philippine economy before and now essay brainly

The Philippine economy under the pandemic: From Asian tiger to sick man again?

Subscribe to the center for asia policy studies bulletin, ronald u. mendoza ronald u. mendoza dean and professor, ateneo school of government - ateneo de manila university @profrum.

August 2, 2021

In 2019, the Philippines was one of the fastest growing economies in the world. It finally shed its “sick man of Asia” reputation obtained during the economic collapse towards the end of the Ferdinand Marcos regime in the mid-1980s. After decades of painstaking reform — not to mention paying back debts incurred under the dictatorship — the country’s economic renaissance took root in the decade prior to the pandemic. Posting over 6 percent average annual growth between 2010 and 2019 (computed from the Philippine Statistics Authority data on GDP growth rates at constant 2018 prices), the Philippines was touted as the next Asian tiger economy .

That was prior to COVID-19.

The rude awakening from the pandemic was that a services- and remittances-led growth model doesn’t do too well in a global disease outbreak. The Philippines’ economic growth faltered in 2020 — entering negative territory for the first time since 1999 — and the country experienced one of the deepest contractions in the Association of Southeast Asian Nations (ASEAN) that year (Figure 1).

Figure 1: GDP growth for selected ASEAN countries

And while the government forecasts a slight rebound in 2021, some analysts are concerned over an uncertain and weak recovery, due to the country’s protracted lockdown and inability to shift to a more efficient containment strategy. The Philippines has relied instead on draconian mobility restrictions across large sections of the country’s key cities and growth hubs every time a COVID-19 surge threatens to overwhelm the country’s health system.

What went wrong?

How does one of the fastest growing economies in Asia falter? It would be too simplistic to blame this all on the pandemic.

First, the Philippines’ economic model itself appears more vulnerable to disease outbreak. It is built around the mobility of people, yet tourism, services, and remittances-fed growth are all vulnerable to pandemic-induced lockdowns and consumer confidence decline. International travel plunged, tourism came to a grinding halt, and domestic lockdowns and mobility restrictions crippled the retail sector, restaurants, and hospitality industry. Fortunately, the country’s business process outsourcing (BPO) sector is demonstrating some resilience — yet its main markets have been hit heavily by the pandemic, forcing the sector to rapidly upskill and adjust to emerging opportunities under the new normal.

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Second, pandemic handling was also problematic. Lockdown is useful if it buys a country time to strengthen health systems and test-trace-treat systems. These are the building blocks of more efficient containment of the disease. However, if a country fails to strengthen these systems, then it squanders the time that lockdown affords it. This seems to be the case for the Philippines, which made global headlines for implementing one of the world’s longest lockdowns during the pandemic, yet failed to flatten its COVID-19 curve.

At the time of writing, the Philippines is again headed for another hard lockdown and it is still trying to graduate to a more efficient containment strategy amidst rising concerns over the delta variant which has spread across Southeast Asia . It seems stuck with on-again, off-again lockdowns, which are severely damaging to the economy, and will likely create negative expectations for future COVID-19 surges (Figure 2).

Figure 2 clarifies how the Philippine government resorted to stricter lockdowns to temper each surge in COVID-19 in the country so far.

Figure 2: Community quarantine regimes during the COVID-19 pandemic, Philippine National Capital Region (NCR ), March 2020 to June 2021

If the delta variant and other possible variants are near-term threats, then the lack of efficient containment can be expected to force the country back to draconian mobility restrictions as a last resort. Meanwhile, only two months of social transfers ( ayuda ) were provided by the central government during 16 months of lockdown by mid-2021. All this puts more pressure on an already weary population reeling from deep recession, job displacement, and long-term risks on human development . Low social transfers support in the midst of joblessness and rising hunger is also likely to weaken compliance with mobility restriction policies.

Third, the Philippines suffered from delays in its vaccination rollout which was initially hobbled by implementation and supply issues, and later affected by lingering vaccine hesitancy . These are all likely to delay recovery in the Philippines.

By now there are many clear lessons both from the Philippine experience and from emerging international best practices. In order to mount a more successful economic recovery, the Philippines must address the following key policy issues:

• Build a more efficient containment strategy particularly against the threat of possible new variants principally by strengthening the test-trace-treat system. Based on lessons from other countries, test-trace-treat systems usually also involve comprehensive mass-testing strategies to better inform both the public and private sectors on the true state of infections among the population. In addition, integrated mobility databases (not fragmented city-based ones) also capacitate more effective and timely tracing. This kind of detailed and timely data allows for government and the private sector to better coordinate on nuanced containment strategies that target areas and communities that need help due to outbreak risk. And unlike a generalized lockdown, this targeted and data-informed strategy could allow other parts of the economy to remain more open than otherwise.
• Strengthen the sufficiency and transparency of direct social protection in order to give immediate relief to poor and low-income households already severely impacted by the mishandling of the pandemic. This requires a rebalancing of the budget in favor of education, health, and social protection spending, in lieu of an over-emphasis on build-build-build infrastructure projects. This is also an opportunity to enhance the social protection system to create a safety net and concurrent database that covers not just the poor but also the vulnerable low- and lower-middle- income population. The chief concern here would be to introduce social protection innovations that prevent middle income Filipinos from sliding into poverty during a pandemic or other crisis.
• Ramp-up vaccination to cover at least 70 percent of the population as soon as possible, and enlist the further support of the private sector and civil society in order to keep improving vaccine rollout. An effective communications campaign needs to be launched to counteract vaccine hesitancy, building on trustworthy institutions (like academia, the Catholic Church, civil society and certain private sector partners) in order to better protect the population against the threat of delta or another variant affecting the Philippines. It will also help if parts of government could stop the politically-motivated fearmongering on vaccines, as had occurred with the dengue fever vaccine, Dengvaxia, which continues to sow doubts and fears among parts of the population .
• Create a build-back-better strategy anchored on universal and inclusive healthcare. Among other things, such a strategy should a) acknowledge the critically important role of the private sector and civil society in pandemic response and healthcare sector cooperation, and b) underpin pandemic response around lasting investments in institutions and technology that enhance contact tracing (e-platforms), testing (labs), and universal healthcare with lower out-of-pocket costs and higher inclusivity. The latter requires a more inclusive, well-funded, and better-governed health insurance system.

As much of ASEAN reels from the spread of the delta variant, it is critical that the Philippines takes these steps to help allay concerns over the country’s preparedness to handle new variants emerging, while also recalibrating expectations in favor of resuscitating its economy. Only then can the Philippines avoid becoming the sick man of Asia again, and return to the rapid and steady growth of the pre-pandemic decade.

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Adrien Chorn provided editing assistance on this piece. The author thanks Jurel Yap and Kier J. Ballar for their research assistance. All views expressed herein are the author’s and do not necessarily reflect the views and policies of his institution.

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Philippine economic development, looking backwards and forward: an interpretative essay.

Over the past decade, the Philippine development story has attracted international attention as it transformed from being the “Sick Man of Asia” to “Asia’s Rising Tiger”. However, the country’s strong growth momentum was abruptly interrupted by the COVID-19 pandemic, which continues to cast a huge shadow over its development outlook. With the country now at the crossroads, this paper reflects on and draws lessons for economic development and policy by examining the country’s three main economic episodes over the post-independence era: (a) the period of moderately strong growth from 1946 to the late 1970s, (b) the tumultuous crisis years from the late 1970s to the early 1990s, and (c) the period from the early 1990s to the 2019 when it rejoined the dynamic East Asian mainstream. Through comparative analysis, the paper also seeks to understand the country’s development dynamics and political economy. We conclude by highlighting elements of a recovery and reform agenda in the post-pandemic era.

Key Words: Philippines, economic development, economic history, political economy, institutions, COVID-19, ASEAN, comparative analysis

JEL codes: E02, I0, N15, O10, O43, O53, P52

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The World Bank in the Philippines

Domestic growth is strong in the Philippines, while global challenges are affecting prospects. The Philippine government is implementing its 8-point socioeconomic agenda and the Philippine Development Plan 2023-2028 to ensure inclusive, resilient, and sustainable growth for a prosperous society.

The Philippines has been one of the most dynamic economies in the East Asia and Pacific region. With increasing urbanization, a growing middle class, and a large and young population, the Philippines’ economic dynamism is rooted in strong consumer demand supported by a vibrant labor market and robust remittances. The private sector remains buoyant, with positive performance from the services sector including business process outsourcing, wholesale and retail trade, real estate, and tourism. Poverty rate declined from 23.3 percent in 2015 to 18.1 percent in 2021 despite the shocks endured through the COVID-19 pandemic and other global headwinds such as high global commodity prices and tight global financial conditions. The Philippine government pursues larger investments in both human and physical capital to boost inclusive growth over the medium and long term. The Philippines’ economic recovery is well underway, as remained robust at 5.6 percent in 2023, which is among the top growth performers in the region. Over the medium-term, the growth outlook will continue to be supported by strong domestic demand, driven by a robust labor market, continued public investments, and the positive effects of recent investment policy reforms which could boost private investment. With continued recovery and reform efforts, the country is getting back on track on its way from a lower middle-income country with a gross national income per capita of US$3,950 in 2023 to an upper middle-income country (per capita income range of US$4,466 -US$13,845).

Last Updated: Mar 19, 2024

The World Bank’s partnership with the Philippines spans 78 years, providing support to the country’s development programs and projects. Since 1945, it has mobilized funding, global knowledge, and partnerships to support the Philippines’ efforts to alleviate poverty, promote agricultural development, upgrade infrastructure, improve health, nutrition, and education, strengthen resilience against climate change and natural disasters, promote peace, and enhance global competitiveness. The Bank is an active partner in helping spur private sector growth including in agriculture, expanding engagement with civil society, and promoting peace and development in Mindanao.

The  Country Partnership Framework (CPF) for the Philippines for 2019-2023 , extended by the  Performance and Learning Review  to 2024, prioritizes investing in Filipinos (health and nutrition, education, and social protection), competitiveness and job creation, and addressing core vulnerabilities by building peace and resilience, with governance and digital transformation as cross-cutting themes. The Bank provides technical assistance and support to projects that strengthen community-driven development including service delivery and linking remote communities to markets; promote human development; and address drivers of conflict. The CPF also supports a cohesive approach to Mindanao’s development and intensify efforts to engage the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM).

As of end-March 2024, the active portfolio of the International Bank for Reconstruction and Development (IBRD or World Bank) in the Philippines consists of 18 operations with net commitments of US$ 7.46 billion. The financing portfolio spans various sectors: Agriculture and Food (21%); Finance, Competitiveness and Innovation (17%); Urban, Resilience and Land (16%); Health, Nutrition and Population (10%); Macroeconomics, Trade and Investment (10%); Social Sustainability and Inclusion (10%); Social Protection and Jobs (8%); Water (3%); Environment, Natural Resources & the Blue Economy (2%); Transport (2%); and Education (1%).

The Philippines’ Trust Fund (TF) portfolio consists of 81 active grants with a total commitment of US$ 82.23 million. These TFs provide technical assistance and advise in project implementation as well as create or share knowledge to support the Government of the Philippines with the planning and execution of projects and policy changes and initiatives.

Since 1962, the International Finance Corporation (IFC) of the World Bank Group has invested up to US$6 billion in over 170 projects in the Philippines. IFC has provided investment and advisory services focused on climate finance, digitalization, financial inclusion, disaster insurance, enhancing the investment climate, and enabling private sector investments in the country. IFC’s strategic priorities in the Philippines include reducing the impacts of climate change, deepening financial inclusion, promoting sustainable infrastructure, and strengthening the capacity of the private sector. 

Last Updated: Apr 11, 2024

Since the Philippines government received its  first World Bank loan in 1957 , the Bank’s development projects in the country have produced significant results for its people.  In the past decades, the Bank’s assistance has expanded to a wide range of projects and analytical work, policy advice, and capacity development in support of the country’s development agenda.

