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Conduct individual research on the Philippine economic situation in the 1980s, focusing on the debt crisis, inflation, and unemployment. Compare the economic conditions during Martial Law and after 1986.

After your research, write a short essay (1–2 paragraphs) explaining how political instability affects monetary policy and why trust is important in maintaining a stable economy.

Post your work on Padlet, and you may customize your post by adding relevant pictures, charts, or other visuals to support your answers.

Please answer using your own knowledge and understanding; don't use any AI Tools.

THANK YOU, GRADE 9- MABOLO AND YAKAL!

-Teacher Shaina

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Martial law saw massive debt-funded spending which eventually collapsed into a severe economic crisis. The post-1986 era prioritized economic and market reforms to stabilize the nation. Political instability weakened monetary policy by increasing financial risks and devaluing the philippine peso. Ultimately, economic stability requires trust to prevent people from moving their money abroad and to ensure protected property rights.

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The economic situation in the 1980s was caused by large external debt which built up during the time of Marcos. This resulted in effects such as

The debt crisis - Which followed heavy borrowing in the 1970s to fund projects, Which ultimately led to the debt crisis which started in the early 1980s

inflation - Reaching levels as high as 50% in 1984 because of the currency, economic mismanagement etc.

unemployment - The economy plummeted resulting in a slow economy during the mid 1980s which hindered manufacturing leading to wide unemployment

Political instability makes things harder to manage for the monetary policy. If our politics are careless with the money of our country then it will be far more difficult to manage the supply of money. At the same time if our government isn't responsible with our money in instances such as borrowing and spending then that makes it harder for the monetary policy to make their goal of price stability and low inflation come to life. If the government keeps the situation of instability so rampant all the time then they are forming obstacles for the monetary policy to deal with.

On the contrary if we have trust worthy and responsible politics who cooperate with the needs of the monetary policy we can see the betterment and economic uprise our country needs. Instead of spending and borrowing money carelessly a trust worthy politic knows how to wisely manage the countries money. which is why a government we can trust in is important for maintaining a stable economy. The President who has multitudes of power has the ability to make or break the economy. By using their power and status for good they can contribute to an outstanding economic uprise, While by using their power for personal gain they risk the danger of leaving their country in shackles of poverty and burdens

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Political instability has a huge effect on monetary policy as it weakens confidence among national and international investors in every market. During the 1980's of the Philippines, government leadership and political righteousness were questioned about their true motive and service for the country. Not only that abrupt policy shifting cause the soaring of inflation and cheapen currency values, which makes it harder for the central banks to keep stability. Fiscal pressure from high debt servicing forced a downturn of the monetary measures, such as high interest rates, which worsened the economic activity and unemployment. Under all of these shocks, discouraged businesses, such as investments, distorted the functioning of markets, and showed how fragile confidence in the government can disrupt basic economic tools.

Now we have trust, which is very crucial in keeping a stable economy, because it ensures that civilians and businesses have confidence in the value of money and in the government's commitment. When this trust is destroyed, it may be corruption, political turmoil, or abrupt leadership changes. No matter what happens, the economy should be trustworthy to gain, invest, or buy goods & services to grow the economy and development of the country.

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The economic conditions in the Philippines during the period of Martial Law in the Philippines under Ferdinand Marcos (1972–1981, but lasted longer and was extended up to 1986). In the early years, the economy was experiencing moderate growth, and large projects such as roads, bridges, and cultural centers that were built. But by the late 1970s and early 1980s, rising foreign debt, corruption, and global economic shocks led to severe economic decline. Inflation increased, unemployment worsened, and poverty deepened. By the time of the 1983 political crisis, following the assassination of Benigno Aquino Jr., investor confidence had collapsed, the peso weakened significantly, and the country faced a debt crisis.

After the 1986 People Power Revolution which brought Corazon Aquino to power, the economy began a slow recovery despite continued political challenges such as coup attempts. After that, Democratic institutions were restored, and economic reforms were introduced to stabilize inflation, restructure debt, and rebuild investor confidence. Political instability directly affects monetary policy because uncertainty can cause investors to withdraw capital, weaken the currency, and force central banks to raise interest rates to control inflation or defend the currency.

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During 1890 Ferdinand Marcos was president and caused the Philippines to gain massive foreign debts. This caused the GDP in 1984 - 1985 to become negative. Then they had the EDSA People Power Revolution in 1986, kicking Ferdinand Marcos out of presidency. After 1986 they the Philippines started to rebuild their economy.

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During the reign of Martial Law in the Philippines, foreign debt and inflation rose to its peak in 1984. Government expenditure on infrastructure soared our external debt almost a hundred times more a year later. Unemployment surged as wages and currency value severely declined. This led to a critical economic collapse in the early 1980s. Following the People Power Revolution, the Aquino administration managed to restabilize the economic growth and stock market despite the structural challenges and natural disasters.

