Mounting Political and Economic Crises Amid Intensifying Great-Power Rivalry

CenPEG Political Briefer October 2026

IN BRIEF

Political conflicts and economic challenges continue to deepen this month in the Philippines under the Marcos Jr. administration. There is, of course, the political intramurals between the competing ruling cliques of the Dutertes and the Marcoses. This continues to unfold amid the ever-worsening economic conditions and growing questions over government accountability. The impeachment trial of Vice President Sara Duterte took a significant turn when House prosecutors withdrew three of the four charges against her, leaving unexplained wealth as the remaining basis for her possible removal from office – much to the contention of critics.

Meanwhile, controversy over congressional amendments to the proposed 2027 national budget revived concerns about pork barrel politics, discretionary spending, and the use of public resources for political patronage.

The economic situation has been equally troubling. Sluggish growth, declining industrial and agricultural production, rising unemployment and underemployment, accelerating inflation, and unprecedented public debt have only underscored the structural weaknesses of the underdeveloped Philippine economy overly reliant on foreign direct investment, import-dependent and export-oriented trade. Millions of households continue to struggle with the rising cost of living, while farmers and fisherfolk faced mounting production costs and the threat of a severe El Niño.

Internationally, the administration pursued deeper economic and strategic integration with the United States through the Pax Silica initiative amid escalating tensions with China. The Philippines has sought to assert its regional leadership through ASEAN – and be a US conduit for the region. This has only underscored the Philippine foreign policy of tethering itself more to US interests amid an increasingly multipolar world.

Indeed, developments in October 2026 further expose the glaring weaknesses in the administration’s development agenda, as elite political intramurals and strategic external dependencies continue to shape the country's political and economic direction.

More of the Duterte impeachment trial and political struggles

The month saw a significant turn in the impeachment proceedings against Vice President Sara Duterte.

The House prosecution panel narrowed its case to a single charge of unexplained wealth, concluding the House prosecution’s presentation of evidence against Duterte, with forensic accounting expert Alexander Cabrera as its final witness. Cabrera testified that Duterte and her husband, lawyer Manases Carpio, had allegedly accumulated PhP817.87 million in undeclared assets and income from 2022 to 2025. Based on bank records, tax returns, corporate documents, and Statements of Assets, Liabilities, and Net Worth (SALNs), Cabrera identified discrepancies involving their cash holdings, properties, income, and business interests.

The prosecution concluded its presentation on October 12. The next day, lead prosecutor Rep. Gerville Luistro announced the withdrawal of three of the four impeachment articles: alleged misuse of confidential funds, bribery, and grave threats, including the alleged assassination plot against President Marcos Jr., his wife, and former House Speaker Martin Romualdez.

The Senate impeachment court accepted the withdrawal, leaving unexplained wealth as the sole remaining charge. The prosecution argued that the financial evidence was sufficient to secure Duterte's conviction without pursuing the other allegations, a move that would also dispense with the testimony of 32 additional witnesses. 

A conviction would result in her removal as vice president and disqualification from holding any public office under the Philippine government. This would effectively bar her from seeking the presidency in 2028. Under the 1987 Constitution, conviction requires the concurrence of at least two-thirds of the members of the Senate impeachment court. An impeachment conviction, however, does not exempt her from possible criminal prosecution and other legal proceedings arising from the allegations.

The decision raised questions about the conduct and fairness of the proceedings. Duterte's lawyers argued that the prosecution had already presented damaging allegations concerning the withdrawn charges during public hearings, while the defense could no longer take the opportunity to rebut them in the same proceedings.

Critics from the Makabayan Bloc have also expressed opposition to the withdrawal of the three impeachment articles, seeing it as a wasted opportunity to make high government officials like the Vice-President accountable for its obvious transgressions.The proceedings also drew public mobilization. Many progressive and mass organizations from Bagong Alyansang Makabayan (New Patriotic Alliance, BAYAN) held protest actions in front of the Senate, demanding Duterte's conviction. The demonstrators highlighted allegations of unexplained wealth and misuse of public funds and called on senator-judges to hold the Vice-President accountable.