Highlights of some projects and results

The  Philippine Rural Development Project  (PRDP) has been helping raise rural incomes, enhance farm and fishery productivity, and improve market access throughout the country since it started in 2015. It has been supporting provincial planning, rural infrastructure, and agriculture enterprise development. It has been using tools such as  geotagging , value chain analysis, expanded vulnerability and suitability assessments, and climate risk vulnerability assessments to strategically guide public investments toward a modern, value-chain oriented, and climate-resilient agriculture and fisheries sector.

The project has supported provincial investment planning for priority agricultural commodities in all 81 provinces of the country. Since 2015, the project has benefitted over 739,000 farmer and fisherfolk beneficiaries (97% of project’s end-target), 49% of them are female beneficiaries.  The project has also constructed and rehabilitated over 1,950 kilometers of farm-to-market roads (about 600 kilometers more are underway). These resulted in reduction of travel time by 61% and reduction in transport costs by 23%. Results of a household survey indicate that farmers and fisher households benefitting from completed infrastructure and agricultural enterprise subprojects gained 36% increase in annual household real income.

In June 2021, the PRDP received US$280 million additional investment and €18.3 million grant to build on the gains achieved by PRDP. A  new PRDP Scale up project  with $600m IBRD was approved in June 2023.

The  Philippines COVID-19 Emergency Response Project  supported the country’s efforts to scale up national vaccination, strengthen the country’s health systems, and overcome the impact of the pandemic especially on the poor and the most vulnerable. It has helped the Philippines ramp up vaccination by supporting procurement of at least 33 million doses of vaccines. The World Bank-financed vaccines are among the first vaccines used for pediatric vaccination, benefitting 7.5 million children all over the Philippines.  The ramp up of vaccination has enabled the authorities to open more economic activities, allowing the country to grow 5.6 percent in 2021. It has facilitated purchase of 500 mechanical ventilators, 119 portable x-ray machines, 70 infusion pumps, 50 RT-PCR machines, 69 ambulances, as well as other medical equipment and supplies crucial for improving the country’s COVID-19 response. It has also built isolation wards with negative pressure systems and reference laboratories, for the country to be more prepared in facing infectious diseases.

To mitigate the COVID-19 pandemic’s impact on the welfare of low-income households, the  Philippines Beneficiary FIRST Social Protection (BFIRST) Project  was initiated to support the government’s flagship conditional cash transfer (CCT) program, known as  Pantawid Pamilyang Pilipino Program  (4Ps). The BFIRST project aims to strengthen the country’s social protection delivery system to be more adaptive and efficient, focusing on the development and implementation of digital transformation strategy for the Department of Social Welfare and Development (DSWD), in addition to supporting the cash grants for the 4Ps.

The BFIRST project is also facilitating the adoption of Philippine Identification System (PhilSys), which enabled services initially under the 4Ps and Assistance to Individuals in Crisis Situations program of DSWD. By adopting PhilSys, as a valid proof of identity, the DSWD will be able to improve the overall experience for its beneficiaries with streamlined process in accessing social assistance services while preventing fraud and leakages. The benefits of adopting PhilSys include digitizing and streamlining DSWD’s beneficiary registration and enrolment, establishing a United Beneficiary Database (UBD), identifying and removing duplicate or ghost beneficiaries, and enabling financial inclusion.

The project also promotes the use of digital payments in the distribution of cash assistance. The 4Ps beneficiaries used to receive their grants by withdrawing cash through an ATM or over the counter with their Landbank cash cards. Early this year, the DSWD shifted to transaction accounts for grant distribution enabling the beneficiaries to receive funds from other sources, save their money, and make electronic fund transfers such as online bills payment. As of July 2023, there are 3,493,827 beneficiaries of 4Ps who have access to transaction accounts.

The 4Ps is the Philippine national poverty reduction strategy and a human capital investment program which was institutionalized with the passage of  Republic Act 11310  on April 17, 2019. The program supports low-income households  invest in the education and health of children  up to 18 years old. The program has made  significant impacts in reducing total poverty and food insecurity among beneficiaries, and has grown to become one of the largest CCT programs in the world, helping more than 6 million households since its inception. As of July 2023, the 4Ps serves 3,978, 736 active households and is being implemented in 148 cities and 1,481 municipalities across 81 provinces throughout the country. The BFIRST project supports 4Ps’ efforts to enroll new families who fell into poverty especially due to the pandemic and facilitate the transition of families who graduate out of the program.

The Kapit-Bisig Laban sa Kahirapan - Comprehensive and Integrated Delivery of Social Services (Kalahi CIDSS) has been supported by the Bank since 2002. Starting in 2014 it received funding under the  KC National Community Driven Development Project  (KC-NCDDP) with accumulative lending of US$779 million. The  KC-NCDDP Additional Financing (AF) was approved by the World Bank Board of Executive Directors in December 2020 and is closing December 31, 2024. KC-NCDDP is implemented in the poorest municipalities in the Philippines, mainly located in areas characterized by high risks to climate change and livelihood constraints. It aims to empower poor and disaster-affected communities to participate in more inclusive local planning, budgeting, and implementation, and improve their access to basic services.  Out of 948 poor municipalities in the Philippines, with a poverty incidence greater than or equal to 26.3 (2009 poverty threshold), 828 municipalities or 87% (a total of 19,647 barangays) were covered under the KC-NCDDP, and 676 municipalities (13, 934 barangays) are covered under the AF.

Impact Evaluation (IE) results indicated positive impacts on household consumption that contributed to reduction in poverty with a 12% increase in per capita spending among beneficiary households and an even higher increase (19%) for households that were identified as poor at project start-up. KC-NCDDP has so far funded 39,831 community sub-projects within the areas of basic access facilities (e.g., village roads, footbridges, footpaths), followed by social services (e.g., day-care centers, classrooms, health stations); environmental protection (e.g. flood and river control; and community production facilities and utilities (e.g. electrification and multipurpose buildings).  About 319,968 Indigenous People households benefitted from the sub-projects. Implementation of community sub-projects also benefitted women where 34.8% are part of the sub-project's implementation workforce. Since the outset of the pandemic, KC-NCDDP has financed 2,654 isolation units and support training of barangay health emergency response teams in 86% of barangays. More than 2.1 million community volunteers have been mobilized in various positions since 2014.The Project has also contributed to enhanced local governance by providing a mechanism for closer engagement between the municipal local government units (MLGUs) and communities. 99% of municipal local government units (MLGUs) have poverty reduction action plans based on KC-NCDDP participatory processes, and 97% of MLGUs have increased representation of peoples’ organizations (POs) in local development councils.

Following Typhoon Haiyan in 2014, KC-NCDDP spearheaded an innovative response to assist disaster-affected municipalities through the Disaster Response Operations Modality (DROM), which was used again for COVID-19 and other disaster events. 

To strengthen the government’s capacity to manage risks from climate change, natural disasters, and disease outbreaks, the Bank has provided the  Fourth Disaster Risk Management Development Policy Loan with Catastrophe Deferred Drawdown Option (Cat DDO4) . The operation is supported by a   technical assistance program to help (i) institutionalize the use of Rehabilitation and Recovery Plans for local government units (LGUs) to rapidly request and access funding from the National Disaster Risk Reduction and Management (DRRM) Fund; and (ii) integrate climate and disaster risk information of LGUs within the National Government’s central risk data system (GeoRiskPH platform). 

The  Ready to Rebuild  (R2R) program was launched to train communities to be more prepared – to build a culture of preparedness to help local governments and communities anticipate the impacts of disasters and prepare recovery plans even before disasters hit.  A total of 350 provinces, cities, and municipalities from all 17 regions in the country have  undergone training , including those struck by Super Typhoon Rai. This translates to 1,800 governors, mayors, and technical staff. An additional 450 technical staff from 150 local governments were  trained  in the use of  GeoRiskPH platform  to integrate hazard and risk information into the local disaster risk reduction and management plans.

The technical assistance supports strengthening the delivery of community-based DRM related Technical and Vocational Education and Training (TVET) program to equip people in vulnerable local government units (LGUs) with critical and targeted skills to be able to quickly respond to and recover from disasters;  increasing the compliance of National Government Agencies (NGAs) and LGUs in climate and disaster budget tagging; integration of climate change adaptation and disaster risk reduction measures in local investment programs and Provincial Commodity Investment Plans.

The Bank is supporting the Department of Science and Technology, Philippine Institute of Volcanology and Seismology, in collaboration with the National Disaster Risk Reduction and Management Council, Office of Civil Defense, and Department of the Interior and Local Government in the development and rollout of the  PlanSmart Ready to Rebuild Automated Planning Tool for Disaster Rehabilitation and Recovery. This web application was developed to help the government formulate and implement hazard- and risk-informed programs and projects to better prepare for and recover from disasters. Thus far, over 400 participants from the National Capital Region, Central Visayas Region, Caraga Region, Southern Tagalog Region, and Bangsamoro Autonomous Region in Muslim Mindanao have been  trained . This resulted in the integration of baseline data of 128 LGUs in the  GeoRiskPH platform .

The financing also supported the urgent needs created by the COVID-19 crisis. This is combined with  technical assistance  to help enhance the capacity of national and local governments in developing effective response mechanisms through  emergency cash transfers  and  Recovery Guide from COVID-19  with suggested strategies and financing options to help communities recover from the impacts of the pandemic. 

The Bank’s assistance extends to conflict-affected areas in the country, providing support for service delivery, skills development, and enhanced participatory processes. Supported by five countries and the European Union, the  Mindanao Trust Fund  (MTF) (2005-2021) aimed to promote peace and development in conflict-affected areas in Mindanao. The MTF funded a series of three Reconstruction and Development Projects (RDPs), which fostered inclusive social and economic recovery, social cohesion, and participatory governance through a community-driven development approach, mainly in the area that in 2019 became the Bangsamoro Autonomous Region of Muslim Mindanao. More recently, the World Bank was chosen by the Government of the Philippines and the Moro Islamic Liberation Front (MILF) to administer a new multi-donor trust fund to support Normalization, the track of the peace process that covers decommissioning and transformation of camps into peaceful and productive communities. The new  Bangsamoro Normalization Trust Fund  (BNTF) will be building on the achievements of the MTF.

In the private sector, IFC has been a leader in developing the thematic bond market in the Philippines, helping banks issue green bonds since 2017 for climate-smart projects, including renewable energy, green buildings, and energy-efficient equipment. IFC’s blue, green, and social bonds have helped provide loans to MSMEs, expand healthcare, and improve wastewater treatments services in water scarce areas. IFC supported  Ayala Corporation’s first social bond in healthcare  for the first green cancer hospital in the Philippines and  Union Bank’s social bond  which provided 4,000 loans to micro, small and medium-sized enterprises (MSMEs) in the country. In April 2022, IFC supported  BDO Unibank's blue bond  issuance to help tackle marine pollution and preserve clean water resources. This was the first blue bond for the Philippines and the first blue bond subscription for IFC globally.

Last Updated: Apr 05, 2024

rise in household income of farmers was posted in 124 agrarian reform communities in the Philippines through improved access to agriculture and rural infrastructure

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Understanding Globalization Effects in the Philippines

Globalization has undoubtedly reshaped the economies, cultures, and societies of countries around the world. But what about its impacts on the Philippines ? How has this nation navigated the tide of globalization and what consequences has it brought? As we delve into the effects of globalization in the Philippines , we will uncover a captivating journey of economic growth , cultural exchange , technological advancement , social transformation , and more. So, join us as we unravel the complexities of globalization and its profound influence on the Philippines.

Key Takeaways:

• Globalization has brought both positive and negative impacts on the Philippines, encompassing various aspects such as economics, culture, and social cohesion .
• The Philippines has experienced significant economic growth and employment opportunities due to globalization, but challenges such as inequality persist.
• The country has embraced trade globalization, seeing an increase in foreign investments and global trade relations.
• Technological advancements and labor market changes have played a pivotal role in the effects of globalization .
• Efforts are needed to bridge the gap between winners and losers in the labor market and address the challenges of inequality and the provision of global public goods .

