It is always tempting when writing outlooks for 2025 to have an overarching theme — the one narrative ring to rule them all. I am taking the opposite direction, which is that we may be neglecting some risks or opportunities that will manifest next year with only limited immediate effect, but which could play out in the coming years.
WATCH THE SWS DATAThe headlines are focused on the congressional efforts to pin down Vice-President Sara Duterte, for reasons ranging from her intemperate outbursts to her office’s spending of its slush funds. Whether Sara’s threats against the president violate the guardrails of democracy or whether her office’s use of confidential funds were illegal and improper are valid questions, but to be credible, the pursuit of answers by congress must have some broader institutional reform effect, and not be a pure political takedown both in perception and reality. She may be fair political game to the administration’s allies, but the line between valid prosecution and perceived persecution of a political opponent is a thin one and could backfire down the road.
Allies of former president Benigno Aquino III used the same strategy allegations to taint the family of his vice-president. This, together with the buoyant economy in the latter half of Aquino’s term, seem to lay the proper groundwork for his nominated successor. The data all seemed to work for the Aquino administration: growth was high, inflation was under control, people were buying motorcycles and cars. But voters cast these aside and focused on the one thing that drew them to the candidacy of then Davao City mayor Rodrigo Duterte: his promise to keep people safe. Purposely or inadvertently, his campaign blindsided the administration with an appeal to a then seemingly unaddressed issue: the growing anxiety of the public over law and order.
After Duterte had won, I always asked the question: was his victory ever in the data? And one publicly and easily available but underappreciated data set clearly revealed an issue that would eventually work against the Aquino administration – the perception of rising crime.
The Social Weather Stations (SWS) is largely underappreciated by our country, whether by policymakers or corporates. This was of course hindsight. But in looking for data that could have correlated with Duterte’s emergence, SWS’ regular surveys on crime victimization stood out. From 2015-2016, it showed a significant number, near doubling, of Filipinos saying that they or a member of their family had been victimized by criminals the past six months.
The Marcos administration should take a closer look at the current SWS numbers because while they are off their highs, the recent trends of both actual victimization and fears of neighborhood crime are also rising. Both SWS (of Mahar Mangahas) and Pulse Asia (of Ronnie Holmes) have been the most reliable sources of social and political trends in the two decades that I have been analyzing political risk — and they are under-supported and their data under-analyzed.
THE DEEP RABBIT HOLE OF GEOPOLITICSGeopolitics will affect our world significantly, especially the tilt against globalization. The trade tensions between China and the US will likely reshape where goods are produced, while the rise of nativist politics could limit immigration. Both could have long-term effects on inflation in the Philippines and, in the case of immigration, our families.
Should trade tensions between China and the US persist, the production efficiencies that kept inflation low the past two decades by concentrating global supply chains in a few countries — which was primarily China — may no longer work, and the Marcos administration may eventually have to deal with structurally higher inflation for manufactured goods later in its term.
In the recent US presidential election, public discomfort (to put it mildly) over rising prices was a key component of voters’ decisions against the incumbent. The Philippines — and much of Southeast Asia — did not experience the severity of the inflation spike in Europe and the US for various reasons but like the rest of the world we may have to deal with structurally worse inflation than the past two decades. Inflation is not only painful for the pocket when at the store or market; recent research shows that it also increases the stress of workers in the workplace. The desire to find ways to keep their incomes at pace with rising prices increases the antagonism between workers and their employers when they ask for wage increases or attempt to organize. It may also cause them to look for new jobs, with the attendant uncertainty that the process brings. These are disruptive and stressful, which Joao Guerreiro, Jonathon Hazell, Chen Lian, and Christina Patterson describe as the “conflict cost” of inflation in a recent paper. Thus, inflation’s political effects cannot and should not be underestimated, especially if more analyses become available that the pain from additional inflation above a certain reference point trumps higher economic growth, also above a certain reference point.
The administration may have to send the Bangko Sentral ng Pilipinas (BSP) a nicer Christmas gift this year (within the limits of ethical behavior, of course). The BSP has been pragmatic but consistent in the need to keep inflation expectations anchored. Its policies and research on managing future inflation risks in the context of uncertainty about how global value chains are being reshaped will be key not only for investors and banks, but ultimately in our ability to effectively manage inflation for the benefit of the common Filipino.
Of course, there are other variables to consider that make this more of a medium-term concern, such as increased oil production causing fuel prices to drop or the possibility of Chinese goods being dumped into Southeast Asia, which might bring down prices. However, the latter has the unintended effect of possibly resulting in new trade barriers as governments attempt to protect their domestic industries, as the Thai and Indonesian discussions on limiting cross-border e-commerce show.
The second issue is with migration. There has been a gradual but noticeable swing towards the tightening of policies for workers and students, even in countries that were once seen as welcoming of skilled labor. The change may not be immediately noticeable for Filipinos. After all, our countrymen who go abroad work in sectors where they are needed and where labor conditions will remain tight such as healthcare, and they may therefore still be exempted from tightening of migration rules. But there is one risk that they face, which is that family-based migration — i.e., a Philippine worker being able to bring in their spouses and children at the outset or petitioning that they be eventually allowed to join them in their new country — could become much more difficult.
It might lead to families being separated for longer, at immense cost to their well-being. We pride ourselves on being a Christian country that values family, but our economic survival and growth over the past two decades has depended on large parts of our population moving abroad and being separated for months, if not years. We tout OFWs as heroes, but their families are the ones paying the price. OFWs are undoubtedly able to better provide economically for those they leave behind, but the studies of the potentially disruptive social effects of decades of migration are few and far between.
Economically, tighter rules on family-based migration might cause workers to remit more of their earnings to the Philippines, which works well for our domestic economy. But it could also make them more reluctant to go abroad, which could in the long run increase domestic political pressures as the escape valve of being able to leave the country shrinks.
This has its own uncertainties: as fewer people are able to leave and become more frustrated with domestic governance, do they become more vulnerable to populists or to mobilize to create real political pressure to improve the outlook for the country? Given the difficulty of organizing politically in the country, the former seems to be the more realistic outcome.
Bob Herrera-Lim is a managing director at Teneo, a New York-based consulting firm that advises companies and investors globally. He covers all of Southeast Asia for the firm’s clients. He is also a fellow of the Foundation for Economic Freedom.