[In This Economy] When corruption drowns growth: The PH economy in 2025

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It’s that time of the year again when we take stock of what happened to the Philippine economy. We started 2025 quite weak, and sad to say, we’re ending it even weaker.

I blame the economic “malaise” that now grips the country. This stems from the explosive scandal concerning corrupted public works that started in President Ferdinand Marcos Jr.’s State of the Nation Address (SONA). He started an anti-corruption campaign that enjoyed no credibility at the outset. Now, his failure to take quick and decisive action has shaken trust in his governance in particular, and our economy and institutions in general.

Before we dwell on this, let’s look at some other economic highlights this year.

Trump’s tariffs

After that pivotal day, April 2, the world wasn’t quite the same.

US President Donald Trump announced sweeping tariffs (import taxes) on almost all places in the world — bizarrely, including islands inhabited only by penguins. Originally, Trump wanted to impose a 17% tariff or tax on all goods the Philippines exports to the US. Other countries in the region managed to haggle for lower tariffs. But somehow, many months later, the administration of President Ferdinand Marcos Jr. managed to negotiate an even higher tariff rate of 19%.

As expected, Marcos’ economic team tried to downplay the Trump tariffs. Thankfully, the effects are not (yet) as bad as I had originally anticipated — partly because we got some exemptions including our biggest export (semiconductors). But rumors continue to swirl that Trump wants to put a 100% tariff on semiconductors — a move that will kill off or at least badly hurt our semiconductor industry. Apart from this, Trump wants to “reshore” call centers to the US and has already recategorized nursing as no longer a profession.

In 2026, then, Trump’s protectionist push might end up hurting two key dollar earners for the Philippines: business process outsourcing (BPO) and overseas Filipino workers (OFWs). Expect more trouble ahead if Trump’s worst and basest protectionist policies are not checked by the US public.

Flop Cabinet revamps

Months in the run-up to national elections, economic growth tends to pick up. But in 2025 we saw the weakest pre-election growth rate of our country in two decades. 

Shortly after the dust settled in the May polls, President Marcos ordered all Cabinet officials to tender their courtesy resignation — to signal perhaps a change in governance in the second half of Marcos’ term. But this had a minimal impact, and Marcos’ popularity continued to dip anyway.

The real Cabinet shake-up occurred in mid-November. Budget Secretary Amenah Pangandaman stepped down and Lucas Bersamin stepped down, too, as executive secretary. This happened days after former lawmaker Zaldy Co released videos implicating the two top officials in the flood control corruption scandal. On the same day, Finance Secretary Ralph Recto became the new executive secretary, and was replaced by a presidential adviser and former businessman, Frederick Go.

This shake-up, meant to signal clean up government, looks instead like they want to clean up their tracks. Pangandaman was key in the huge insertions in the past three national budgets, while Recto ordered a cash sweep of PhilHealth and the Philippine Deposit Insurance Corporation. Until now, P167 billion of funds taken from these agencies have not been returned. In the meantime, the cash sweep compromised the insurance of Filipinos’ health and bank deposits.

All in all, two of Marcos’ economic managers have mangled the public coffers and exposed them to needless risks. This speaks to economic mismanagement of the highest degree.

Flood control scandal

This brings us to the highlight of this year, when President Marcos made a show of railing against corrupt lawmakers who inserted pork barrel-like projects in the 2025 General Appropriations Act. 

Marcos famously said in July, “Mahiya naman kayo!” (Shame on you!) This new anti-corruption drive (uncharacteristically sparked by a Marcos) is almost convincing — except that there are many internal logical inconsistencies and hypocrisies that, until now, puzzle observers and critics.

First and foremost, why open a Pandora’s box? A Marcos crusading against corruption is like an arsonist heading the fire brigade. The elephant in the room is that, as I argued years back, no Marcos can claim to be anti-corruption to begin with. 

Marcos expresses disgust at the jets and helicopters of the corrupt lawmakers and nepo-babies, goes after the unpaid taxes of flood control actors, and demands a lifestyle check on all of them. But he himself continues to evade paying hundreds of billions of estate tax liabilities and the ill-gotten wealth of his family from Martial Law (1972–1986). 

By the way, historical records show that flood control projects were corrupted even during the time of his father, Ferdinand E. Marcos, many decades ago.

Bringing it closer to the present, Marcos can’t feign ignorance about the flood control anomalies. Heck, he’s ultimately responsible for the corrupted budgets since 2023, being the one who signs the budget law at the end of the day. 

He also raised no concerns about the budget insertions until Chiz Escudero, former Senate president, blocked the impeachment trial of Vice President Sara Duterte earlier this year. Escudero’s links to corrupt contractors are now out in the open, and so are the links of many others. But Marcos implicitly tolerated all of that for years. There’s no way he’s learning about massive corruption just this year. Besides, he should be familiar with how corruption works.

Succumbing to public pressure, Marcos created the Independent Commission for Infrastructure or ICI. But on December 4, one of the members, former public works secretary Rogelio “Babes” Singson, resigned. This all but kills off the credibility of the ICI, and signals that Marcos’ anti-corruption campaign is dying a quick death in 2025.

Even slower growth

Corruption in the Philippines is endemic, and the private sector tolerates corruption to some extent if only to get by. But the sheer scale of corruption exposed this year, because of Marcos’ “exposé,” has prompted the private sector to speak out. 

They’re now quite vocal against corruption, and this reflects just how much trust in the economy has been shaken. The stock market index is down (after years of moving “sideways”), the peso is down against the dollar (because of an outflow of hot money), and foreign direct investments are down by 22% from last year.

Most damning of all is that economic growth dipped to a measly 4% in the third quarter of 2025 — the lowest rate since 2011 barring the pandemic. No one among the forecasters anticipated growth to be this low. In an analysis of official government data, I showed that this is largely because of a drop in public construction. This led me to think: what part of growth in the past 10 years was due to corruption? Is corruption driving growth in the Philippines, so much so that there’s no way to stop corruption without harming growth-inducing public works?

What now?

In the next few days we’ll get to see whether Congress successfully cleansed the 2026 budget of pork projects. I doubt it. Yes, they may successfully reduce flood control corruption, because of all the attention on it. But as I keep saying, flood control is only a small part of the corruption in public works (most of which goes to roads and bridges). 

I expect politicians to reduce unprogrammed funds, the new vehicle for discretionary pork spending that lawmakers discovered and relied on in the past few years. But just like before, pork will find a way. It always does.

I also think that President Marcos will just ride it out till 2028, and make more performative but futile efforts against corruption. In the meantime, will our economy survive the malaise? While politicians are playing politics, key economic reforms are being sidelined. We’re not doing nearly enough to fix basic problems like the education crisis, stunting among children, debt management, MUP pensions, ease of doing business, and the like.

Despite all the political turmoil this year, we’re in no danger of full-blown economic collapse, like what happened in the 1980s. But I’m worried about the Philippines’ development trajectory. This year, we missed being an upper-middle income country by $26 of gross national income per capita. Vietnam missed it by just $6. Vietnam is obviously doing something right, and we ought to be learning from them.

Absent key and urgent reforms, especially in the last 2.5 years of the Marcos administration, expect the Philippines to embarrassingly lag behind.

Despite this dark prognosis, hope springs eternal. Let’s still hope for the best next year. – Rappler.com

JC Punongbayan, PhD is an assistant professor at the UP School of Economics and the author of False Nostalgia: The Marcos “Golden Age” Myths and How to Debunk Them. In 2024, he received The Outstanding Young Men (TOYM) Award for economics. Follow him on Instagram (@jcpunongbayan).