Globalization Trends in the Philippines

As the Philippines continues to embrace globalization, the country has witnessed notable trends in trade openness , finance openness , and economic integration . These trends reflect the nation’s growing integration with the global economy and its efforts to capitalize on the opportunities presented by globalization.

Trade Openness

Trade openness has been a key component of the Philippines’ global engagement strategy. Over the years, the country has made significant progress in improving its trade openness , as evidenced by the increasing share of trade in its GDP. This can be attributed to the Philippines’ commitment to promoting an open trade policy and the development of global value chains in strategic sectors such as electronics and electrical components industry. This sector has played a pivotal role in driving the country’s export growth and enhancing its competitiveness in the global market.

Finance Openness

The Philippines has also experienced moderate financial openness, signaling its growing integration with international financial markets. The country has witnessed an increase in capital flows and the liberalization of its foreign exchange regulatory system. This has boosted investor confidence and attracted both portfolio and direct investments, leading to an expanding exposure to external liabilities. The Philippines’ growing financial openness reflects its strong macroeconomic fundamentals, making it an attractive destination for global investors.

Economic Integration

At the heart of globalization lies economic integration , and the Philippines has been actively engaging in this process. The country’s efforts to integrate with the global economy have resulted in a deeper integration into regional and global supply chains. This has facilitated the development of industries and sectors that are well-positioned to thrive in the global market. The Philippines’ economic integration signifies its commitment to leveraging its strengths and resources to participate fully in the global economy.

As the Philippines embraces globalization, it is important to monitor and adapt to these trends in order to reap the full benefits of economic integration and global opportunities. By fostering trade and finance openness , as well as pursuing effective strategies for economic integration, the Philippines can position itself as a competitive player in the global arena.

Economic Restructuring

The new wave of globalization has brought about economic restructuring , reshaping global trade patterns and the development of global value chains . The Philippines has experienced changes in its trade dynamics, with a shift towards the export of intermediate goods and the import of capital goods. This has led to the development of global value chains , particularly in industries like electronics and electrical components.

The country has seen improvements in transport and communication technology, which have facilitated trade and allowed companies to manage their production more efficiently. The growth of the IT-BPO industry has also contributed to economic restructuring in the Philippines.

Worsening Inequality

Despite the positive impact of globalization on economic growth and employment , there are concerns about worsening inequality in the Philippines. Income inequality has been on the rise, with certain income groups capturing a larger share of global growth. The drivers of income inequality include technological advancements, changes in labor markets, and unequal access to education and opportunities. These factors have contributed to a widening income gap in the country. Addressing inequality is crucial in ensuring that the benefits of globalization are shared more equitably among the population.

Trends in Inequality

The Philippines has experienced a concerning trend of worsening inequality in recent years. The income gap between the rich and the poor has been widening, leading to a more uneven distribution of wealth. This trend is evident in various sectors of society, from urban areas to rural communities. The poorest segments of the population often face limited access to resources, opportunities, and social services, exacerbating the inequality issue.

The drivers of income inequality in the Philippines are complex and multifaceted. A comprehensive approach is needed to address these issues and create a more inclusive society, where the benefits of globalization are shared by all.

“It is our collective responsibility to ensure that no one is left behind in the pursuit of progress. Addressing inequality is not only a moral imperative but also a strategic investment in building a fair and sustainable future.”

As the Philippines continues to navigate the challenges of globalization, it is essential to prioritize policies and initiatives that reduce inequality and promote inclusive growth. By investing in education, skills training, and social safety nets, the country can empower its citizens to thrive in an increasingly interconnected world economy.

Next, we will explore the threats to the provision of global public goods posed by the current state of globalization and the role of international cooperation in overcoming these challenges.

Threats to Provision of Global Public Goods

As globalization continues to shape our interconnected world, there are growing concerns about the provision of global public goods . These goods, such as addressing climate change, reducing poverty, and promoting equality, require international cooperation and collective action. However, various threats pose significant challenges to achieving these goals.

One of the major threats to the provision of global public goods is the rise of protectionism and inward-looking policies in certain countries. As nations become more focused on their own interests, international cooperation becomes strained, hindering efforts to tackle global issues. This poses a significant challenge in addressing problems that require global collaboration and collective solutions.

The global community also faces challenges in addressing pressing issues such as climate change, poverty, and inequality. These complex problems require coordinated global action and cooperation. However, differing priorities, interests, and approaches among nations can hinder progress and dilute efforts to find effective solutions.

Another threat to the provision of global public goods is the declining social cohesion and trust in society. As communities become more fragmented, it becomes increasingly difficult to mobilize collective action and foster the international cooperation needed to address global challenges. Declining social cohesion undermines the trust and cooperation necessary for countries to come together and make meaningful progress.

Efforts to overcome these threats and ensure the provision of global public goods require promoting international cooperation and strengthening collaboration among public and private organizations. It is crucial to foster a sense of shared responsibility and common purpose among nations. By working together, we can overcome the challenges posed by globalization and address pressing global issues in a meaningful and impactful way.

Globalization has brought about various threats to the provision of global public goods, including the rise of protectionism, the challenges of addressing complex global issues, and declining social cohesion . Overcoming these threats requires a renewed commitment to international cooperation and collaboration, as well as efforts to build trust and strengthen social cohesion . By working together, we can ensure the provision of global public goods and create a more sustainable and prosperous world for all.

Cultural Impacts of Globalization in the Philippines

Globalization has had a profound impact on the culture of the Philippines, influencing both the education system and the labor market. One significant cultural impact of globalization is the increased diversity within the higher education institutions in the country. As a result of migration and globalization, there is now a more diverse student population, promoting equity, inclusiveness, and enriching the learning environment.

However, it is crucial to address the instances of discrimination that international students may still encounter. Discrimination can hinder the full realization of the benefits of a diverse student body. As the Philippines continues to embrace globalization, it is important to cultivate an environment of understanding, respect, and acceptance among students from different backgrounds.

Globalization also places a greater emphasis on critical thinking skills within the education system. As the demand for skilled human capital grows, students need to develop critical thinking abilities to navigate the complexities of a globalized world. The ability to critically analyze information and think independently becomes increasingly valuable as the world becomes more interconnected.

Furthermore, the Philippines’ reliance on labor export has had a significant influence on its education system. With a focus on producing globally competitive individuals, the training of students is centered around skills that align with the demands of the international labor market. This includes preparing students for work abroad, where they can contribute to the economic growth of both the Philippines and the countries they migrate to.

To balance the cultural impacts of globalization, the Philippines needs to foster a culture of understanding, sensitivity, and openness to different beliefs and values. This can be achieved through promoting cultural exchange programs, encouraging dialogue, and providing opportunities for students to engage with diverse perspectives.

The Cultural Impacts of Globalization in the Philippines:

By embracing the cultural impacts of globalization while promoting understanding and inclusivity, the Philippines can harness the benefits of a diverse society and prepare its students for success in a globalized world.

Globalization and the Philippine Economy

Globalization has had a significant impact on the Philippine economy . The expanding exports and continuous capital accumulation have been key contributors to the country’s economic growth. The Philippines has witnessed positive effects on employment and industry performance , particularly in sectors associated with global value chains. The integration into global markets has created opportunities for job creation and enhanced productivity in various industries.

One of the driving forces behind the positive impact of globalization on the Philippine economy is the implementation of Free Trade Agreements (FTAs). These agreements have resulted in industry growth and improved labor productivity. However, it is important to note that the network effects of FTA trade shocks have not been statistically significant.

International trade plays a crucial role in shaping the economy of the Philippines. The country’s engagement in global trade has contributed to its overall growth, employment opportunities, and industry performance . By participating in global value chains, the Philippines has been able to tap into international markets and leverage its competitive advantages.

Below is a table highlighting the impact of globalization on the Philippine economy:

Overall, globalization has played a significant role in shaping the Philippine economy. The country’s participation in global trade has resulted in economic growth, employment opportunities, and enhanced industry performance. However, policymakers and stakeholders must continue to address the challenges and potential risks associated with globalization to ensure sustainable and inclusive development.

Globalization and the Education System in the Philippines

Globalization has had a significant impact on the education system in the Philippines. The country recognizes the need for internationalization in education to foster global competencies and enhance competitiveness.

However, there are challenges and obstacles that need to be addressed. Inadequate e-library and ICT services, institutional challenges , and faculty motivation towards advanced education are some of the issues that hinder the effective integration of global perspectives in the curriculum.

The integration of international and global dimensions into the curriculum, faculty composition , research, and global linkages is crucial for the internationalization of education in the Philippines. By embracing the diverse perspectives and knowledge from around the world, students can develop the necessary skills and understanding to thrive in a globalized society.

“Education is the passport to the future, for tomorrow belongs to those who prepare for it today.” – Malcolm X

To address the challenges posed by globalization, the Philippines must invest in the development of modern e-library and ICT infrastructure to facilitate access to global knowledge resources. Additionally, institutions should prioritize faculty development programs that promote continuous learning and research collaborations with international partners.

The integration of international components and global perspectives into the curriculum should be an ongoing process. This can be achieved by incorporating cross-cultural learning experiences, promoting critical thinking skills, and fostering a global mindset among students.

Faculty Composition and Global Expertise

Creating a faculty composition that reflects global expertise is essential for a truly internationalized education system. By recruiting faculty members with diverse cultural backgrounds and experiences, institutions can provide students with a broader understanding of global issues and perspectives. Furthermore, faculty members with international experience can serve as role models, inspiring students to pursue global opportunities and expand their horizons.

Enhancing Global Linkages

Establishing global linkages with educational institutions and organizations worldwide is crucial for the internationalization of education in the Philippines. Collaborative research projects, student exchange programs, and joint academic initiatives create opportunities for knowledge sharing, cultural exchange , and the development of global competencies.

“Education is not preparation for life; education is life itself.” – John Dewey

By actively engaging with global partners, the Philippine education system can create a vibrant and inclusive learning environment that prepares students to navigate the challenges and opportunities of a globalized world.

Globalization and Social Cohesion in the Philippines

Globalization has had far-reaching implications for social cohesion in the Philippines. One of its notable effects has been the increase in migration , which has resulted in a more diverse society, fostering equity and inclusiveness. The Philippines, known for its warm hospitality, has been successful in embracing cultural diversity.

However, there are challenges that need to be addressed to ensure and strengthen social cohesion and trust among its population. One significant concern is job security , as globalization brings changes to industries and labor markets. The inherent uncertainties in a rapidly changing global economy can cause anxiety and erode trust between employers and employees.

Another challenge is the potential commodification of local culture in the tourism industry. While globalization has provided opportunities for tourism growth, it is essential to strike a balance between showcasing the country’s heritage and preserving its authenticity. The Philippines should maintain cultural integrity while capitalizing on the economic benefits that tourism brings.

The key to building trust and social cohesion lies in promoting understanding, respect, and inclusiveness among the population. This can be achieved through dialogue, education, and community engagement. By encouraging intercultural interactions and providing platforms for open discussions, the Philippines can foster greater cohesion within its society.

Fostering Social Cohesion:

• Promote cultural education and awareness programs within schools and communities.
• Encourage intercultural dialogue and understanding through community events and initiatives.
• Invest in programs that enhance job security and provide opportunities for upskilling and retraining.
• Develop sustainable tourism practices that respect and preserve local culture and traditions.
• Support community-led initiatives that promote social inclusiveness and equality.

By prioritizing these steps, the Philippines can navigate the challenges of globalization while preserving its social fabric. Embracing the benefits of globalization while safeguarding social cohesion will ensure a more inclusive and harmonious society for all.

