Learning from history: Five points and a caution

The other day, we were one of the three panelists during the 6th General Membership Meeting of the Financial Executives Institute of the Philippines or Finex. The other two were Finance Assistant Secretary Neil Adrian S. Cabiles and Metrobank Chief Economist Nicholas Mapa, a former colleague at the Bangko Sentral ng Pilipinas’ Department of Economic Research. Their presentations focused on the economic and financial aspects of the theme “Philippine Economic Outlook: Policy Shifts and Market Reactions After the 2025 Elections.”

Mr. Cabiles was more than convincing in saying that the Philippine Government is moving heaven and earth to invite foreign investors to invest in the Philippines, get the infrastructure projects completed as scheduled, and ensure that business processes do not pose any obstacles to doing business in this country. Mr. Mapa sounded his well-crafted five calls in the Philippines, particularly on monetary policy, adaptation to the US tariff policy, and the direction of the Philippine peso — ingenious and to the point.

Let me share my brief presentation with some edits for publication.

My proposition is that the 2025 mid-term elections were not exactly a game-changing political event, whether in terms of policy shift or market reaction. We need to learn from history.

First, notwithstanding what appears to be a mild repudiation of the Marcos administration’s senatorial candidates, with two opposition candidates emerging in the top five, and some unknown but qualified candidates surpassing the votes obtained by some candidates of both the Administration and former President Rodrigo Duterte’s PDP Laban, the change in the Cabinet was far from a revamp. There was no cosmetic surgery done, there was only a slight tweak in the shade of the foundation and a little powdering on the surface. “Not business as usual” might be a misnomer.

Second, based on that, we don’t expect that there will be a critical rethink of economic policy moving forward. Economic management is to continue despite the fact that the Administration candidates suffered something of a rebuke in the polls because of issues on political governance and economic management. We recall that in the recent Pulse Asia survey, respondents rated economic issues like inflation, lack of jobs, poverty, and wages to be the most urgent national issues. One good affirmation of this survey was the result of another survey. The Stratbase-SWS reported in late April, a month before the May 2025 mid-term elections, that over 14 million Filipino families considered themselves poor. This is around 55% of all Filipino families. This is concerning, to say the least. To be sure, there have been improvements in these metrics but their pace is more glacial than urgent.

Third, we differ from the view that the arrest of former President Duterte was an important determinant in the final outcome of the senatorial elections. True, prior to the arrest, more Administration candidates dominated the top 12 slates in polls, but the final outcome showed only a handful of them kept their standing and more Duterte candidates made it to the winning circle. The fact that two opposition candidates finished the race with a very impressive No. 2 and No. 5 in part disproves such a proposition. Such an arrest was correct and in keeping with justice and a repudiation of the culture of impunity in this country. This was also long overdue. What would be earth-shaking would be the provisional release of the former president by reason of his advanced age. That could very well license every senior official of governments around the world to commit crimes against humanity.

Our own take is that troll farms managed to turn it around and shaped it into a rallying cry for justice, claiming the International Criminal Court (ICC) move with the Marcos administration’s cooperation, as being an assault to our independence and sovereignty. Troll farms were unrelenting in proclaiming — and some senators of the Republic chiming in ahead of the impeachment of Vice-President Sara Duterte — that the arrest was wrong. Obviously, some failed to discern between facts and fiction, fake news and real news. Duterte supporters virtually weaponized the ICC case to deflect close scrutiny of his policy on drugs and his administration’s corruption especially during the pandemic. If left unchecked, some social destabilization is bound to ensue, something that discourages, rather than inspires, business confidence.

Fourth, the impeachment of the vice-president could have been an excellent opportunity to demonstrate to the world that there is rule of law in the Philippines and that justice prevails. She has been accused of serious high crimes that justify impeachment. What is sad is that even President Ferdinand Marcos, Jr. seems to be vacillating. The President should remain neutral and allow the wheel of justice to roll, whoever would be on trial. Instead, if the President himself does not believe that Sara should be impeached, then there is a tacit admission that the Articles of Impeachment hold no water. Some people could be manipulated into believing that this could imply that the former President must also be innocent.

As proof, we have seen the proliferation of AI-generated videos shared by no less than a senator of the Republic showing students expressing dissent against the impeachment of Sara Duterte. What is most appalling is that the senator himself was quoted to have agreed with the message of the AI-produced videos. He himself sponsored on the Senate floor that the Articles of Impeachment submitted by the House of Representatives be dismissed. Yes, only in the Philippines can judges lawyer for the accused.

Contrary to what is being peddled that impeachment will not do any good to the people, and that impeachment is not something that the people can eat, justice, the rule of law, and good governance cannot likewise be eaten but they are the fundamental bedrock of our democracy. This is not exactly appealing to investors; what they are seeing is a soft republic driven by some vested interests.

Fifth, the results of the 2025 mid-term elections did not seem to hit the President strongly enough for him to make the necessary pivot to ensure policy review, economic reform, and political stability. Instead of a cabinet revamp, we had a tweak; instead of political decisiveness, we had political indecision.

But recently, the President himself admitted that he has been receiving false accomplishment reports on government projects. “These fools are taking me for a ride. That’s when you realize, these people aren’t reliable, so we need to find someone else,” the President was quoted as saying.

No wonder, the President announced that the entire government is on probation! That should call for an appropriate policy shift that should be announced in the State of the Nation address this July.

The last three years should mark a difference in investor confidence in the medium-term and long-term prospects of the Philippine economy. No more “business as usual.”

What we have today is economic growth that is considered decent enough to be one of the fastest in the world. But actually, given the enormous economic scarring of the pandemic starting in 2020, and the considerable, serious incidence of poverty and income inequality in the Philippines, we should be growing beyond the official target of 6-6.5%. But what is this that we hear, that the Development Budget Coordination Committee is about to review the macroeconomic assumptions of the National Government for a possible downward adjustment in the growth targets?

Thus, investors see a mixed picture.

As the ASEAN Briefing recently emphasized, we may have a fundamentally strong economy, but we are also faced with political headwinds and structural challenges. We need stronger leadership in the economy, one that adheres to the tenets of good governance and eschews corruption such that it pays to do business here. We badly need fiscal consolidation to avoid a large fiscal deficit and overreliance on public debt. Introducing technology-driven innovation in all economic sectors could minimize productivity drag and achieve higher economic efficiency and growth. Such structural transformation could ensure durable, low, and stable inflation while the financial system continues to be supportive of economic growth. If they see that infrastructure is being enhanced for greater connectivity, that public health and education are being upgraded for a highly skilled human capital, and that social services are being expanded, investors can see their profitable future in the Philippines.

Otherwise, if investors fail to see this critical mass of economic changes happening, we will continue to remain just at the threshold of economic progress and prosperity as in the last few decades, our dream of breaking out of the lower middle-income trap would remain in our deep sleep.

Finally, it pays to be reminded of a quote from Otto Von Bismarck who said that: “What we learn from history is that no one learns from history.” This is existential because as George Santayana also warned us, “Those who do not learn from history are doomed to repeat it.”