Going down the drain

Numbers don’t lie. The economic indicators show the Philippine economy is on the brink of collapse in the remaining two years of President Ferdinand “Bongbong” Marcos Jr. (PBBM) unless corrections are done fast before he bows out of office. An economist and professor emeritus in Economics, Monetary Board (MB) member Benjamin Diokno rang the alarm bells on the continuing decline of the country’s gross domestic product (GDP).

As the measure of growth of the country’s economy, the latest GDP growth recorded for the second quarter of this year was merely 2.3 percent, Diokno noted with deep concern. Speaking at our Kapihan sa Manila Bay news forum last Wednesday, Diokno echoed the fears of many affected sectors on the declining growth of Philippine economy.

“The numbers tell a disquieting story (of the Philippine economy),” Diokno cited.

“Early politicking sinks the economy,” Diokno traced this from the time PBBM first took office. Diokno called it “the collapse of the Philippine economy” when the country’s GDP growth rate plunged from 8.1 percent in the first quarter of 2022 to the present 2.3 percent. “It would be irrational to blame the collapse of the economy solely on external forces,” Diokno argued.

When he came in June 2022, PBBM was facing the global impact of the Russian-Ukraine war. And currently, we are all reeling from the US-Iran war.

Without equivocation, Diokno declared: “The sharp slowdown of the economy could be blamed on misallocation of the national budget, poor implementation of government programs and projects, and corruption.”

 Diokno, however, clarified that economic weakness is rarely the product of politics alone. He pointed out inflation, the global fuel prices, weak investment and delays in public construction all matter. As far as Diokno sees it, the worsening state of the Philippine economy “is largely domestic driven.”

“I think politics reared its ugly head too soon,” Diokno rued.

His critical outlook on the Philippine economy comes at a time when Malacañang submitted the proposed P7.2-trillion national budget for next year. The 2027 General Appropriations Act (GAA) bill is the penultimate budget proposal of the Marcos administration, sent to the 20th Congress last Wednesday.

Diokno served as former Department of Budget and Management (DBM) secretary for three previous administrations starting from the late president Cory Aquino; during the shortened term of ex-president Joseph Estrada and then under former president Rodrigo Duterte. He was subsequently appointed Governor of the Bangko Sentral ng Pilipinas (BSP) in 2019.

Diokno quit the highest-paying job in our country as BSP governor when PBBM recruited him to become his Department of Finance secretary in June 2022. Diokno was among the first Cabinet members who PBBM recruited. As finance secretary, he sat as ex officio MB member. Chaired by the sitting BSP governor, the seven-man MB is regarded as the highest monetary policy-making body in our country.

When he left the Marcos Cabinet in February 2024, PBBM named Diokno as regular MB member with a fixed-term of six years. His transition back to MB followed months of speculation regarding economic policy disagreements with lawmakers. He publicly clashed with certain legislative proposals, such as debates over rice and fuel tax adjustments.

Moving forward, Diokno presented graphs of the country’s quarterly GDP growth rates that showed it first sharply dropped to 4.3 percent in the second quarter of 2023. “It would seem that a year and a half into its non-extendible six-year term, the Marcos administration had decided to abandon its ‘North Star’ and launched instead the PIRMA’s People’s Initiative,” he recalled.

The PIRMA he alluded to stood for People’s Initiative for Reform, Modernization and Action. In Tagalog, pirma means a person’s signature. In the case of PIRMA, it denoted the signature-gathering campaign to push for amendments to our country’s 1987 Constitution. The people’s initiative is one of three modes of Charter change, a legal process that allows citizens to directly propose constitutional amendments.

Saved by the Supreme Court (SC) ruling, Diokno cited it junked as “defective” the signature-gathering done by the defunct 19th Congress headed then by PBBM’s first cousin, former speaker Martin Romualdez. Thus, the controversial people’s initiative “lost political support” of its leaders.

“But the damage has been done. Time and resources have been devoted to efforts to alter the Constitution for political gain,” Diokno charged. “Worse, the administration lost its credibility that it is truly committed to strong economic growth, reducing poverty and narrowing the country’s gap.”

On the other hand, Diokno explained his reference to “North Star,” the bright star called Polaris that aligns almost directly above the Earth’s North Pole. Because it stays fixed in the northern sky while other stars move, it has served as a vital tool for navigation. Thus, it is a symbol of constancy and a metaphor for a guiding purpose or core goal in life.

Diokno particularly pointed to the Medium-Term Fiscal Framework (MTFF) which he helped draw up with the first Marcos Cabinet economic team from day one of PBBM’s term. In a graph presentation, he pointed to the interest payments on our country’s debts that have been rising as a share of total revenues and moving far above the original MTFF targets.

This means interest payments are crowding out the so-called “fiscal space” that the DBM refers to as available revenues against expenditures. From DBM’s own estimates, Diokno fears this is projected to reach 21.4 percent against target of 13.4 percent by next year.

“This leaves fewer resources for priority spending and makes disciplined budget execution difficult,” he stressed. The numbers don’t look good in telling the true bad state of the nation’s economy. Like the garbage that caused flooding in our country, the fiscal wastes threaten to further bring down GDP growth.

Diokno though remains upbeat PBBM will still be able turn around the economy in his remaining term. But how? That will be answered in my next column on Monday.