Policy Recommendations for Navigating Globalization in the Philippines

Navigating the challenges of globalization in the Philippines requires a comprehensive approach. In order to address economic restructuring and promote inclusive growth, policymakers and stakeholders should consider the following policy recommendations :

• Promoting Inclusive Growth: Efforts should be made to ensure that the benefits of globalization are shared more equitably among all segments of society. This can be achieved by implementing policies that provide equal access to education, healthcare, and opportunities for economic advancement.
• Reducing Inequality: Measures should be taken to reduce income inequality and bridge the gap between different income groups. This can be accomplished through progressive taxation, social welfare programs, and policies that promote equal access to quality education and employment opportunities.
• Addressing Global Public Goods: Strengthening cooperation at the global level is crucial for addressing global issues and providing public goods that benefit all nations. The Philippines should actively participate in international efforts to combat climate change, poverty, and other pressing challenges.
• Fostering Social Cohesion: Building trust and social cohesion within the country is essential for creating an inclusive and resilient society. This can be achieved by promoting understanding, respect, and inclusiveness among different cultural, ethnic, and socio-economic groups.

By implementing these policy recommendations , the Philippines can navigate the challenges of globalization and create a more equitable and prosperous future for all its citizens.

Globalization has had a profound impact on the Philippines, touching various aspects of its economy, education system, culture, and social fabric. The effects of globalization have been mixed, presenting opportunities for growth and development, while also posing challenges and concerns.

The Philippines has experienced positive economic growth and employment as a result of globalization. The country has embraced trade openness and seen an increase in foreign investments , fostering economic integration and global trade relations. However, there are concerns about increasing inequality and the uneven distribution of benefits. Policymakers should focus on inclusive policies that ensure the benefits of globalization are shared equitably among all segments of society.

Addressing the challenges brought on by globalization requires a proactive response from the Philippines. The country should prioritize the development of inclusive policies that promote social cohesion and trust. Additionally, international cooperation is crucial for addressing global issues and providing global public goods. By navigating the new wave of globalization with inclusivity and cooperation in mind, the Philippines can harness its potential and thrive in a rapidly changing world.

In conclusion , the Philippines’ response to the effects of globalization should involve adopting inclusive policies, promoting international cooperation, and fostering social cohesion. By doing so, the country can minimize the challenges posed by globalization and maximize its opportunities for growth, development, and a brighter future.

What is globalization and how does it impact the Philippines?

What are the trends of globalization in the philippines, how has globalization led to economic restructuring in the philippines, what impact has globalization had on inequality in the philippines, what are the threats to the provision of global public goods due to globalization, how has globalization influenced the culture and education system in the philippines, what impact has globalization had on the philippine economy, how has globalization affected the education system in the philippines, how has globalization impacted social cohesion in the philippines, what policy recommendations are there for navigating globalization in the philippines, source links.

• https://www.bis.org/publ/bppdf/bispap100_q.pdf
• https://typeset.io/questions/how-has-globalization-impacted-the-philippine-economy-47abdl1qvc
• https://www.econstor.eu/bitstream/10419/211082/1/1676789774.pdf

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• Southeast Asia
• Philippines - Economics

ECONOMIC HISTORY OF THE PHILIPPINES

The Philippines was once a model of development and second only to Japan among east Asian economies. In the 1960s, when South Korea was a land of peasant, the Philippines was one of Asia's industrial powerhouses. It produced consumer goods, processed raw materials and had assembly plants for automobiles, televisions and home appliances. Chemical plants produced drugs. Scrap metal was imported and made into steel for ships and factories produced cement, textiles and fertilizer.

Prior to 1970, Philippine exports consisted mainly of agricultural or mineral products in raw or minimally processed form. In the 1970s, the country began to export manufactured commodities, especially garments and electronic components, and the prices of some traditional exports declined. By 1988 nontraditional exports comprised 75 percent of the total value of goods shipped abroad. *

In the 1970s and 80s, the Philippines declined while its neighbors grew and became one of the poorest non-Communist governments in Southeast Asia. The gains made in the 1950s and 60s were lost to corruption, cronyism, and mismanagement during the Marcos years and ineptitude of the Aquino years Now the Philippines is sometimes referred to as "sick man of Asia" and a "Latin-style banana republic in the South China Sea." Its per capita income is about one tenth of that of Taiwan. Many of its most talented people work overseas.

According to The Economist: “What distinguishes Manila from other South-East Asian capitals is the ubiquitous Jeepney, the loud rickety bus used by the city's poorer inhabitants. Once modified American Jeeps, nowadays most Jeepneys are cobbled together from second-hand Japanese lorries. They have become a metaphor for the Philippine economy: inefficient and easily overtaken. In the 1970s the Philippines was richer than its neighbours. Yet while it chugged along at growth rates of around 2 percent, other countries stepped on the gas: it was passed by Singapore, Malaysia, Thailand and, more recently, by China. A former American colony, it could have made more of its cultural affinities with the United States, including the widespread use of English. The incompetent and crooked rule of Ferdinand Marcos from 1965 to 1986 bears some of the blame for its failure to do so. A sluggish economy combined with a fast-growing population has forced some 8m Filipinos—equivalent to almost a tenth of the resident population—to seek jobs abroad.[Source: The Economist, August 16, 2007]

See Agriculture, See History, The Philippines under Spain and the United States.

Economic Development in the Philippines in the Early 20th Century

In the mid-nineteenth century, a Filipino landowning elite developed on the basis of the export of abaca (Manila hemp), sugar, and other agricultural products. At the onset of the United States power in the Philippines in 1898-99, this planter group was cultivated as part of the United States military and political pacification program. The democratic process imposed on the Philippines during the American colonial period remained under the control of this elite. [Source: Library of Congress *]

Access to political power required an economic basis, and in turn provided the means for enhancing economic power. The landowning class was able to use its privileged position directly to further its economic interests as well as to secure a flow of resources to garner political support and ensure its position as the political elite. Otherwise, the state played a minimal role in the economy, so that no powerful bureaucratic group arose that could pursue a development program independent of the wishes of the landowning class. This situation remained basically unchanged in the early 1990s. *

At the time of independence in 1946, and in the aftermath of a destructive wartime occupation by Japan, Philippine reliance on the United States was even more apparent. To gain access to reconstruction assistance from the United States, the Philippines agreed to maintain its prewar exchange rate with the United States dollar and not to restrict imports from the United States. For a while the aid inflow from the United States offset the negative balance of trade, but by 1949, the economy had entered a crisis. The Philippine government responded by instituting import and foreign-exchange controls that lasted until the early 1960s. *

Economic Development in the Philippines in the 1950s and 60s

Import restrictions stimulated the manufacturing sector. Manufacturing net domestic product (NDP) at first grew rapidly, averaging 12 percent growth per annum in real terms during the first half of the 1950s, contributing to an average 7.7 percent growth in the GNP, a higher rate than in any subsequent five-year period. The Philippines had entered an import-substitution stage of industrialization, largely as the unintended consequence of a policy response to balance-of-payments pressures. In the second half of the 1950s, the growth rate of manufacturing fell by about a third to an average of 7.7 percent, and real GNP growth was down to 4.9 percent. Import demand outpaced exports, and the allocation of foreign exchange was subject to corruption. Pressure mounted for a change of policy. *

In 1962 the government devalued the peso and abolished import controls and exchange licensing. The peso fell by half to P3.90 to the dollar. Traditional exports of agricultural and mineral products increased; however, the growth rate of manufacturing declined even further. Substantial tariffs had been put in place in the late 1950s, but they apparently provided insufficient protection. Pressure from industrialists, combined with renewed balance of payments problems, resulted in the reimposition of exchange controls in 1968. Manufacturing recovered slightly, growing an average of 6.1 percent per year in the second half of the decade. However, the sector was no longer the engine of development that it had been in the early 1950s. Overall real GNP growth was mediocre, averaging somewhat under 5 percent in the second half of decade; growth of agriculture was more than a percentage point lower. The limited impact of manufacturing also affected employment. The sector's share of the employed labor force, which had risen rapidly during the 1950s to over 12 percent, plateaued. Import substitution had run its course. *

To stimulate industrialization, technocrats within the government worked to rationalize and improve incentive structures, to move the country away from import substitution, and to reduce tariffs. Movements to reduce tariffs, however, met stiff resistance from industrialists, and government efforts to liberalize the economy and emphasize export-led industrialization were largely unsuccessful. *

Philippines Economy Under Marcos

The Philippines economy grew at a relatively high average annual rate of 6.4 percent during the 1970s, financed in large part by foreign-currency borrowing. External indebtedness grew from $2.3 billion in 1970 to $24.4 billion in 1983, much of which was owed to transnational commercial banks. In the 1980s the Philippine economy was hurt by political instability, authoritarianism, increasing foreign debt, falling commodity prices, corporate mismanagement and vast unemployment.

The Philippines found itself in an economic crisis in early 1970, in large part the consequence of the profligate spending of government funds by President Marcos in his reelection bid. The government, unable to meet payments on its US$2.3 billion international debt, worked out a US$27.5 million standby credit arrangement with the International Monetary Fund (IMF) that involved renegotiating the country's external debt and devaluing the Philippine currency to P6.40 to the United States dollar. The government, unwilling and unable to take the necessary steps to deal with economic difficulties on its own, submitted to the external dictates of the IMF. It was a pattern that would be repeated with increasing frequency in the next twenty years. *

In the early 1980s, the economy began to run into difficulty because of the declining world market for Philippine exports, trouble in borrowing on the international capital market, and a domestic financial scandal. The problem was compounded by the excesses of President Ferdinand E. Marcos's regime and the bailing out by government-owned financial institutions of firms owned by those close to the president that encountered financial difficulties. In 1983 the country descended into a political and economic crisis in the aftermath of the assassination of Marcos's chief rival, former Senator Benigno Aquino, and circumstances had not improved when Marcos fled the country in February 1986. *

Impact of Martial Law on the Philippine Economy in the 1970s and 80s

In September 1972, Marcos declared martial law, claiming that the country was faced with revolutions from both the left and the right. He gathered around him a group of businessmen, used presidential decrees and letters of instruction to provide them with monopoly positions within the economy, and began channeling resources to himself and his associates, instituting what came to be called "crony capitalism." By the time Marcos fled the Philippines in February 1986, monopolization and corruption had severely crippled the economy. *

In the beginning, this tendency was not so obvious. Marcos's efforts to create a "New Society" were supported widely by the business community, both Filipino and foreign, by Washington, and, de facto, by the multilateral institutions. Foreign investment was encouraged: an export-processing zone was opened; a range of additional investment incentives was created, and the Philippines projected itself onto the world economy as a country of low wages and industrial peace. The inflow of international capital increased dramatically. *

A general rise in world raw material prices in the early 1970s helped boost the performance of the economy; real GNP grew at an average of almost 7 percent per year in the five years after the declaration of martial law, as compared with approximately 5 percent annually in the five preceding years. Agriculture performed better that it did in the 1960s. New rice technologies introduced in the late 1960s were widely adopted. Manufacturing was able to maintain the 6 percent growth rate it achieved in the late 1960s, a rate, however, that was below that of the economy as a whole. Manufactured exports, on the other hand, did quite well, growing at a rate twice that of the country's traditional agricultural exports. The public sector played a much larger role in the 1970s, with the extent of government expenditures in GNP rising by 40 percent in the decade after 1972. To finance the boom, the government extensively resorted to international debt, hence the characterization of the economy of the Marcos era as "debt driven."

