke international rules, albeit in its own defense. For example, this occurred against China in recent years over competing maritime claims in the South China Sea via the United Nations (U.N.) Convention on the Law of the Sea (the tribunal ruled in favor of Manila). Yet when President Duterte was elected (serving 2016 – 2022) he sought to improve China-Philippines relations, including by not seeking the ruling’s enforcement.
In contrast, the current President Marcos campaigned on enforcing the ruling. He has also moved to strengthen the crucial U.S.-Philippines defense alliance (the Philippines is affected by rising U.S.-China strategic rivalry across many areas) and to make his country a maritime leader in Southeast Asia. These efforts could easily suffer if the Duterte camp pulls ahead once again. The Philippines has also taken a strong stance against Russia’s war in Ukraine, joining the West in supporting U.N. resolutions condemning Moscow.
On the economic side of the global rules-based order, the Philippines is part of the China-ASEAN Free Trade Agreement and in 2023 acceded to the (China-centered) Regional Comprehensive Economic Partnership. Like other large Association of Southeast Asian Nations (ASEAN) neighbors, Manila views multilateral trade deals and foreign investment as major economic growth drivers, although the constitutional restrictions referred to above limit this; some statutes since 1987, when the current constitution was written, have liberalized the economy slightly but are subject to constitutional challenge.
Marcos wants the referendum in 2025 on changing the constitution to aid Philippine economic liberalization; this would attract greater foreign investment and could ease Philippine entry into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership; however, the Duterte camp has criticized the proposed charter changes, threatening Marcos with potential treason charges if he holds the referendum.
TREND ►
The expropriation risk is moderate and could lower in the second half of President Ferdinand Marcos Jr.’s six-year term, especially if he can ease foreign investment-related restrictions via a proposed 2025 referendum; however, the 2023 establishment of a sovereign wealth fund – which the government hopes will attract additional foreign money — could cloud that landscape because it could raise corruption levels.
Marcos’s popularity has dropped 10 points since his term began in mid-2022 (something not uncommon when leaders face the realities of government over campaigning), but he remains on solid ground with the public. The growing feud between the Marcos and Duterte clans will damage Marcos’ image but not enough to spark large-scale violence.
The most likely scenario for widespread violence would be evidence of new and massive corruption or a severe economic downturn. If Marcos can avoid both scenarios, he will likely complete a full presidential term.
Two factors raise the Philippines’ terrorism risk. First, the October Hamas attacks in Israel and the resulting war increases the likelihood of terrorist attacks in the Philippines’ Mindanao southern area, especially as Marcos has been outspoken in criticizing Hamas. The danger is not as much from indigenous Philippines jihadist groups but the re-energization of the regional Jemmah Islamiyah network — whose Indonesian and Malaysian operatives often hide in the Philippines’ south.
Second, the Duterte family political dynasty, based in Mindanao, has taken exception to Marcos’ position on the Bangsamoro Peace Process negotiations with Muslim separatist groups. Local extremists will likely try to take advantage of this political dissonance.
Economic growth is 5.6%, exceeding most projections, making the Philippines Southeast Asia’s fastest-growing economy in 2023. This was attributed to continued post-pandemic recovery, increased public infrastructure spending and the digital economy’s expansion.
Growth in 2024 is forecast at 5% to 6% but could be lowered by global economic headwinds or China’s tendency to express security-related displeasure with Manila via export restrictions and bans.
The Philippines is not at risk of direct trade sanctions but like other Southeast Asian countries will be tempted to disregard Western sanctions on Russia if presented with severe food or energy shortages.
The Marcos administration is focusing on digital trade and plans to introduce a bill to Congress on regulating artificial intelligence. Marcos plans to propose that as the foundation for a regional artificial intelligence framework when Manila is ASEAN’s 2026 chair.
At the end of 2023, the Philippines’ sovereign debt rose to about $260 billion — an all-time high and up 9% on 2022. The government cited higher global interest rates. The central bank thus raised rates by 451 points.
However, with the robust 2023 growth, the debt-to-gross domestic product ratio sank to 60.2%. The need to borrow to cover the growing government deficit would raise the debt higher in 2024.