Political instability often makes inflation targets difficult to manage. This drives the currency value and credibility of banks to lessen. Moreover, it hinders banks to transmit the effective policy, resulting to short-term, substandard solutions. Meanwhile, trust is named the hidden tool of a stable economy because it guarantees long-term transactions and smoother exchanges. Addtionally, this improves efficiency and motivates innovation.

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The Philippine economy in the 1980s faced a severe debt crisis, high inflation, and rising unemployment, especially toward the latter part of the decade. During the Martial Law period under President Ferdinand Marcos, the government borrowed heavily from foreign lenders, increasing the country’s external debt from around US$2.3 billion in 1970 to over US$26 billion by 1985. Much of this was used to finance government projects and sustain economic growth, but it resulted in a debt-servicing crisis when global interest rates rose and export revenues fell. Inflation spiked to around 50 percent in 1984, causing prices of basic goods to soar, and unemployment increased, with underemployment affecting a large portion of the workforce. These economic pressures contributed to recession and declining living standards before the 1986 People Power Revolution.

After 1986, the government faced the daunting task of stabilizing the economy amid lingering debt burdens and restoring investor confidence. Political instability during the final years of Martial Law weakened trust in the economy, leading to capital flight and reduced investment. Monetary policy became challenging because high debt levels limited the government’s ability to stimulate growth without risking inflation. Confidence from citizens and international investors helps maintain stable prices, encourages investment, and supports economic growth. When people trust that a government can manage its money responsibly and maintain political stability, inflation is more likely to stay low and unemployment down, helping the economy recover from crises like that of the 1980s.

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During Martial Law, the Philippines underwent rapid growth at first due to the heavy government spending and large foreign loans used for infrastructure projects. But this was not sustainable since corruption and political favoritism took place while foreign debts increased significantly. The situation became worse after the assassination of Benigno Aquino Jr which led to political instability, loss of investor confidence, and a severe economic crisis. After 1986, Corazon Aquino focused on restoring democracy, rebuilding investors trust and restructuring the country's debt. Even though recovery was slow at first the economy gradually stabilized in the 1990s.

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The economic performance of the Philippines during the Martial Law era (1972–1986) is the perfect example of how political instability and poor governance can undermine sound monetary policy and economic growth. For perspective, during the era after ww2, the Philippines was arguably more developed than most other countries in Southeast Asia at the time, however, under Ferdinand Marcos, the government pursued aggressive borrowing to fund large infrastructure projects and maintain political control. As a result, foreign debt soared from roughly $2.3 billion in 1970 to over $26 billion by the mid‑1980s, creating a growing debt servicing burden that diverted resources from productive investment. Persistent inflation eroded purchasing power, with annual rates frequently spiking above 50% in 1984 before the economy collapsed into recession by the mid‑1980s, this largely reduced any confidence most foreign investors had in the Philippines and pushed the perception of the Philippines as a high‑risk environment contributing to a currency crisis. The exchange rate went from around ₱3.9 per US dollar in 1965 to over ₱19 per US dollar by 1985.

So in esence, political stability is a very important component to a prosperous nation/state since political instability is the fastest way to speedrun running your country into the ground, an example of which is Russia during the 1990s, Zimbabwe after hthe ZANU-PF won and Venezuela right now, where prolonged political and institutional crises are linked to ongoing hyperinflation, rapid currency depreciation, and external isolation that damage economic prospects.

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In the era of Martial Law, the economy was on a downfall. Our country started to face more problems, such as higher debts, inflation, and higher rate of unemployment. As our country borrows more money, there is more debt that also occurs, further increasing the rate of inflation and leading to more factories closing down leaving more unemployment. Political instability plays a role in the downfall of our country's finance and economy. As corruption spreads throughout the country, there is less trust in our economy, meaning less investors, Then the EDSA revolution came, resulting to a more stabilized and trustworthy country.

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Monetary policies are important, necessary parts of handling a country's economy; therefore, they must be handled very carefully by the people concerned with making the decisions behind them. Political instability can affect how those people make the decisions, and what they communicate to others about it, due to the conflict and rash decisions that define political instability.

A great example of this is how Philippine debt grew so quickly when Marcos declared Martial Law - the power that came with it allowed Ferdinand Marcos to borrow plenty of money, specifically "petro-dollars" (excess money that oil-producing countries at the time needed to lend out) which were particularly easy to borrow. This money did in fact spark economic growth early in Martial Law. But since the way the money was used did not yield much return, it led the Philippine economy to suffer greatly and accumulate incredible amounts of debt in the later years of martial law; which brought plenty of problems to the economy on top of that.

(see image 2 if you want a graph)

Trust allowing a country to borrow money is very important - practically every country borrows money, but how they handle it is much more important. If a country has plenty of trust, in their own government and economy and with other countries, they can grow very well, spend the borrowed money properly, and show to other countries that this country and its economy is good with handling loans and money - things necessary with maintaining a stable economy.