After martial law was declared Marcos's cronies amassed huge fortunes while the Philippines ran up a huge national that brought the economy to edge of collapse. Real incomes declined by half between 1956 and 1985 as the wealth of richest 10 percent rose from 27 percent to 37 percent. In the latter half of the 1970s, heavy borrowing from transnational commercial banks, multilateral organizations, and the United States and other countries masked problems that had begun to appear on the economic horizon with the slowdown of the world economy. By 1976 the Philippines was among the top 100 recipients of loans from the World Bank and was considered a "country of concentration." Its balance of payments problem was solved and growth facilitated, at least temporarily, but at the cost of having to service an external debt that rose from US$2.3 billion in 1970 to more than US$17.2 billion in 1980. *

There were internal problems as well, particularly in respect of the increasingly visible mismanagement of crony enterprises. A financial scandal in January 1981 in which a businessman fled the country with debts of an estimated P700 million required massive amounts of emergency loans from the Central Bank of the Philippines and other government-owned financial institutions to some eighty firms. The growth rate of GNP fell dramatically, and from then the economic ills of the Philippines proliferated. In 1980 there was an abrupt change in economic policy, related to the changing world economy and deteriorating internal conditions, with the Philippine government agreeing to reduce the average level and dispersion of tariff rates and to eliminate most quantitative restrictions on trade, in exchange for a US$200 million structural adjustment loan from the World Bank. Whatever the merits of the policy shift, the timing was miserable. Exports did not increase substantially, while imports increased dramatically. The result was growing debt-service payments; emergency loans were forthcoming, but the hemorrhaging did not cease. *

It was in this environment in August 1983 that President Marcos's foremost critic, former Senator Benigno Aquino, returned from exile and was assassinated. The country was thrown into an economic and political crisis that resulted eventually, in February 1986, in the ending of Marcos's twenty-one-year rule and his flight from the Philippines. In the meantime, debt repayment had ceased. Real GNP fell more than 11 percent before turning back up in 1986, and real GNP per capita fell 17 percent from its high point in 1981. In 1990 per capita real GNP was still 7 percent below the 1981 level. *

Impact of U.S. Military Bases on the Philippines Economy

The economy of the Philippines in the Marcos years in many ways was propped by the Subik and Clark American military bases, trade with the United States and income from overseas workers. The World Bank played a major role in planning and running the Filipino economy under martial law.

In early 1991, the Philippine government was in ongoing negotiations with the United States on the future status of United States naval and air facilities at Subic Bay and Clark Air Base. What would normally be an issue of foreign policy and national security became a major domestic political issue and took on an economic dimension of considerable importance. At the domestic level, the conflict was between those who argued that the continuing presence of the United States bases was an infringement on Philippine sovereignty and a continuation of a neocolonial relationship and those who, for a combination of internal security, foreign relations, and economic reasons, saw the need for maintaining the presence of the bases. President Aquino, through 1990, refused to publicly commit herself to a position; however, it was clear that her government was working to reach accommodation with the United States. As negotiations progressed, the economic issue became prominent. [Source: Library of Congress *]

There were three economic considerations from the point of view of the Philippine government. First, the proportion of the Philippine budget allocated for its armed forces was the smallest in the region, a fact linked to the presence of United States air and naval forces in the Philippines, as well as direct military assistance. Second, in the latter half of the 1980s, the bases directly employed between 42,000 and 68,000 Filipinos and contracted for goods and services from Filipino businesses. During this period, yearly base purchases of goods and services in the Philippine economy (when corrected for the estimated import content of the goods purchased) was in the range of P6.0 billion to P8.3 billion. *

A third and politically very important consideration, was the sum given to the Philippines by the United States in connection with the presence of the bases, referred to as aid by United States officials and as rent by the Filipinos. Base-related payments were first agreed to in 1979 when United States president Jimmy Carter made a "best effort" pledge to secure US$500 million for the Philippines from the United States Congress over a five-year period. In 1983 another five-year commitment was made, this time for US$900 million. In October 1988, the Philippines' Secretary of Foreign Affairs Raul Manglapus and United States' Secretary of State George Schultz signed a two-year agreement for US$962 million, an amount double the previous compensation but substantially less than the US$2.4 billion that the Philippines initially demanded. In 1991 talks over the future of the bases and the size and terms of the aid or rent that would be given in consideration for continued United States access to military facilities in the Philippines was the most important unresolved issue. The decision of the Philippine administration to bring Secretary of Finance Jesus Estanislao into the negotiations in March 1991 was a further indication of the economic importance of the bases to the Philippine government. *

Philippines Economy Under Cory Aquino

The Philippines economy floundered under Corazon Aquino. Power shortages and brownouts were common. The American military bases were closed down. Economic growth revived in 1986 under Aquino, reaching 6.7 percent in 1988. But in 1988 the economy once again began to encounter difficulties. The trade deficit and the government budget deficit were of particular concern. In 1990 the economy continued to experience difficulties, a situation exacerbated by several natural disasters, and growth declined to 3 percent. [Source: Library of Congress *]

The Philippine economy experienced considerable difficulty in the 1980s. Real gross national product (GNP) grew at an annual average of only 1.8 percent, less than the 2.5 percent rate of population increase. The US$668 GNP per capita income in 1990 was below the 1978 level, and approximately 50 percent of the population lived below the poverty line. The 1988 unemployment rate of 8.3 percent (12.3 percent in urban areas) peaked at 11.4 percent in early 1989, and the underemployment rate, particularly acute for poor, less-educated, and elderly people, was approximately twice that of unemployment. In 1988, about 470,000 Filipinos left the country to work abroad in contract jobs or as merchant seamen. *

In 1990 the Philippines had not yet recovered from the economic and political crisis of the first half of the 1980s. At P18,419, or US$668, per capita GNP in 1990 remained, in real terms, below the level of 1978. A major thrust of Aquino's 1986 People Power Revolution was to address the needs of impoverished Filipinos. One of the four principles of her "Policy Agenda for People-Powered Development," was promotion of social justice and poverty alleviation. Government programs launched in 1986 and 1987 to generate employment met with some success, reversing the decline of the first half of the decade, but these efforts did little to alleviate the more chronic aspects of Philippine poverty.

After Aquino took office the most immediate task for here economic advisers was to get the economy moving, and a turn around was achieved in 1986. Economic growth was low (1.9 percent), but it was positive. For the next two years, growth was more respectable — 5.9 and 6.7 percent, respectively. In 1986 and 1987, consumption led the growth process, but then investment began to increase. In 1985 industrial capacity utilization had been as low as 40 percent, but by mid-1988 industries were working at near full capacity. Investment in durable goods grew almost 30 percent in both 1988 and 1989, reflecting the buoyant atmosphere. The international community was supportive. Like domestic investment, foreign investment did not respond immediately after Aquino took office, but in 1987 it began to pick up. The economy also was helped by foreign aid. The 1989 and 1991 meetings of the aid plan called the Multilateral Aid Initiative, also known as the Philippine Assistance Plan, a multinational initiative to provide assistance to the Philippines, pledged a total of US$6.7 billion. *

Economic successes, however, generated their own problems. The trade deficit rose rapidly, as both consumers and investors attempted to regain what had been lost in the depressed atmosphere of the 1983-85 period. Although debt-service payments on external debt were declining as a proportion of the country's exports, they remained above 25 percent. And the government budget deficit ballooned, hitting 5.2 percent of GNP in 1990. *

The 1988 GNP grew 6.7 percent, slightly more than the government plan target. Growth fell off to 5.7 percent in 1989, then plummeted in 1990 to just over 3 percent. Many factors contributed to the 1990 decline. The country was subjected to a prolonged drought, which resulted in the increased need to import rice. In July a major earthquake hit Northern Luzon, causing extensive destruction, and in November a typhoon did considerable damage in the Visayas. There were other, more human, troubles also. The country was attempting to regain a semblance of order in the aftermath of the December 1989 coup attempt. Brownouts became a daily occurrence, as the government struggled to overcome the deficient power-generating capacity in the Luzon grid, a deficiency that in the worst period was below peak demand by more than 300 megawatts and resulted in outages of four hours and more. Residents of Manila suffered both from a lack of public transportation and clogged and overcrowded roadways; garbage removal was woefully inadequate; and, in general, the city's infrastructure was in decline. Industrial growth fell from 6.9 percent in 1989 to 1.9 percent in 1990; growth investment in 1990 in both fixed capital and durable equipment declined by half when compared with the previous year. Government construction, which grew at 10 percent in 1989, declined by 1 percent in 1990. *

Economic Policy Under Cory Aquino

In 1986 Corazon Aquino focused her presidential campaign on the misdeeds of Marcos and his cronies. The economic correctives that she proposed emphasized a central role for private enterprise and the moral imperative of reaching out to the poor and meeting their needs. Reducing unemployment, encouraging small-scale enterprise, and developing the neglected rural areas were the themes. [Source: Library of Congress *]

Aquino entered the presidency with a mandate to undertake a new direction in economic policy. Her initial cabinet contained individuals from across the political spectrum. Over time, however, the cabinet became increasingly homogeneous, particularly with respect to economic perspective, reflecting the strong influence of the powerful business community and international creditors. The businesspeople and technocrats who directed the Central Bank and headed the departments of finance and trade and industry became the decisive voices in economic decision making. Foreign policy also reflected this power relationship, focusing on attracting more foreign loans, aid, trade, investment, and tourists. *

It soon became clear that the plight of the people had been subordinated largely to the requirements of private enterprise and the world economy. As the president noted in her state-of- the-nation address in June 1989, the poor had not benefited from the economic recovery that had taken place since 1986. The gap between the rich and poor had widened, and the proportion of malnourished preschool children had grown. *

The most pressing problem in the Philippine international political economy at the time Aquino took office was the country's US$28 billion external debt. It was also one of the most vexatious issues in her administration. Economists within the economic planning agency, the National Economic and Development Authority (NEDA), argued that economic recovery would be difficult, if not impossible, to achieve in a relatively short period if the country did not reduce the size of the resource outflows associated with its external debt. Large debt-service payments and moderate growth (on the order of 6.5 percent per year) were thought to be incompatible. A two-year moratorium on debt servicing and selective repudiation of loans where fraud or corruption could be shown were recommended. Business-oriented groups and their representatives in the president's cabinet vehemently objected to taking unilateral action on the debt, arguing that it was essential that the Philippines not break with its major creditors in the international community. Ultimately, the president rejected repudiation; the Philippines would honor all its debts. *

Domestically, land reform was a highly contentious issue, involving economics as well as equity. NEDA economists argued that broad-based spending increases were necessary to get the economy going again; more purchasing power had to be put in the hands of the masses. Achieving this objective required a redistribution of wealth downward, primarily through land reform. Given Aquino's campaign promises, there were high expectations that a meaningful program would be implemented. Prior to the opening session of the first Congress under the country's 1987 constitution, the president had the power and the opportunity to proclaim a substantive land reform program. Waiting until the last moment before making an announcement, she chose to provide only a broad framework. Specifics were left to the new Congress, which she knew was heavily represented by landowning interests. The result — a foregone conclusion — was the enactment of a weak, loophole-ridden piece of legislation. *

The Aquino administration appeared to be unable to work with the Congress to enact an economic package to overcome the country's economic difficulties. In July, as the government deficit soared Secretary of Finance Jesus Estanislao introduced a package of new tax measures. Then in October, stalemated with Congress, Aquino agreed to seek a reduction in the budget gap without new taxes. The agreement met with resistance from the Congress for being an onorous imposition on an economy in crisis, growth would be stifled and the poor would be impacted negatively. The willingness of the Congress to pass the tax package called for in the IMF agreement was in doubt. In 1990 Congress placed a 9 percent levy on all imports to provide revenues until an agreement could be reached with the administration on a tax package. In February 1991, however, it was learned that in its agreement with the IMF for new standby credits, the government had promised that it would indeed implement new taxes. *

Accusations were widespread in Manila's press about the 1990-91 impasse. On the one hand, it was claimed that Aquino and her advisers had no economic plan; on the other hand, the Congress was said to be unwilling to work with the president. Traditional political patterns appeared to be reasserting themselves, and the technocrats had little ultimate influence. One study of the first Congress elected under the 1987 constitution showed that only 31 out of 200 members of the House of Representatives, were not previously elected officials or directly related to the leader of a traditional political clan. Business interests directly influenced the president to overrule already established policies, as in the 1990 program to simplify the tariff structure. Business and politics have always been deeply interwoven in the Philippines; crony capitalism was not a deviant model, but rather the logical extreme of a traditional pattern. As the Philippines entered the 1990s, the crucial question for the economy was whether the elite would limit its political activities to jockeying for economic advantage or would forge its economic and political interests in a fashion that would create a dynamic economy. *

Economy Under Ramos

President Fidel Ramos (1992-1998) was given high marks for handling the economy. By breaking apart monopolies, liberalizing foreign investment laws and privatizing business and industries by controlled powerful families, Ramos was crediting with transforming the Philippines from a country with a history of poverty, corruption, rebellion, foreign ineptness and tax evasion into an economic powerhouse that was not yet an Asian tiger but was sometimes referred to as Asian tiger cub.

