Philippines Midterm Elections: A Political Crossroads with Global Implications
3min read The Philippines’ May 2025 midterm elections have transformed into a high-stakes showdown between two political dynasties—President Ferdinand Marcos Jr. and the Duterte family—whose rivalry is reshaping domestic policy, foreign relations, and investor sentiment. At the heart of this clash is control of the Senate, which will determine the political fate of Sara Duterte, the vice president and Rodrigo Duterte’s daughter, while also influencing the country’s stance toward China’s territorial ambitions. For investors, the outcome could redefine risks and opportunities in one of Asia’s fastest-growing economies.
A Senate Battle with Sovereignty on the Line
The Senate race is the electoral focal point, with 12 seats up for grabs. A Marcos-led coalition’s victory would secure a supermajority needed to impeach Sara Duterte, who faces charges of conspiracy to assassinate the president and misuse of public funds. Conversely, a Duterte-aligned Senate could block her removal, preserving the clan’s political clout ahead of the 2028 presidential race.
The geopolitical stakes are equally critical. Marcos has positioned himself as a nationalist defender of Philippine sovereignty in the South China Sea, contrasting with accusations from Duterte loyalists that he has compromised national interests to appease foreign powers. This tension is not just rhetorical: Marcos’s adherence to the 2016 Hague Arbitration ruling against China’s territorial claims contrasts with Rodrigo Duterte’s prior alignment with Beijing, which included a controversial “independent foreign policy” stance.
China’s Role: A Double-Edged Sword
The election’s outcome could sway the Philippines’ diplomatic balancing act with China. Marcos’s administration has walked a tightrope, maintaining economic ties through Belt and Road Initiative (BRI) projects while resisting Beijing’s territorial overreach. Sara Duterte has amplified nationalist rhetoric, accusing Marcos of “selling out” to foreign entities—a charge that resonates with voters weary of U.S.-China tensions.
The PSEi’s volatility reflects investor anxiety over political instability. Should Marcos’s camp secure Senate control, it could stabilize the policy environment, benefiting sectors like infrastructure and tech. Conversely, a Duterte resurgence might reignite uncertainty, particularly if Rodrigo Duterte’s ICC detention fuels perceptions of legal fragility.
Economic Crosscurrents
The Philippine economy, growing at 6.6% in 2024, faces headwinds from global inflation and U.S. trade policies. Investors are watching closely how the election’s outcome impacts governance stability and foreign investment flows. Sectors tied to China, such as infrastructure and energy, could see shifts depending on whether Marcos’s pro-sovereignty stance or Duterte’s “independent” diplomacy prevails.
Meanwhile, the Duterte family’s electoral gambit—Rodrigo Duterte’s mayoral run in Davao despite his ICC detention—adds a layer of unpredictability. A Duterte victory there, while symbolic, could galvanize his supporters, complicating legislative agendas.
The Bottom Line: Risks and Rewards
For investors, the midterm elections are a referendum on political stability and geopolitical risk. A Marcos Senate victory could:
- Boost confidence in governance, easing concerns over corruption and legal challenges.
- Strengthen ties with the U.S. and Indo-Pacific allies, attracting FDI in tech and defense sectors.
- Support infrastructure projects under the BRI, provided they align with national sovereignty priorities.
Conversely, a Duterte-friendly Senate might:
- Delay reforms, prolonging uncertainty over economic policies.
- Reignite territorial disputes, increasing geopolitical risks for energy and maritime sectors.
Historical parallels offer clues. In 2016, Duterte’s election spurred a brief equity rally, but his volatile policies later dampened growth. Marcos’s early reforms, such as digital economy initiatives, have shown promise, but his legacy hinges on Senate control.
Conclusion: A Pivotal Moment for Markets
The Philippines’ midterm elections are a litmus test for its political and economic trajectory. With the Senate in play, investors must weigh the risks of prolonged political feuds against the promise of a stable, reform-oriented government.
FDI data shows a steady rise to $11.5 billion in 2024, but this growth could stall if political instability resurfaces. A Marcos-led Senate might cement investor confidence, while a Duterte comeback could resurrect concerns over policy volatility.
For now, the markets are betting on stability. Marcos’s coalition holds a narrow lead in Senate polls, and the PSEi has climbed 8% since February—a sign of cautious optimism. Yet the election’s true impact will depend on whether Manila can navigate its political divide without derailing its economic momentum. In a region increasingly defined by geopolitical rivalry, the Philippines’ choice could set the tone for Southeast Asia’s next chapter.
