Economic Problems Under the Marcos Administration

Economic Problems Under the Marcos Administration

The Marcos family and their supporters have continuously insisted that the administration of former president Ferdinand Marcos that lasted for 21 years drove the Philippine economy to its golden years. There is some level of truth to this claim. However, data from the government and institutions, and analyses from economists and scholars have also revealed the economic problems that emerged and persisted during the Marcos administration.

As a backgrounder, Marcos implemented economic strategies centered on the principle of rapid growth and modernization through loans and economic control. There were gains under these strategies. However, they also brought forth economic problems.

The Debt Crisis Due to Debt Mismanagement

The costs of managing the Philippines during the administration of Marcos were enormous. Aside from its extensive economic development programs and projects, it spent heavily on expanding the military capabilities of the country. To finance these costs, the government borrowed from international lenders such as countries, transnational commercial banks, and multilateral organizations.

Data from the World Bank revealed that from USD 4.1 billion in 1975, the external debt of the country doubled to USD 8.2 billion in 1977 and ballooned further USD 24.4 billion in 1982.

Economists Robert S. Dohner and Ponciano S. Intal, Jr. noted that the country had a reputation for prudent economic management. The Marcos administration had responsibly managed its financial obligations during the 1970s. The country had one of the best debt reporting and control systems of any least-developed countries or LDCs. However, at the onset of the 1980s, it resorted increasingly to short-term borrowing.

Marcos was essentially borrowing too much too quickly. Both economists mentioned that problems in the global economy that include higher oil and reduced commodity price, higher world real interest rates, and recession in developed countries contributed to the economic woes of the Philippines under the Marcos administration, just like how these events affected other LDC borrowers.

However, Dohner and Intal highlighted the fact that the country suffered economically not because of the unfavorable events in the global economy but because it developed an unsustainable borrowing momentum. The external shocks merely accelerated its economic downturn.

Low Exports Stemming from Poor Productivity

The external debt to export ratio of the Philippines stood at more than 200 percent from 1978 to 1991, and peaking in 1985 according to the World Bank data. This ratio is a debt burden indicator. What this means is that the debt of the country had grown faster than its basic source of external income, thus creating repayment problems in the future. In addition, it also means that the country was not producing enough goods and services for exports.

Low volume of exports was definitely another economic problem under the Marcos administration. Dohner and Intal mentioned that exports initially grew at a rate of 13 percent annually from 1974 to 1980. However, they explained that during the 1970s, the product composition of Philippine exports transformed from primary commodities or slightly processed commodities to labor-intensive manufactured products. Manufacturing these products required a substantial volume of imports as inputs.

Coupled with the massive infrastructure projects, the capital goods imports of the Philippines were high under the Marcos administration, thus resulting in a trade deficit that hovered around 5 percent of GNP despite the rapid growth of export earnings.

Exports eventually declined due to the problems in the manufacturing sector, as well as the local and global economy. Dohner and Intal noted that the country suffered from the terms of trade deterioration and a slowdown in global market demands. In addition, because producing exports also depended on oil imports, an increase in the price of oil in the global market during the 1973 Oil Price Shock severely affected the ability of the country to manufacture.

There was also another reason behind the decline in productivity and thus, low exports: crony capitalism. Dohner and Intal, as well as JC Punong Bayan and Kevin Mandrilla, noted that the business landscape during the Marcos administration had become weak, uncompetitive, and unfavorable not only due to external events but also because of internal problems.

In their article, Punongbayan and Mandrilla explained that crony capitalism during the Marcos administration discouraged free market competition by favoring the interests of the cronies, thus discouraging other business organizations and stagnating the manufacturing sector. Essentially, as explained further by Dohner and Intal, businesses became less willing to invest and expand in the Philippines and instead move their resources outside the country.

Mismanagement of Crony Enterprises and Corruption

The debt crisis and low exports of the Philippines during the presidency of Marcos also signify the problems with managing the crony enterprises. Remember that the former president built a group of cronies to reduce the influence of traditional Filipino business and political elites, thus enabling him to control the political and economic affairs of the country.

Scholar and educator Ricardo Manapat, in his book “Some are Smarter than the Others: The History of Marcos’ Crony Capitalism,” mentioned that many of the pursuits undertaken by the cronies did not produce economic value because of corruption and their lack of business acumen. Some of these undertakings were not needed at that time while others did not address the real needs of the society.