Oliver Teves of Associated Press wrote: “For a brief period of the 1990s, the Philippines under the presidency of Fidel Ramos registered high growth rates and was touted as the next Asian "tiger" economy. But the ingrained poverty, corruption and crime rate, and the abiding threat of another popular uprising conspire to scare away investors and drain the country of its best brains and hardest workers. [Source: Jim Gomez and Oliver Teves Associated Press, February 25, 2006 +^+]

The Philippine economy showed some improvement in early 1992, spurred by increases in agricultural production and in consumer and government spending. Budget deficits were well within IMF guidelines — P3.2 billion in the first two months. At the end of April, the treasury posted a P5.5 billion surplus as a result of higher than programmed revenue receipts, mainly from the sale of Philippine Airlines. The increased revenue permitted the early repeal of the 5 percent import surcharge, stimulating both import spending and export growth. The money supply grew more rapidly than desired, but was kept under control. Treasury bill rates fell to 17.3 percent in March 1992 from 23 percent in November 1991, and inflation was down to 9.4 percent for the first quarter of 1992, from 18.7 percent in 1991. *

One of the greatest threats to the Philippine economy in 1992 was the power shortage. The fall in the water level in Lake Lanao caused a 50 percent reduction in the power supply to Mindanao in December 1991, and the resumption of full power was not expected until almost the end of 1992. The power shortage in Luzon continued to be chronic. Power cuts of four to five hours per day have been common; in May they reached six hours on some days in Manila, the country's industrial hub. To help to meet this chronic shortage, the government reactivated the contract with Westinghouse Corporation to restart construction on a 620 megawatt nuclear power plant on the Bataan Peninsula that had been abandoned in 1986. This plant however was not scheduled to go on line until 1995. *

To get the Philippines economy going, Ramos and the Philippine Congress abolished tariffs and preferential terms that enriched the rich families. He reformed the banking system and drove down interest rates. He overhauled the electricity infrastructure so that energy shortages and brown outs became a thing of the past.

The growth rate during the Ramos years was a robust 5 percent a year and inflation was in the single digits, down from 25 percent in 1990. Under his leadership, fiber optic lines were installed, property values soared, five star hotels and condominiums were built, the stock market showed big gains, overseas workers began returning home and the former American military bases at Subic and Clark became thriving trade and industrial centers.

Foreign investment increased. Companies like Acer (a Taiwanese company) and Intel moved into the Philippines Much of the prosperity was linked to investments from Hong Kong by tycoons like Gordon Wu, who shipped their money to Manila before the reunification with China. In the early 1990s, the Philippines was regarded as an economic rival of Thailand and Malaysia now it lags far behind them.

Asian Economic Crisis in the Philippines in 1997-98

During the Asian Economic Crisis in 1997-98, the Philippines the stock market declined by 32 percent and the currency against the dollar had depreciated by as much as 48 percent and later level off at 30 percent at end of December 1997. Because many of its exports went to Europe it was not hurt that badly by a lack of demand from crisis-hit Asia. The level of bad loans never got that high. Money sent home by Filipino workers abroad helped stabilize the currency. Most currency speculators were Filipinos.

The IMF offered some help. Foreigners were not allowed to sell pesos. Businesses responded to the crisis in a favorable way. They reduced debt, closed money-losing factories, and agreed to mergers and joint ventures with foreigners. Even so the Philippines recovered more slowly after the cris than some other Asian countries that were much harder hit.

Economy Under Estrada

There was a sense of optimism when Joseph Estrada was elected. Investors shared this sense of hope and initially poured money into the Philippines but it didn’t take long for this optimism to evaporate. Foreign investors were turned off by cronyism, scandals and favoritism towards Philippines companies.

Estrada moved to tighten securities regulations, liberalize the trade of grains and privatize the electricity industry. His effort to change laws limiting foreign ownership of businesses to 40 percent was halted by his impeachment trial.

In the end Estrada proved to be a friend of big business. He revived the culture of corruption and was plagued by charges of cronyism. This was on top of inconsistent monetary policy, slow economic growth, and uncertainty brought about by terrorists and insurgencies. He said he was a friend of the poor yet he failed to launch one meaningful anti-poverty program. Most of his efforts consisted of parading around with movie stars that were reminiscent of what Imelda Marcos did. There also wasn’t much of an effort to pave roads, set up irrigations projects or build school or collect taxes to pay for them.

As Estrada became embroiled in scandal, the peso, the stock markets and confidence in the Philippines as a place to invest dropped as did his approval ratings dropped. Foreign companies like Philips Electronics and Johnson & Johnson pulled out of the Philippines. After his ouster in 2001 he left behind a huge budget deficit and debt payments that were double what the country sent on health, education and agriculture combined. The sick man of Asia was sicker than ever.

See Corruption

Economy Under Arroyo

Gloria Macapagal-Arroyo was welcomed with great fanfare when she became president in 2001. The day she was sworn in, the stock market surged 30 percent and businessmen praised her skills and abilities, Arroyo launched free market and anti-corruption policies that were welcomed by both the local and international business communities. Again there was a sense of hope.

But again the sense optimism didn’t last long. Investment dried up as a result of global slowdowns and security concerns. Direct foreign investment was only $319 million in 2001 compared to $1.8 billion in 1992.

Growth was 3.4 percent in 2001, 4.3 percent in 2002 and 4.5 percent in 2003. In 2004 the economy was hurt by high oil prices. Still more growth was needed just to keep pace with 2.36 percent population growth rate. Inflation was less than 6 percent but the deficit grew at an alarming rate as the government spending increased and tax revenues fell. Raising revenues became one of the main problems. In 2003, the deficit reached $3.6 billion and debt was estimated to be over $100 billion. The government’s debt burden reached its peak in 2004 when it settled at 74 percent of GDP.

Arroyo began her second term in 2004 with promises of “austerity and simplicity” and the announcement of a reform package to fight corruption, attract foreign investment, and make the Philippines less dependent on foreign energy. She promised to create 10 million jobs by 2010 and announced that power rates would be doubled to avert an energy crisis, She also promised to provide clean water and electricity to every village in the Philippines and build 3,000 schools. The plan called for the seemingly impossible combination of increased spending, higher taxes and a balanced budget in five years.

Arroyo’s economic drive quickly lost momentum. She was unable to over come political opposition to privatizing companies like the National Power Corporation, which lost $1.8 billion in 2003. Instead an effort was made to make them efficient. By the end of her term much of her time was spent responding to charges that she rigged the 2004 elections and he was husband was involved in kickback scheme with a Chinese company involving millions of dollars.

Growth in 2003 and 2004 was around 5 percent due in art to rising demand for Philippines electronic exports. Growth occurred despite continued hikes in oil and consumer prices on top of typhoons and floods. Growth was 4.7 percent in 2005. That year exports amounted to 40 percent of GDP. Many of the export items were electronics. Two-thirds of Philippine imports are used to build exported computer parts, disks and other electronic products made by local units of companies such as Texas Instruments Inc. and Toshiba Corp.

See Debt and Deficit, Taxes, Tax Evasion

Philippines Economy Picks Up in the Mid-2000s

Arroyo was an economics professor after all and not everything that happened under her watch was a failure. In fact she had many good ideas and policy schemes but they were overshadowed by her political troubles and bogged down in Congress. In 2007, before the global economic crisis took hold, The Economist reported: Things are looking up. The economy has grown by at least 5 percent in each of the past three years, for the first time since the 1970s. In the first quarter of this year, growth was 6.9 percent, year-on-year. Soaring remittances from Filipinos overseas help. Last year they added up to $12.8 billion, equivalent to 11 percent of GDP. Exports—especially to China and most particularly of microchips—are also booming. [Source: The Economist, August 16, 2007 - ]

“Better economic management also helps. Inflation is now 2.6 percent, down from 8.6 percent in 2004. Changes made in 2005 have increased tax revenues without hurting growth. Despite recent wobbles, the government should still come close to balancing the budget next year, compared with a deficit of over 5 percent of GDP in 2002. The country's banks, hurt badly in the 1997 Asian financial crisis, have been slow to recover, but now they are starting to lend again. Foreign direct investment is picking up from a low base. Texas Instruments recently chose the Philippines over China for a $1 billion electronics factory, while Hanjin, a South Korean shipbuilder, will spend $1.7 billion on its Philippines yard. Foreign mining firms have started to develop huge untapped mineral reserves. -

“The Philippines has rapidly emerged as India's main rival in business-process outsourcing (BPO) and now hosts the call-centres of many American firms. A recent study by the Asian Development Bank reckoned that BPO could provide jobs for up to 11 percent of those joining the Philippines' labour force between now and 2010. -

All good news, but worries remain. However welcome the growth in call-centre jobs, it is engineering and business graduates who are queueing to take them. A recent International Labour Organisation study noted that the country's average annual productivity growth between 2000 and 2005 was just 0.9 percent, compared with 10.3 percent in China and 4.9 percent in India, suggesting that “many new job entrants are underemployed”. -

“A chief problem, despite foreign interest, is a rate of investment that is at 20-year lows as a share of GDP. Poor infrastructure, especially roads, hampers businesses of all sorts. Gil Beltran, a senior finance-ministry official, says the government intends to increase annual infrastructure spending from 2.8 percent of GDP to 5 percent. Successive administrations have had a poor record of keeping such promises. The public finances still need a lot of fixing. Tax revenues as a share of GDP are still below pre-1997 levels, while public debt is high, at around 75 percent of GDP. The next big job, says Mr Beltran, is to simplify the mess of illogical tax breaks that cost a fortune in lost revenues. Efforts to drag big-business tax-dodgers to court have so far got nowhere. A swingeing tax rise on Jeepney owners looks like squeezing the poor to spare the rich.

Perhaps a virtuous cycle will develop. The government might boost revenues and spend them on sensible works, so encouraging business, which would boost tax revenues further. It is easier to imagine the Philippines slipping back into complacency, relaxing its efforts and letting this golden opportunity pass by. -

Philippines and the Global Economic Crisis in 2008 and 2009

The Philippines was affected by global economic crisis in 2008 and 2009 as was nearly everywhere. Clarissa Batino of Bloomberg wrote in December 2008: “The Philippine peso headed for its worst year since 2000 and stocks had their biggest annual loss in at least two decades on signs the global slowdown is hurting sales of the nation’s exports”. A “drop in trade flows is a bad sign that the economy will be slowing pretty rapidly,” said Simon Wong, an economist at Standard Chartered Plc in Hong Kong. “The global downturn puts pressure on Asian economies and currencies, including the peso.” [Source: Clarissa Batino, Bloomberg, December 24, 2008 |::|]

“The currency is poised for a 13.4 percent loss this year, the most since shortly before former President Joseph Estrada was ousted in a revolt. The Philippine Stock Exchange Index slumped 48 percent this year to 1,872.85, the biggest annual drop since Bloomberg started tracking the data in 1988.Overseas sales account for a third of the $144 billion economy. The Philippines imports electronics components and exports mobile-phone chips and computer parts. Gross domestic product may expand 0.7 percent next year, compared with an estimated 3.8 percent this year, Wong said, citing contractions in exports and remittances in 2009. The government expects growth of as little as 4.1 percent this year and 3.7 percent in 2009, versus last year’s three-decade high of 7.2 percent. |::|

“The World Bank expects global trade to shrink in 2009 for the first time in more than 25 years, threatening export-reliant economies in Asia. The Philippines last week cut interest rates to support growth as the global slump weakened demand for Intel Corp.’s computer chips and other electronics goods, which account for two-thirds of the nation’s overseas sales. |::|

Philippine Economy Picks Up in the 2010s Under Benigno Acquino III

The Philippines economy picks up in the 2000s under Benigno Acquino III. The Philippine economy expanded by 7.2 percent in 2013, 6.8 percent in 2012, 3.7 percent in 2011 and 7.6 percent in 2010. In 2012, gross domestic product surpassed the government’s forecast for growth of 5 percent to 6 percent. The Philippines had the second-highest growth rate in the world 2012, after China, according to Reuters. Government expenditure in the Philippines jumped nearly 12 percent in 2012, while private spending, which was bolstered by remittances from abroad, was up 6.1 percent, Reuters reported.

