RULING OLIGARCHIES IN INFIGHTING, ECONOMY IN NEAR COLLAPSE, U.S. DEFENSE ALLIANCE IS CENTRAL TO MARCOS FOREIGN POLICY

Prof. Bobby M. Tuazon*

CenPEG's Director for Policy Studies

July 31, 2026

Less than two years away from the next presidential race, the Philippines is wracked by political infighting with an impeachment charge against Vice President Sara Duterte. Amid the Middle East armed conflicts, oil prices have gone over the edge arising partly from the country’s inability to produce oil let alone alternative energy. Known for his friendly ties with the US, President Marcos Jr. strengthened security alliances with the US and other countries including India – a member of the China-led BRICS. Maritime tensions between the Philippines and China have heightened with Marcos Jr. summoning the Chinese envoy to the presidential office in protest.

PHILIPPINE POLITICS

The historic impeachment of Vice President Sara Duterte dominated Philippine politics in July 2026. Other highlights were the widespread fallout from a massive flood control corruption scandal, and political maneuvering ahead of President Ferdinand Marcos Jr.’s fifth State of the Nation Address (SONA).

The upper congressional chamber – the 24-member Senate - convened as an impeachment court, resuming the high-profile impeachment trial of the vice president. The key allegations are death threats made against President Marcos Jr., his family as well as former House Speaker Martin Romualdez. Other charges were the multi-million peso embezzlement of taxpayer funds, receiving kickbacks from anomalous government contracts, and unexplained wealth.

Leading the prosecution in the lower House was Batangas Representative Gerville Luistro, supported by key members including Iloilo Reps Lorenz Defensor and Manila’s Joel Chua.

As expected, the House debates centered around the prosecution's push to subpoena Duterte's bank accounts, tax files, and Anti-Money Laundering Council (AMLC) records.

Melvin Matibag, director of the National Bureau of Investigation (NBI), testified regarding the alleged grave threats, noting the agency did not issue a direct subpoena to Duterte due to her historical pattern of ignoring House and executive summons.

Fallout from flood control corruption

The political front has also been fractured over a large-scale P8.8 trillion corruption scheme in flood control infrastructure projects. The scandal forced the resignation of House Speaker Martin Romualdez (the President’s cousin).

The administrative and criminal complaints filed against high-ranking officials have caused public trust in President Marcos Jr. to drop to a record low of 34%, based on Social Weather Stations (SWS) polls. Conversely, VP Duterte's trust rating stood at 57%.

Build-up to the 2026 SONA

Political tension mounted as the country prepared for President Marcos Jr.'s penultimate SONA on July 27. Ahead of Marcos Jr.’s speech national democratic coalitions like the Bagong Alyansang Makabayan (Bayan or New Patriotic Alliance) and various religious leaders have organized a "People's SONA" and street protests to condemn the administration's reliance on pork-barrel spending and its failure to tackle structural poverty.

While the political elite battle in courts, public discontent is driven by severe economic strains. For instance, most of 52 priority bills identified by the Legislative Executive Development Advisory Council (LEDAC) remain stalled at the committee level, including the Progressive Budgeting for Better Governance Act and amendments to the Anti-Money Laundering Act.

Too, 59% of citizens view inflation and food prices as their primary concern, followed closely by government graft, according to the latest Pulse Asia survey. The Marcos administration attributed the inflation to global oil price hikes owing to Middle East armed conflicts, but this allegation is overshadowed by the government’s heavy dependence on oil imports where prices are jacked up each day and its failure to produce oil amid available local resources.

NATIONAL ECONOMY: OLIGOPOLY

Truth be told, a small group of major market players dominates the downstream oil market in the Philippines led by Petron, Shell, and Chevron (Caltex). The system is made possible by the Downstream Oil Industry Deregulation Act of 1998 allowing any qualified person or entity to import, refine, and market petroleum products freely. The market functions as an oligopoly dominated by the "Big Three" (Petron, Shell, Chevron) alongside large independent players like Phoenix Petroleum and Unioil.

Meantime, the pivotal economic issues in Philippine politics centered on a severe macroeconomic slowdown, surging geopolitical trade penalties, and a historic currency crash that have completely dominated the national conversation ahead of Marcos Jr.’s SONA.

Business groups and political think tanks are actively demanding that the administration pivot from political infighting to aggressive economic execution to combat these compounding crises.

Downgraded growth targets & international headwinds

Government’s Development Budget Coordination Committee has slashed the year’s growth outlook from 5%–6% down to 3.5%–4.5% after a weak 2.8% Q1 performance. Citing delayed investments and high commodity prices, the International Monetary Fund (IMF) cut down its growth forecast to 3.9%, while the Asian Development Bank (ADB) downgraded its projection to 3.8%, making the Philippines one of the worst-performing major economies in Southeast Asia for the year.

New US tariff shock

This month, Washington slapped an additional 12.5% tariff on Philippine exports under President Donald Trump’s protectionist trade agenda and MAGA (Make America Great Again). The surprise attack prompted the Marcos administration to deploy a negotiation team to appeal the penalty. No results have been reported so far.

Trump’s act exposed the Marcos administration’s poor eyesight – definitely due to the president’s blind belief in everything the US says.

Marcos allies applauded reports from the Leechiu Property Consultants that the country technically achieved “upper middle-income status” in July. Low-income groups who continue to tighten their belts, say otherwise. The underlying reasons include insufficient wage hikes despite an ₱85 daily minimum wage increase in Metro Manila. Labor groups have protested, pointing out that 7.41 million underemployed Filipinos cannot keep up with the soaring cost of living.

Even influential business groups such as the Cebu Chamber of Commerce and Industry and the Management Association of the Philippines (MAP) reacted strongly denouncing "politicized project selection" and institutional gridlocks. Despite government assurances that the public works and highways will throw corruption through the roof, the department remains trapped by flood control budget mismanagement and corruption – like dusting the dirt underneath the carpet.

Driven by revenue leakages and import dependencies, the national debt ballooned to ₱18.55 trillion, sparking congressional debates over automatic debt servicing crowding out crucial social protection.

Marcos’ balancing strategy?

President Marcos Jr. managed foreign relations by seeking a diplomatic reset with China while heavily reinforcing alliances with the United States, India, and regional partners during Association of Southeast Asian (Asean) ministerial events in the Philippines Marcos Jr. hosted. (China’s team was led by Foreign Minister Wang Yi.)

In the first instance, the Philippine president on July 21 summoned Chinese Ambassador Jing Quan following a confrontation at Ayungin Shoal where Chinese Coast Guard personnel reportedly injured Filipino naval servicemen. Expressing his consternation over the incident, Marcos called for a "reset" in bilateral ties to prevent future confrontations.

As expected, however, the Philippine president showed friendly interaction with the US by deepening security ties. Meeting Trump’s state secretary Marcos Rubio in Manila, both governments agreed to expand cooperation in defense and artificial intelligence.

Known for being a “player,” Marcos maintained friendly ties with China as the leading trade partner under his country’s continuing policy of exporting agricultural products and minerals in exchange for valuable imports. The Philippines also has economic relations with, aside from the US, Japan, South Korea, and other neighboring countries. The country’s weak economy churns out a perennial trade deficit.

The Philippines has run a chronic annual trade deficit for decades since the 1970s. Key drivers include heavy reliance on imported raw materials and fuel, growing capital goods demand for infrastructure, and a narrow manufacturing/export base. #

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A retired professor at the University of the Philippines, Tuazon is CenPEG’s Director for Policy Studies and vice-chairman of the think tank. He co-authored 13 books and is the sole author of a recent book, “Spies, Clan Politics, and A New World Order.”