Meanwhile, the 2027 national budget has shown that political patronage and pork barrel politics continue to be persistent under the Marcos Jr. administration. On October 12, the People's Budget Coalition (PBC) and the Roundtable for Inclusive Development criticized the House-approved General Appropriations Bill (House Bill No. 10858) for introducing more than PhP200 billion in budget changes without adequate transparency. The coalition noted that the amendments presented publicly on October 1 amounted to PhP116 billion, but the October 6 committee report reflected more than PhP200 billion in changes. Over PhP84 billion in additional amendments did not have an accompanying explanation.

The group identified PhP1.06 trillion in budget items vulnerable to political patronage and abuse, including PhP210 billion in assistance and discretionary funds, PhP695 billion in infrastructure, PhP43 billion for political offices, and PhP112 billion in unprogrammed appropriations.

It also questioned the addition of PhP83.5 billion to these red-flag allocations, particularly the expansion of programs such as the DSWD's Assistance to Individuals in Crisis Situations, DOH's Medical Assistance to Indigent and Financially Incapacitated Patients, and labor department’s Tulong Panghanapbuhay sa Ating Disadvantaged/Displaced Workers (TUPAD, or Emergency Employment Program for Disadvantaged/Displaced Workers).

These mechanisms, according to the PBC, risk making access to public services dependent on political patronage rather than transparent, rule-based entitlements.

The PBC and BetterGov.PH compared the House version of the 2027 budget with the National Expenditure Program (NEP), identifying 7,465 projects that were either absent from the original executive proposal or had their allocations adjusted. Their DPWH district-office analysis identified Ilocos Norte's first district (under presidential son and Rep. Sandro Marcos) as having the highest number of projects without matching NEP entries: 405 projects worth PhP4.37 billion.

Other heavily flagged offices included South Cotabato's second district, with 257 projects worth PhP1.64 billion, and Isabela's fourth district, with 147 projects worth PhP1.68 billion.

The coalition further reported that the House reduced funding for projects by approximately PhP130 billion, including major railway and flood-mitigation projects, despite existing loan commitments. It warned that delays could result in additional commitment fees and penalties. This has raised concerns that public funds are being redirected toward locally distributed infrastructure and discretionary allotments at the expense of long-term development programs and essential social services.

Meantime, the impeachment struggle and budget controversy reflect a broader crisis of political accountability. As the Marcos-Duterte rivalry intensifies ahead of 2028, competing political factions continue to wield influence over state institutions and public resources. 

The national economy deteriorates even further

The Philippine economy continued to deteriorate under the Marcos Jr. administration, marked by slowing economic growth, increasing inflation and unemployment and underemployment, and mounting public debt. The worsening situation reflects not merely external factors but also the government's failure to address the structural weaknesses of the domestic economy, particularly its dependence on imports, weak industrial and agricultural production, and lack of decent, secure employment with liveable wages.

Economic growth slowed to just 2.6% in the first half of 2026, following an already weak 4.4% expansion in 2025. This is far below the government's growth targets and represents the weakest first-half performance outside the pandemic period in recent years. The country's productive base has continued to shrink. Manufacturing accounted for only 17.3% of gross domestic product (GDP) in the first half of 2026, while agriculture, fisheries, and forestry contributed just 7.8%.

These, according to IBON Foundation, are among their lowest shares in Philippine economic history.

Meanwhile, services continued to dominate economic activity, accounting for approximately 56% of GDP. These figures highlight failures to develop strong domestic industrial and agricultural bases for productive employment and meeting the population's basic needs.

The workers’ situation has likewise deteriorated. August 2026 figures showed 2.8 million unemployed Filipinos, up by 736,000 from the previous year. This brings the unemployment rate to 5.3%. Underemployment, meanwhile, increased by 524,000 to 5.9 million, while the number of full-time workers declined by 2.9 million. Part-time employment increased by 2.1 million.

IBON estimates that around three-fourths of employed Filipinos are informal workers in insecure, low-paying, and poor-quality jobs. These figures indicate that even those counted as employed increasingly lack sufficient working hours and incomes to support their families.