In 2012, Floyd Whaley wrote in the New York Times, “With $70 billion in reserves and lower interest payments on its debt after recent credit rating upgrades, the Philippines pledged $1 billion to the International Monetary Fund to help shore up the struggling economies of Europe. “This is the same rescue fund that saved the Philippines when our country was in deep financial trouble in the early ’80s,” said Representative Mel Senen Sarmiento, a congressman from Western Samar. [Source: Floyd Whaley, New York Times, August 27, 2012 /^]

“The Philippines has certainly had a steady flow of positive economic news recently. On July 4, 2012, Standard & Poor’s raised the country’s debt rating to just below investment grade, the highest rating for the country since 2003 and equivalent to that of Indonesia. The Philippines is the 44th-largest economy in the world today, according to HSBC estimates. But if current trends hold, it can leap to the No. 16 spot by 2050. The Philippine stock market, one of the best performers in the region, closed at a record high after the recent S.& P. rating upgrade, and the country’s currency, the peso, reached a four-year high against the dollar at about the same time. /^\

“The gross domestic product of the Philippines grew 6.4 percent in the first quarter, according to the country’s central bank, outperforming all other growth rates in the region except China’s. Economists expect similarly strong growth in the second quarter. “We have made a very bold forecast for the Philippines, but I think justifiably so,” said Frederic Neumann, a senior economist at HSBC in Hong Kong. /^\

“ Trinh D. Nguyen, an economist with HSBC in Hong Kong, said the Philippines had benefited from an increase in government efficiency and revenue collection, as well as aggressive actions to address corruption, like the impeachment of the chief justice of the Supreme Court and the arrest of former President Gloria Macapagal Arroyo on suspicion of accepting kickbacks and of misusing government lottery money. “It is not only short-term growth that draws investors to the Philippines,” Ms. Nguyen said. “The fundamentals are there.”/^\

“But there are also real weaknesses in the country. Recent flooding, which by some estimates submerged 50 percent of Manila, illustrates a shortage of modern infrastructure that makes the Philippines highly vulnerable to disasters. “The Philippines is hit with several deadly and devastating natural disasters every year,” Ms. Nguyen said. But government officials have said that the recent flooding might actually help economic growth, because reconstruction will require an increase in public spending and the country will have to put into place programs to make it more resistant to the effects of natural disasters. /^\

“Another hurdle is the fact that the Philippines has traditionally underexploited its natural resources. The government estimates that there are 21.5 billion tons of metal deposits in the country, including large deposits of nickel, iron, copper and gold. But they have never been a significant driver of economic growth because extraction has been mismanaged, Mr. Neumann said. In the shorter term, there are concerns that the country’s newfound prosperity has not sufficiently eradicated poverty. /^\

Philippines Economy Improves But Doesn’t Create So Many Jobs

Floyd Whaley wrote in the New York Times, “At his vegetable stand on a busy street in the Philippine capital, Lamberto Tagarro is surrounded by gleaming, modern skyscrapers, between which a river of luxury vehicles flows. “The Philippines is the rising tiger economy of Asia,” Mr. Tagarro said. “But only the rich people are going up and up. I’m not feeling it.” Mr. Tagarro earns the equivalent of about $5 a day working before dawn and after dark, battling petty corruption to maintain his improvised sidewalk stand and dealing with rising wholesale prices for the onions and tomatoes he sells. [Source: Floyd Whaley, New York Times, June 19, 2013 ==]

“The Philippines, with a 7.8 percent expansion of gross domestic product in the first quarter of 2013, has the fastest-growing economy in East Asia, surpassing even China’s. The country has a red-hot stock market, a strong currency and a steady stream of accolades and upgrades from international ratings agencies. But Mr. Tagarro’s experience — of being left behind by the country’s newfound prosperity — mirrors that of many Filipinos, according to the latest government poverty and employment data. ==

“An estimated seven million Filipinos, about 17 percent of the work force, have gone overseas in search of jobs, according to the Asian Development Bank. For those who stay home, options are few. Despite the rapidly expanding economy, the country’s unemployment rate increased to 7.5 percent in April, from 6.9 percent at the same time a year earlier. About three million Filipinos who want to work are unemployed. “Higher rates of economic growth over recent years have not made a serious dent in the employment problem in the Philippines,” the Asian Development Bank reported in its recent Asian Development Outlook report.” ==

In some cases the number of unemployed has risen as the economy has grown. Earlier Whaley wrote in New York Times, “The robust growth in the Philippines in 2012 has not translated into significant job growth, according to government figures. Unemployment was at 6.8 percent in October, up from 6.4 percent a year earlier, and the number of unemployed in the country rose to 2.76 million from 2.64 million.” [Source: Floyd Whaley, New York Times, January 31, 2013]

President Benigno Acquino III and the Failure to Create Jobs

Floyd Whaley wrote in the New York Times, “President Benigno S. Aquino III ran on a platform of clamping down on corruption, improving the business environment in the country and addressing widespread poverty. In his first three years in office, Mr. Aquino removed high-level government officials accused of corruption, cracked down on tax evaders and aggressively courted foreign investment. Though his efforts to improve the economy have received accolades, he has had less success in addressing the country’s persistent, widespread poverty. [Source: Floyd Whaley, New York Times, June 19, 2013 ==]

“Mr. Aquino’s political opponents argued before recent legislative elections that his actions had further enriched the wealthy and left the poor behind. The Philippines still has a strong service sector. In 2011, it overtook India as a top provider of offshore call centers. But the country lacks the manufacturing base that has lifted millions of people out of poverty in other Asian countries. In countries like China, the rural poor increased their income by finding jobs in factories. That is rarely an option in the Philippines, and few poor people from the countryside are qualified to work in a call center.” ==

In early 2013, Amando Doronila wrote in the Philippine Daily Inquirer, “The Aquino administration flooded the media with the report that the economy expanded 6.6 percent in 2012. The result however was not good enough to have any significant social impact on alleviating poverty and reducing the wide wealth chasm between the rich and the poor. Growth in the past two years of the Aquino administration has not translated into creating enough jobs for the poor that will allow them to break out of the poverty trap.[Source: Amando Doronila, Philippine Daily Inquirer, February 4, 2013 /*/]

“The President, however, acknowledged that “the gap between the powerful and the powerless” has become too huge. Too many people are being left behind and it has also become clear that inequity is borne of corruption. “The few at the top have been allowed to run roughshod over the many and have [manipulated] the system to benefit themselves, while the rest wallow in poverty,” the President said. “The greatest challenge for any modern society, then, is how to stem the corruption that has feasted on the very moral fabric of our society,” he added. /*/

“Socioeconomic Planning Secretary Arsenio Balisacan said the “impressive” 6.5-percent growth for 2012 should be sustained for several years to allow its effects to filter down to the grassroots and benefit ordinary Filipinos. Asked about how long would it take for the broad section of the population to benefit from the growth, Balisacan was evasive. “It should be happening, but don’t expect a miracle [where poverty would be] wiped out or substantially reduced,” he said.The 6.5-percent growth figure reflected “only one year” performance of the economy. “If you note experiences of countries around us, it takes several years of sustained … or rapid growth before you can reduce poverty, say by one-half for the population,” Balisacan said. /*/

“Benjamin Diokno, a professor at the University of the Philippines’ School of Economics, agreed that 6.6 percent for 2012 was “a strong growth,” he expressed doubt that the growth rate would be sustainable. Diokno pointed out that based on the October labor statistics, the recent growth may be characterized as “labor-shedding growth. Close to 1 million jobs were lost.” Most Filipinos still depend on agriculture and related sectors for a living, he said.” /*/

Philippine Economy Grows 7.2 Percent in 2013

Beating government expectations, the Philippine economy expanded by 7.2 percent in 2013. Combined with 2012 Philippines experiences its strongest two years of growth since the 1950s. Karl Lester M. Yap and Cecilia Yap of Bloomberg wrote: “Gross domestic product rose 7.2 percent in 2013, the Philippine Statistics Authority said, after gaining 6.8 percent in the previous year. That was the fastest two-year pace since 1954-1955, data compiled by Bloomberg show. A recovery in advanced economies may help President Benigno Aquino achieve his goal of bolstering growth to as much as 8.5 percent by 2016 as he transforms the country into a manufacturing hub. Rising exports have helped counter the impact of Super Typhoon Haiyan, and the central bank said today it will act if needed to contain inflation expectations. “The Philippine economy clearly still has strong momentum despite the typhoon,” said Edward Teather, an economist at UBS AG who covers Southeast Asian markets from Singapore. “That sort of strength in the context of an acceleration in developed nations increases the risk of overheating, something policy makers should keep an eye on.” [Source: Karl Lester M. Yap and Cecilia Yap, Bloomberg, January 29, 2014]

“The Philippines won its first investment-grade scores from Moody’s Investors Service, Fitch Ratings and Standard and Poor’s last year. Aquino’s pledge to curb corruption and spur faster growth has seen foreign direct investment almost double to $2.8 billion in 2012 from 2008, World Bank data show. Consumer spending rose 5.6 percent last quarter from a year earlier, according to today’s report. Investment gained 5.7 percent, while manufacturing increased 12.3 percent. [Ibid]

Jovan Cerda wrote in philstar.com: “Socioeconomic Planning Secretary Arsenio Balisacan said the economy grew better than the government's official target of 6 to 7 percent for 2013, but added that it could have been higher had the country not been affected by various disasters. "Indeed, growth could have been better, had we not been perturbed by various disasters that hit the country such as the Bohol earthquake, the Zamboanga siege and typhoon Yolanda," he said. [Source: Jovan Cerda, philstar.com, January 30, 2014 ||||]

“The Philippines remains as one of the best performing economies in the Asian region in the fourth quarter of 2013, second only to China, which grew by 7.7 percent, Balisacan said. On the supply side, the services and industry sectors continued to be the drivers of economic growth, expanding by 7.1 percent and 9.5 percent in 2013, respectively. "The services sector contributed 3.6 percentage points of the real GDP growth in the fourth quarter of 2013. This was followed by the industry sector with 2.8 percentage points and agriculture with 0.1 percentage point. Fourth-quarter growth on the supply side was mainly propelled by manufacturing, trade, finance and real estate," Balisacan said. ||||

“Meanwhile, on the demand side, growth was boosted by household consumption, which contributed 4.2 percentage points, and net exports, which contributed 1.6 percentage points. Despite the better-than-expected growth, however, some sectors tamed overall growth for 2013, Balisacan said. "Construction had the biggest setback in the fourth quarter. The subsector contracted by 0.8 percent due to stricter rules imposed on real estate lending in compliance with prudential regulations. The Board of Investments has also tightened mass housing incentives. The rule requiring developers to allot 20 percent of their total housing investment for low-cost mass housing units is now being closely monitored and enforced." ||||

“Government spending also slowed down by 5.2 percent, dipping from the 9.5 percent growth posted in the fourth quarter of 2012. The deceleration was due to lower disbursements in personnel services and maintenance and other operating expenditures. For the full year, however, government spending jumped by 8.6 percent. Imports also slowed down by 1.9 percent during the last quarter of 2013 from the 8 percent posted in the same period in 2012. ||||

