Pressure builds on Marcos from Philippine corruption scandal

Rising anger in the Philippines over a huge corruption scandal has forced out two ministers from President Ferdinand Marcos Jr.’s cabinet, testing his administration’s efforts to restore public trust and investor confidence.

The revamp underscores Marcos’s determination to press ahead with his corruption crackdown, even as allegations touch his own allies. It also reflects growing pressure on the president from the graft claims linked to flood-mitigation projects in one of the world’s most typhoon-prone countries.

Whether it’s enough to arrest deteriorating sentiment is unclear. The unfolding scandal, which Marcos first exposed in July, caused economic growth to slump in the third quarter and has weakened both the peso and stocks. The cabinet reshuffle adds a new layer of uncertainty, analysts say, and could put Philippine assets under renewed pressure.

Markets were largely steady on Tuesday, with the peso off 0.1% at 58.98 to the dollar at 10:55 a.m. in Manila, and the main stock index up 0.2%. Still, the Philippines’ benchmark stock index has fallen 11% this year, bucking gains across the region, with the MSCI Asia Pacific Index up 23%. Manila is the world’s third worst performing stock market this year, according to data compiled by Bloomberg.

“The resignation of two cabinet officials may help defuse the situation because the budget controversy happened under their watch but it will not dissolve public anger and frustration,” said Bob Herrera-Lim, managing director of risk consultancy Teneo. The crisis will likely persist through early next year and the outcome hinges on whether those involved in graft will be held to account regardless of their links to Marcos, he said.

Executive Secretary Lucas Bersamin and Budget Secretary Amenah Pangandaman resigned on Monday, “after their departments were mentioned in allegations related to the flood control anomaly” and “to allow the administration to address the matter appropriately,” Presidential Communications Office Undersecretary Claire Castro said.

Finance Secretary Ralph Recto will replace Bersamin and Budget Undersecretary Rolando Toledo will step up to become officer in charge for the budget department, filling Pangandaman’s shoes. Marcos has tapped Frederick Go, currently special assistant to the president for investment and economic affairs, as the nation’s new finance chief, replacing Recto.

Bersamin denied any involvement in the graft allegations on flood-control projects when his name was mentioned at a Senate inquiry in September. Pangandaman last week rejected claims by a former lawmaker implicating her in 100 billion pesos ($1.7 billion) of project spending that Marcos had allegedly ordered to be included in the 2025 budget.

After Marcos accepted her resignation, Pangandaman said she believes it’s “the most honorable path to allow our nation to move forward with clarity and unity.”

Ex-Congressman Zaldy Co, who’s also at the center of some of the allegations himself, has meanwhile accused Marcos of receiving 25 billion pesos in kickbacks, a claim the president’s office has labeled “propaganda.”

Economists said the overhaul underscores elevated political risk in the Philippines.

Pantheon Macroeconomics’ Miguel Chanco noted the anti-corruption drive continues to unsettle markets and that fiscal consolidation had already fallen behind schedule under Recto’s watch. Robeco’s Asia sovereign strategist, Philip McNicholas, said the negative market reaction reflects uncertainty over replacements, though he added that Marcos’s push to investigate graft could ultimately be viewed as a governance positive.

It’s the second major reshuffle in Marcos’s cabinet since he took office in 2022. He made changes to his economic team in January last year when he named Recto as finance head. In May, he asked his entire cabinet to resign to “recalibrate” his administration after an underwhelming performance by his allies in the Senate election. But he ended up keeping his economic team, only replacing his foreign affairs secretary.

The scandal has implicated many lawmakers, officials and contractors, all of whom have denied wrongdoing. The list included Marcos’s cousin, Congressman Martin Romualdez, who quit as speaker of the House of Representatives in September.

The latest revamp shows Marcos is acknowledging that the “center of governance needed re-anchoring,” said Ederson Tapia, a professor of public administration at the University of the Philippines. Making Recto the executive secretary places a “stabilizing force” at the presidential palace as he “understands both policy logic and political temperature,” Tapia said. Go, as finance chief, “signals a pivot toward managerial discipline and tighter economic stewardship at a moment when public confidence is visibly frayed,” he added.

The cabinet changes were announced on day two of a rally by an influential church group that drew some 600,000 people. The sea of protesters, many wearing white shirts printed with Transparency for a Better Democracy, converged at the historic Rizal Park in Manila, with thousands having camped out after Sunday’s gathering, where 650,000 people joined.

On Monday, Vice President Sara Duterte said Marcos is facing a “crisis of confidence, especially in the way these corruption investigations are being handled, which appear to lack both direction and resolve.”

At the church rally, Senator Imee Marcos, a staunch Duterte supporter, accused his brother and his family of being drug users. Castro, the president’s press officer, said Imee’s accusation has no basis and questioned her motive. A separate, smaller rally organized by a group led by retired military officers and known supporters of the Duterte family saw protesters carrying tarpaulins with “Marcos Resign Now” emblazoned on them.

The religious group, Iglesia ni Cristo, widely known for voting as a bloc during elections, supported the Marcos-Duterte tandem but ties between the two politicians have collapsed over policy differences. Iglesia ni Cristo cut short a planned three-day rally that was supposed to conclude Tuesday, according to police.

Companies in the Philippines have also started to weigh in with six representative groups pressing action.

“We urge public institutions to ensure policy stability, uphold the rule of law and address corruption quickly and decisively,” groups including the Management Association of the Philippines and the Philippine Chamber of Commerce and Industry said.

____

(With assistance from Neil Jerome Morales.)