Additionally, trust in a government can hold it together tightly, even in conflict, and allow it to make decisions that would be impossible to make without confidence in each other. On top of that, having the trust of foreign countries can also attract foreign investors to do things in an economy, further sparking economic growth.

Just like how a group project turns out good when all the members have chemistry with each other, and trust each other to do things, having trust economically can help an economy to grow and to stabilize.

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Martial law created many negative impacts especially in our reputation as a progressive country. One great problem that our country faced during this time was the debt crisis. According to the Martial Law Museum, our external debt grew from 2.3 billion dollars to 28 billion. This was caused by the heavy borrowing of money for infrastructures and military equipment. This also made the Philippines one of the most heavily indebted countries in Asia. Another problem that the country had to face was inflation. During that time, the inflation rates increased to 50% in 1984. This was considered one of the highest rates in Philippine history at that time; but Martial Law did not only affect the economy, it also affected society. Many people were unemployed during this time which caused negative effects such as higher rates in poverty. Agricultural businesses such as the Sugar Industry in Negros Occidental experience bankruptcies for the hacienderos and job losses for the farmers.

Although the economic conditions of both Martial Law and 1986(Post-Marcos Period) were severe, they both differed based on the different problems the government was facing. During Martial Law, they faced the initial problems of the country. During 1986, they experienced the consequences of these conflicts while trying to recover from Martial Law.

An unstable government can create severe problems in our economy. They affect monetary policy through the large debt caused by corruption. This creates a dishonest environment especially to the politicians who organize the funds for government projects.

Maintaining a stable economy requires trust because it avoids doubt between the government, businesses and the citizens and instead gives them the confidence to spend and manage money in the economy. This creates a better outcome that can improve the economic growth of our country.

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In the 1980s, the Philippines faced serious economic problems. During Martial Law, the government borrowed heavily from other countries, which led to a debt crisis. Prices of goods increased, and many people lost their jobs or couldn’t find any. After 1968, although the government had changed, the economy still struggled because had a lard debt and many people lacked confidence in the government’s ability to fix the problems.

Political instability makes it difficult for a country to maintain a stable economy. Frequent changes in leadership and a lack of public trust can weaken the central bank’s ability to manage money and control inflation,while businesses may hesitate to invest. Trust is essential because when people and investors believe the government can manage the economy responsibly, prices stay more stable, businesses invest, and the economy can grow. Without trust, economic problems get worse and people suffer more.

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After the 1986 People Power Revolution, the new government inherited this fragile economy and had to balance honoring past debts with efforts to stabilize prices and rebuild confidence. Political instability in the early post-1986 years, including coup attempts and social unrest, made it harder to implement consistent monetary policy. Central banks rely on stable expectations to manage inflation, interest rates, and the money supply. When political unpredictability undermines trust, investors and the public may demand higher risk premiums, push assets offshore, and weaken the currency, all of which make it harder to control inflation and unemployment. Trust in institutions, transparent governance, and predictable policy help anchor people’s expectations about prices and investments. Without that trust, confidence erodes, monetary policy becomes less effective, and the economy is more vulnerable to shocks.

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Political instability profoundly affects Monetary Policy and economic trust. When a government is unstable, investors, consumers, and international partners lose confidence in its ability to manage the economy, currency depreciation, and reluctance to invest.

During Martial Law

Heavy foreign borrowing

Infrastructure development, but backed by debt

Declining trust after political unrest

Inflation

After Martial Law

inherited foreign debt

Focus on restructuring and restoring credibility

In the Philippines’ 1980s crisis, political turmoil under Martial Law and the assassination of political opposition figures undermined confidence, worsened capital outflows, and limited the central bank’s ability to control inflation and support growth. This erodes trust in institutions and in the value of money making it harder to stabilize prices or attract long-term investment. Stable economies rely on trust in policy predictability, in the rule of law, and in transparent governance because confidence encourages spending, saving prudently, investment, and cooperation with monetary authorities. When that trust breaks down, inflation spikes, unemployment rises, and debt becomes a political and economic burden rather than a tool for development.

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In the 1980s, the Philippines faced a serious economic crisis. During the rule of Ferdinand Marcos under Martial Law, the country borrowed a lot of money from other countries. This led to a big debt crisis when the government could no longer pay easily. Prices of goods went up fast (inflation), and many people lost jobs (unemployment increased). After 1986, when Corazon Aquino became president, the economy was still weak, but the government slowly worked to fix the debt, control inflation, and rebuild trust with investors.

Political instability makes it hard for a country to manage its money because people and investors feel unsure about the future. When there is no trust in the government, people may avoid spending or investing, which slows down the economy. Trust is important because it helpskeep prices stable, encourages businesses to grow, and makes people feel confident about saving and spending money.