Furthermore, the crony enterprises borrowed heavily either directly from government-owned financial institutions or the private market using their association with Marcos. Dohner and Intal said that the changing financial atmosphere of the 1980s made them vulnerable. Note that there was a financial scandal in 1981 in which a crony fled the country bringing with him debts amounting to PhP 700 million.

When 80 of these enterprises collapsed due to their failure to pay their loans and outright mismanagement, Marcos bailed them out using massive emergency loans from the Central Bank and other government-owned financial institutions, thus compounding the economic problems of the Philippines further.

Manapat also mentioned that the height of the power of the Marcos cronies during the 1970s saw the rise of capital flight linked to corruptions. Funds obtained by the government through foreign loans were directed to crony enterprises and channeled further in overseas bank accounts in the U.S., Switzerland, and the Netherlands, among others. The Marcos family had said to stash away enormous money amounting to USD 10 billion.

Other Economic Problems Under the Marcos Administration

Data from the World Bank, the Philippine Statistics Authority, and Banko Central ng Pilipinas, and compiled and presented in the separate articles of Punongbayan, and Edson Joseph Guido and Che de los Reyes revealed specific macroeconomic indicators.

Underemployment peaked at 33 percent in 1984. Peso plummeted from PhP 3.92 to PhP 6.02 against the USD from 1969 to 1970 and plummeted further to PhP 16.70 in 1984. By the end of the Marcos administration, the Philippine Peso fell to PhP 18.61 to the USD.

The GDP during the 21-year reign of Marcos marked record peaks and lows. Right after the declaration of martial law in 1972, the country experienced high GDP growth that reached nearly 9 percent in 1973 and 1976. However, the country also experienced a 7.3 percent contraction in 1984 and 1985. The average GDP growth during the entire Marcos administration was only at 3.8 percent.

Inflation rate was also at the double-digit range. The inflation rate in 1971 was 21.4 percent, and it jumped to 34.2 percent in 1974. By 1984, the country experienced the highest inflation rate at 50.3 percent. Depletion on foreign currency reserves due to massive government spending and imports that exceed exports devalued the peso and increased the prices of goods and services.

The real wage rate for unskilled workers also went down from 86.02 in 1966 to 23.21 in 1985 and in the same period covered, the real wage rate for skilled workers plummeted from 112.9 to 35.55.

Punongbayan explained that the disappointing macroeconomic indicators during the Marcos administration earned the Philippines the title as the “Sick Man of Asia” and prevented the country from becoming part of the “East Asian Miracle.” Note that by the time the country regained its income levels in 1982, other Southeast Asian countries such as Indonesia, Thailand, and Malaysia had grown their incomes by 2 to 4 times already.

A paper by economists Jeffrey G. Williamson and Emmanuel de Dios explained further that the country lost two decades of economic development due to the economic problems under the Marcos administration. Although the country had increased its GDP per capita nearly three times from 1960 to 2016, Indonesia had 6-fold increase, Thailand had a 10-fold increase, and Malaysia had an 8-fold increase in their GDP per capita during the same period covered.


  • De Dios, E. and Williamson, J. G. 2014. “Has The Philippines Forever Lost its Chance at Industrialization?” Philippine Review of Economics, 51(2), pp. 47-66
  • Dohner, R. S. and Intal, P. Jr. 1989. “Introduction to the Marcos Legacy: Economic Policy and Foreign Debt in the Philippines.” In eds. J. D. Sachs and S. M. Collins, Developing Country Debt and Economic Performance, Volume 3: Country Studies—Indonesia, Korea, Philippines, Turkey. University of Chicago Press. ISBN: 0-226-30455-8
  • E. J. Guido and C. De Los Reyes. 2017, September 21. “The Best of Times? Data Debunk Marcos’s Economic Golden Years. ABS-CBN. Available online
  • Manapat, R. 1991. Some are Smarter than Others: The History of Marcos’ Crony Capitalism. 1st ed. Aletheia Publications. ISBN: 978-9719128700
  • Punongbayan, JC. 2018, September 21. “Analysis: Golden Age? Inflation Reached 50% During the Marcos Regime.” Rappler. Available online
  • Punongbayan, JC and Mandrilla, K. 2016, March 5. “Marcos Years Marked ‘Golden Age’ of PH Economy? Look at the Data. Rapper. Available online
  • World Bank. 2016. “World Development Indicators.” Mentioned in E. J. Guido and C. De Los Reyes, “The Best of Times? Data Debunk Marcos’s Economic Golden Years. ABS-CBN.
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