Binding constraints: Corruption and limited fiscal space

PRESIDENT Ferdinand R. Marcos, Jr. has entered the second half of his term with many promises to fulfill, but constrained by dwindling political capital, as shown by the administration's performance in the 2025 midterm elections.

- By Pia Rodrigo and Filomeno S. Sta. Ana III

Although a recent OCTA survey (May 2025) said that President Marcos' satisfaction rating is a high 68.1%, this does not translate into sufficient political capital. The political capital is necessary to pass difficult legislative reforms. For instance, a Senate that is mainly opposition, regardless of political color, will constrain the administration's legislative agenda.

Further, the high satisfaction rating stands on shaky ground. Populist measures like the P20-per-kilo rice and different kinds of ayuda, make the masses happy. But this populism is fiscally unsustainable.

Nonetheless, if the President would like to leave a good legacy, he could use his high satisfaction rating to overcome the present major obstacles, introduce the durable reforms, and enable longer-term growth. His satisfaction rating should give him confidence that bold reforms can be done in the last three years of his term.

Thus, despite facing a few controversies, including the 2025 budget which was tagged by civil society as the most corrupt budget in Philippine history, President Marcos can still rectify the situation, move beyond business as usual, and adopt decisive reforms.

The administration must contend with what the World Bank describes as “weak Philippine growth until 2027.” The administration in truth has failed to meet its original growth targets. To save face, it has annually revised the targets downwards.

PROCESS OF IDENTIFYING BINDING CONSTRAINTS

As a first step, the Marcos administration needs to identify the binding constraints to private investments and growth. From there, determine the appropriate policy interventions. To undertake this, the growth diagnostics approach, popularized by Ricardo Hausmann, Dani Rodrik, and Andrés Velasco, is useful.