THE PHILIPPINE ECONOMY IN MARCOS  BUILD UP OF ECONOMIC CONTROL

YEARS “behest loans”

“technocrats”
FERDINAND MARCOS
“cronies”
 First term (1965–1969)  OMNIBUS TAX LAW OF 1969
 Second term (1969–1972) Placing tax reform in its legislative agenda. As a
 Martial Law (1972–1981) result, by the end of the 1960s, 70 to 75% of the
 Third term (1981–1986) country’s tax revenues were being derived only
 The New Filipinism from indirect taxes.
 The New Filipino  DEFICIT SPENDING AND FOREIGN
LOANS
 The Tiger of Asia
The government’s spending deficit in the first
 The Golden Age
Marcos administration from 1965 to 1969 was
BACKGROUND: ECONOMY OF THE 70% higher than that of the Macapagal
PHILIPPINES BEFORE 1965 administration from 1961 to 1965

Before Marcos first became President in 1965, INFLATION RATE (21.4%)

the Philippines was already the second largest economy SECOND TERM
in Asia, behind only Japan at a time when the entirety of 1969-1972
Asia was still recovering from the ravages of World War The second term of the presidency of
II. Ferdinand Marcos began in 1969. The social
The Philippine economy before Marcos was impact of the 1969–1970 balance of payments
characterized by growing industrial production in sectors crisis quickly led to social unrest – so much so
including textiles, clothing, metalwork, machinery and that Marcos went from winning the elections by
petroleum products. a landslide in November 1969 to dodging
effigies by protesters just two months later, in
INFLATION RATE (6.3 5%) January 1970. Despite the crisis, the
administration continued its strategy of using
foreign loans to funded industrialization
projects, encouraged by low interest rates in
international capital markets. Philippine external
debt was at $4.1 billion in 1975, but doubled to
$8.2 billion in only two years.
 SOCIAL UNREST
 BUILDUP TO MARTIAL LAW
 PETRODOLLAR-LOAN FUELED
SPENDING
INFLATION RATE (34.2%)
UNDER MARTIAL LAW
Notice the high inflation rates recorded in the 1972-1981
1970s and 1980s, during the time of then-president
Ferdinand Marcos. The earlier ones were fueled by Marcos declared martial law in September 1972,
various factors like the devaluation of the peso, massive and because he packaged it as a way of introducing
government spending, skyrocketing world oil prices, and stability in light of the social unrest that had been
a series of typhoons. going on since the 1970 balance of payments crisis,
the business community mostly supported the move
INFLATION RATE at first. The economy continued to grow because of
FIRST TERM an international boom in the demand for key
1966-1969 Philippine export commodities, especially sugar and
Marcos had quantified his promise of coconut. Corruption contributed to significant capital
“performance” as “Rice ,Roads, and School buildings,” flight, and even Marcos’ immediate family were
and he used loans to fulfill those promises. Loans mostly accused of participating in the plunder of the
funded the construction of 1,201 km new asphalt roads Philippine economy, with some estimates placing
where the more fiscally conservative Macapagal their “unexplained wealth” at US$10 Billion.
administration had only managed to build 70; 2,124 km
of gravel roads were built where the Macapagal  CRONY CAPITALISM, CORRUPTION,
government had managed only 118; and 15,831 lineal AND CAPITAL FLIGHT
meters of bridges where Macapagal had only built 651.  GLOBAL COMMODITIES BOOM AND
This loan-driven spending also allowed Marcos to DEBT-DRIVEN GDP GROWTH
construct 38, 705 permanent school buildings and 58,745  1973 AND 1979 OIL CRISIS
prefabricated school buildings in his first three years,
while the Macapagal administration had only managed
to build 400 classrooms in its four years.
 nation in Asia, Africa and Latin America in absolute
ECONOMIC NOSEDIVE AND MARCOS OUSTER terms.
1981-1986
-INFLATION RATE (50.3%)

GROSS DOMESTIC PRODUCT (3.4%)

1970-1980 GROWTH RATE OF GDP PER CAPITA
The GDP of the Philippines rose during the
Martial Law rising from P55 million to P19.3 billion in
about 8 years. This growth was spurted by massive
lending from commercial banks, accounting for about
62% of the external debt. However, despite the
aggressive borrowing and spending policies, the
Philippines lagged behind its Southeast Asia
counterparts in GDP growth. This lag, which became
very apparent at the end of the Marcos regime, can be
attributed to the failures of economic management that
was brought upon by State-run monopolies, mismanaged
exchanged rates, imprudent monetary policy and debt
management all underpinned by rampant corruption and
cronyism.

MAIN DEVELOPMENT STRATEGIES

THREE CENTRAL PILLARS:

1. GREEN REVOLUTION
2. EXPORT AGRICULTURE AND
FORESTRY
3. FOREIGN BORROWING

GREEN REVOLUTION
Rice, the foundations of the Philippines
economy, is the country’s single most important crop
and the staple food for much of the population.
New Rice Technology: Three Essential Elements
“High-yielding” or “modern” rice varieties originated at
the IRRI.
Chemical fertilizers, to which these varieties are highly
responsive.
Water control, notably irrigation in the Philippine
setting.
In 1973, the martial law regime merged all
coconut-related government operations within a single
agency, the Philippine Coconut Authority (PCA). The
government created the Coconut Industry Development
Fund (CIDF) to finance the development of a hybrid
coconut tree.

EXPORT AGRICULTURE AND FORESTRY

FOREIGN BORROWING: THE DEBT-F0R-

DEVELOPMENT STRATEGY
The foreign borrowing was a key element in
Philippine development strategy during the Marcos era.
The primary rationale was “borrowed money, improving
the well-being of present and future generations of
Filipinos.
Between 1962 1986, the external debt grew from
$355 million to $28.3 billion. By the end of the Marcos
years, the Philippines was the “ninth most indebted