The employment situation has worsened amid sharp increases in the prices of basic commodities. September 2026 saw inflation reach 7.2%, while inflation among the poorest 30% of households surged to 9%. This is the highest in three years. Food prices have been particularly hardest hit: rice inflation among the poorest households reached 23.6%, while vegetable and fish prices also had substantial increases.

The peso further depreciated to Php64.06 against the US dollar by October 29. This is the peso’s weakest level on record and adds to the cost of imported fuel, food, and other essential commodities. IBON estimates that the average nominal minimum wage of Php518 remains Php801 short of the Php1,319 family living wage needed to meet the basic requirements of a family of five.

IBON has criticized the Marcos administration for failing to use available government powers to intervene in oil price setting, impose price controls on basic necessities, and suspend or reduce petroleum taxes amid the continuing global oil price shock. Its assistance programs have reached only a fraction of affected households and provided amounts inadequate to offset rising costs.

Likewise, the group estimates that 21.4 million poor, low-income, and lower-middle-income families, comprising more than 96 million Filipinos, have been further marginalized by rising prices. Meanwhile, September 2026 Social Weather Stations figures showed that self-rated poverty has reached 55% of families, while involuntary hunger is at 22.6%.

This situation is particularly alarming for farmers and fisherfolk as the country braces for a severe Super El Niño. IBON described government assistance as largely performative, with one-time cash transfers and inadequate subsidies failing to address soaring production costs and mounting livelihood losses. The Php10-billion Presidential Assistance for Farmers and Fisherfolk, for instance, covered only around 40% of registered beneficiaries, providing a one-time Php2,325 per recipient. Fertilizer and fuel costs have risen sharply, while agricultural production has weakened. Crop production declined by 5% in the first half of 2026 compared with the same period last year, while fisheries production fell by 6.7%.

Rather than strengthening domestic agriculture through substantial production support, irrigation, and infrastructure, the administration continues to rely on stopgap measures and loans that risk deepening farmers' indebtedness.

The Philippines’ national government debt has reached Php19.66 trillion by September 2026. This is the highest in Philippine history, with the debt-to-GDP ratio rising to 66% by June. Gross borrowings under Marcos Jr. administration had reached Php10.9 trillion, while debt service amounted to Php8.18 trillion. The growing debt burden further constrains public resources that could otherwise be directed toward social services, agricultural development, and industrialization.

These developments expose the severe issues of the administration's economic agenda. It has presided over a weakening productive base, worsening employment conditions, declining purchasing power, and mounting indebtedness.

IBON's assessment points to the need for a fundamental shift away from stopgap dole-outs and dependence on imports and foreign capital toward genuine national industrialization, agricultural development, decent wages, and an economy oriented toward meeting the needs of the Filipino majority.

Deepening US strategic alignment, regional diplomacy, and worsening relations with China

The Marcos Jr. administration continued to deepen the Philippines' strategic alignment with the United States in October 2026, even as it sought to project the country as a regional leader through its 2026 ASEAN chairship. Developments surrounding the US-led Pax Silica initiative, the country's participation in multilateral economic meetings in Bangkok, Thailand, and the worsening diplomatic confrontation with China has underscored how the country has come far off from pursuing an independent foreign policy amid intensifying great-power competition, primarily between China and the US.

A major focus was Pax Silica, the US-led initiative on artificial intelligence, semiconductor production, critical minerals, and strategic supply chains, which the Philippines joined in April 2026. Its proposed flagship project is a 4,000-acre Economic Security Zone in New Clark City, Tarlac, under the broader Luzon Economic Corridor linking Subic, Clark, Manila, and Batangas.

The government has championed the initiative as an opportunity to attract foreign investment, develop high-technology industries, and integrate the country into global supply chains.

However, critics have pointed out that the Philippines’ participation in such an initiative would preclude any technology transfer that would benefit the countries in the long run. Furthermore, they have raised concerns about its implications for national sovereignty, environmental sustainability, and the rights of Indigenous peoples and farming communities whose claims overlap with the proposed development area.

Opposition to the initiative gained international visibility during the IMF-World Bank Annual Meetings in Bangkok on October 12–18. On October 14, Philippine and international organizations led by the International League of Peoples’ Struggle (ILPS) held the “Shut the Pax Down: Resistance and Solidarity Against Imperialist Plunder” workshop, bringing together groups opposed to what they described as the initiative's implications for US economic and strategic domination. The gathering sought to coordinate resistance ahead of the anticipated signing of a Pax Silica framework during US President Donald Trump's expected visit to Manila for the November ASEAN Summit.

In the Philippines, the Network Opposed to Pax Silica, composed of environmental advocates, Indigenous organizations, scientists, and other civil society groups, continued to challenge the project over ancestral land, displacement, and environmental concerns.

Meanwhile, the Philippine government also used its 2026 ASEAN chairship purportedly to advance regional economic and security cooperation. The administration emphasized mobilizing private capital and blended financing to address regional development needs and climate change.

Meanwhile, the Philippines hosted the 20th ASEAN Defence Ministers' Meeting and the 13th ADMM-Plus in Cebu on October 28-29, with maritime security, the South China Sea, disaster response, and regional defense cooperation among the issues discussed. This meeting happened in the context of the further deteriorating relationship between the Philippine government and Chinese diplomats in Manila.

There is, of course, the public exchange between Defense Secretary Gilberto Teodoro Jr. and Chinese Ambassador Jing Quan. After Teodoro described China as a regional “troublemaker” because of its actions in the South China Sea, Jing responded on October 15 that China could “easily win” if it resorted to force, although it preferred peace. Philippine Coast Guard spokesperson Rear Admiral Jay Tarriela called the statement a direct threat. The ambassador criticized Teodoro, Tarriela, and Filipino lawmakers for their public statements against China, urging the Marcos administration to help restrain what he called anti-China politicians and forces.

Several lawmakers joined in the grandstanding, which bordered on Sinophobia, with some calling for Jing to be declared persona non grata. Senators Erwin Tulfo and JV Ejercito pursued resolutions seeking the envoy's expulsion, although the authority to declare a foreign diplomat persona non grata rests with the executive branch.

Beijing accused Philippine politicians of aggravating bilateral tensions and warned against actions that could push relations toward confrontation. The tensions resurfaced at the October 28-29 ASEAN defense meetings, when China accused an unnamed Philippine politician of obstructing its participation.

These developments highlight the administration's expanding security and economic dependence on Washington while maintaining – albeit poorly so – its significant trade relations with Beijing and seeking regional diplomatic cooperation through ASEAN. As argued by CenPEG's political studies director, Bobby M. Tuazon in Home Alone: The Philippines in a Multipolar World, the country risks becoming a battleground for competing powers rather than an independent actor. The challenge remains to defend Philippine sovereignty and maritime rights without surrendering strategic autonomy or allowing the country to become further entangled in great-power rivalries.

To recap

These developments in October have shown the interconnected nature of the country's political, economic, and foreign-policy crises. The Marcos-Duterte confrontation and the controversy over the 2027 national budget reveal how political power and control over state resources remain concentrated among competing elite factions, while demands of genuine accountability and democratic governance are unaddressed. At the same time, the deteriorating economic situation exposes the failure of the administration to craft meaningful programs that can abate the adverse effects on ordinary Filipinos of the Iran war and the lingering oil crisis.

The administration's continued alignment with US strategic and economic initiatives, meanwhile, raises questions about the country's ability to chart an independent course amid intensifying great-power competition in a multipolar world. While asserting Philippine sovereignty and maritime rights remains important, this should not mean subordinating national interests to Washington's geopolitical and economic agenda. Nor should the pursuit of foreign investment and technological development come at the expense of national industrialization, environmental protection, and the rights of affected communities.

The country's multiple whammy cannot be resolved through elite political realignments, stopgap assistance, or deeper dependence on foreign powers. The people demand fundamental changes in the structures of political and economic power: genuine democratic accountability, national industrialization, agricultural development, economic sovereignty, and the protection of civil and political rights.

Building a political alternative rooted in the interests and aspirations of workers, farmers, and other marginalized sectors remains the most urgent task.#