“Aside from slowdowns in certain sectors, the combined impact of typhoons and other disasters may have also reduced the full year real GDP growth by at least 0.1 percentage point, Balisacan said. Looking forward, Balisacan said the agriculture and industry sectors are expected to be vibrant this year, as the government promotes linkages between the two sectors to increase value added as a key strategy identified in the Philippine Development Plan midterm update. Major infrastructure projects, especially in the transport sector are also expected to boost growth this year and beyond....[W]e are optimistic that the Philippine economy will remain strong in 2014, especially that the outlook on the global economy is becoming more favorable and as the domestic economy remains robust," he said. ||||

Philippines Gets First-Ever Investment Grade Rating

In March 2013, the Philippines achieved its first-ever investment grade rating after international debt watcher Fitch raised the country’s rating to BBB- from BB+. Daxim L. Lucas wrote in the Philippine Daily Inquirer, “Fitch Ratings — the first of the three major international debt watchers to upgrade the Philippines — also assigned a stable outlook for the country’s credit rating. Fitch cited the country’s sovereign balance sheet as being comparable to those of ‘A’-rated nations, while a “persistent current account surplus, underpinned by remittance inflows” has made the country a “net creditor” from its previous deficit position. Fitch also noted the economy’s 6.6-percent economic growth for 2012 and the expected strong growth for 2013, both of which are “stronger and less volatile” that BBB-rated peers over the last five years. “Improvements in fiscal management begun under President Arroyo have made general government debt dynamics more resilient to shocks,” Fitch said. [Source: Daxim L. Lucas, Philippine Daily Inquirer, March 27, 2013]

In May 2013, Standard & Poor' increased the Philippines a long-term sovereign credit rating of "BBB" from "BBB-", and upgraded its short-term rating to "A-2" from "A-3". “The outlook is stable. "We raised the ratings because we now believe the ongoing reforms to address shortcomings in structural, administrative, institutional, and governance areas will endure beyond the current administration," Standard & Poor's credit analyst Agost Benard noted in an e-mailed statement to reporters. [Source: Danessa O. Rivera, GMA News, May 8, 2014 =]

GMA News reported: “The debt watcher also noted the upgrade "reflects the country's strong external liquidity and international investment position, combined with an effective monetary policy framework relative to the country's income level," while maintaining low inflation and interest rates. Malacañang said it was "gratified" by the latest credit rating upgrade from S&P. "And we are hopeful that this will eventually translate into increased investments, and accelerated jobs generation," Presidential Communications Operations Office head Herminio Coloma Jr. said. The Aquino administration is "committed to strengthen public institutions, and build increased capacity among citizens and communities, and thereby promote the attainment of inclusive growth. This is the path that leads to sustained economic development and the raising of the Filipino people’s quality of life," Coloma added. =

“S&P gave the Philippines an investment grade rating on May 2, 2013. It was the second upgrade from practically junk status since Fitch Ratings gave the Southeast Asian country its first ever investment grade status in March 2013. In a statement Friday, Budget Secretary Florencio Abad said S&P basically validated the progress in good governance reforms under the the Aquino administration. “For one, this credit upgrade recognizes the gains brought about by the public financial management reforms we have instituted," Abad noted "We are on the right track in terms of continuously improving our public spending efficiency, primarily in ramping up investments for infrastructure projects, among other key priority and substantial programs and projects," he added. =

Philippine Economy in 2014

Karl Lester M. Yap and Cecilia Yap of Bloomberg wrote: “Aquino plans to increase spending to a record this year while seeking more than $8 billion of investments in highways and airports to improve infrastructure and create jobs. San Miguel Corp., Ayala Corp. (AC) and Megawide Construction Corp. are among companies building schools, power plants and roads. The government estimates reconstruction of the typhoon-affected areas will cost 361 billion pesos ($8 billion). [Source: Karl Lester M. Yap and Cecilia Yap, Bloomberg, January 29, 2014]

Disasters slowed the Philippine economic growth down to 5.7 percent in 1st quarter of 2014. Cliff Venzon of Nikkei wrote: “Philippine economic growth slowed a year-on-year to 5.7 percent in the first quarter of 2014, as natural disasters weighed on production, the government reported. This makes the Philippines the third-fastest growing economy in Asia after China (7.4 percent) and Malaysia (6.2 percent), National Economic and Development Authority Secretary Arsenio Balisacan said in a briefing. The growth, the slowest since the fourth quarter of 2011, was also below market and government expectations. Meanwhile, the January-March expansion was driven by the services and industry sectors, which climbed 6.8 percent and 5.5 percent, respectively, the Philippine Statistics Authority said. Balisacan said natural disasters that hit the country late last year — particularly typhoon Haiyan — pulled economic growth down. "The effects of the typhoon went beyond the Yolanda-affected areas through the supply chain," Balisacan said, using the local name for Haiyan. "That affected investment plans of companies and individuals...so private construction suffered in the first quarter," he added. [Source: Cliff Venzon, Nikkei, May 29, 2014]

In November 2013, Haiyan killed around 6,300 people in the Philippines and destroyed $2 billion worth of crops and infrastructure. In October, a 7.2-magnitude earthquake struck the province of Bohol, also in central Philippines, causing widespread devastation. Balisacan said the effects of Haiyan are "expected to diminish" while reconstruction efforts in typhoon affected areas should also prop up the economy in the coming quarters. "We remain confident that we will meet the growth target of 6.5-7.5 percent for 2014," he said, pointing out that the Philippines is still poised to become Southeast Asia's fastest growing economy — a position it held last year.

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Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Lonely Planet Guides, Library of Congress, Philippines Department of Tourism, Compton’s Encyclopedia, The Guardian, National Geographic, Smithsonian magazine, The New Yorker, Time, Newsweek, Reuters, AP, AFP, Wall Street Journal, The Atlantic Monthly, The Economist, Foreign Policy, Wikipedia, BBC, CNN, and various books, websites and other publications.

Last updated June 2015

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What does 2023 hold for the Philippines’ economy?

The COVID-19 pandemic and other geopolitical events have caused a global crisis over the past couple of years. Major upheavals of this scale are not unknown—in the 20th century, various significant events shook the world, like both World Wars and the Cold War. Between these periods of disruption, global events played out across three “eras”: the Post-War Boom after the Second World War, the Era of Contention from 1972 to 1974, and the Era of Markets from 1989 to 1992, each of which had distinct characteristics and opportunities.

The effects of the current crisis, both humanitarian and economic, cannot be underestimated. However, as the world continues to emerge from the pandemic, business leaders can take advantage of these upheavals, and shape innovation and growth—as evidenced in previous eras—by anticipating future disruptions and shaping strategies accordingly. This kind of “era thinking” is particularly valuable in the Philippines, where disruptions caused by the conflict in Ukraine and international supply-chain crises have had a clear impact.

Looking ahead into 2023, the economic forecast for the Philippines remains a moving target. After a record 10 percent contraction in 2020, the country may bounce back in 2023 with projected growth of around 5.3 percent, though it will hardly rise above preCOVID-19 levels (exhibit).

Key challenges face the country: significantly high unemployment numbers; a high inflation rate (forecast to reach 5.1 percent in 2023); rising policy rates; import and export bottlenecks; and the declining strength of the Philippine peso against the American dollar. 1 “2023 inflation seen topping official target,” Manila Times , January 13, 2023.

The state of the Philippines’ economy in seven major sectors

This article analyzes seven key sectors that offer a detailed insight into the state of the Philippines’ economy in 2023 and beyond. As the data shows, the outlook is complex—there are serious issues to address, but also reasons for optimism.

Real estate and construction

Several global and macroeconomic shocks will likely impact the Philippines’ post-pandemic economic recovery in the real estate and construction sectors. Policy rates may reach 6.25 percent in the first half of 2023, which would negatively impact home lending rates and increase the strain on a sector that must also address the increased costs of construction and logistics caused by supply-chain issues.

Nonetheless, more optimistic projections include an expansion in real estate investment opportunities and the emergence of green real estate, a promising step toward the Philippines’ goal to reduce carbon emissions by 75 percent by 2030. 1 “Philippines raises carbon emissions target to 75 percent by 2030,” Reuters, April 16, 2021.

Much of the sector is expected to recover to pre-pandemic levels by the end of 2023, and construction by the end of 2024. Much of this growth will likely be driven by residential building construction, predicted to grow by 12 percent. Non-residential construction, by contrast, has yet to recover to pre-pandemic levels.

There will likely be an increased demand for office space, caused by companies introducing return-to-office policies, as well as a resurgence in the need for industrial, retail, and leisure spaces, both of which would boost sector-wide growth.

Another consideration is hybrid working—this is in fact higher in the Philippines than the global norm. 1 Vaughn Alviar, “Hybrid work is the future,” Philippines Daily Inquirer , March 11, 2022. Office spaces may need to be reinvented as companies look to adopt more hybrid ways of working. This could result in vacancy rates persisting, however the growth of coworking facilities and the desire for sustainable buildings will necessitate innovations in construction techniques and leasing agreements, thus encouraging sector-wide growth.

Travel and hospitality

The outlook for the travel and hospitality sector is strong, with a full recovery to pre-pandemic levels expected by 2024. Outbound and inbound travel may be sluggish due to remaining international travel restrictions and further health and safety concerns: 71 percent of Asian countries still impose travel restrictions to varying degrees; Europe is more lenient with 50 percent of countries imposing no restrictions at all.

Despite this, hotel occupancy is expected to rise as more foreign tourists visit the Philippines. China’s removal of quarantine on arrival from January 8, 2023, and Hong Kong’s withdrawal of mandatory quarantine on arrival in September 2022, are both reasons for optimism. If mainland China’s air travel were to recover at the same pace as Hong Kong’s, four million air passengers a month out of China can be expected by the second quarter of 2023, pushing air travel back up to 40 percent of pre-COVID-19 levels.

Several key trends are expected to influence economic recovery in the sector, the impacts of which may be both positive and negative. High inflation, for example, has increased airlines’ operating expenses. The weakening peso, by contrast, could have a positive effect by encouraging locals to travel and spend within the country rather than abroad. In fact, local air travel is already on the rise and is expected to reach preCOVID-19 levels in the second half of 2023. 1 Katlene O. Cacho, “Air travel approaches pre-pandemic levels,” SunStar, December 20, 2022

The growth of “revenge travel” (travelling widely and often to make up for time and opportunities lost during the COVID-19 pandemic and attendant travel restrictions) also contributes to the robust growth of leisure travel, while business travel is recovering more slowly. This is largely due to the inconsistent travel restrictions between countries, and remote working tools that do away with the necessity of meeting in person.

Sustainable tourism and increased awareness of eco-friendly travel options may not negatively affect the number of tourists visiting the Philippines, but they will likely change how visitors and locals arrive in, and travel through, the country. The fact that the hospitality industry has recovered more significantly than airlines shows this. Other contributing factors include the increase in domestic travel and the popularity of the “digital-nomad” lifestyle, which allows travelers to live and work for extended periods in their destinations of choice, rather than flying between destinations frequently.

Financial services

The strength of the Philippines’ financial services sector in 2023 will likely be subject to two key factors: interest rate hikes and rising inflation. Interest rate hikes could have a positive effect by widening the net-interest margin, but macrovolatility could cause a slowdown in new loans. Rising inflation will likely increase the pressure on wages and increase operational costs.

The financial sector is already responding to these challenges. It is prioritizing the interoperability and digitization in top banks, and the country’s central bank, Bangko Sentral ng Philipinas, is expected to increase interest rate hikes to keep up with inflation. 1 Lawrence Agcaoili, “More BSP rate hikes boom as inflation spikes,” Philstar Global, January 6, 2023.

Banks have taken additional steps. These include recovering nonperforming loans, reducing loan loss provisions with an outlook on improved credit status, and the emergence of digital neobanks, which offer higher savings interest rates and faster customer acquisition. Perhaps most crucially, there are growing efforts to make banking more accessible and inclusive. The growth of digital banking is significant: in 2021, 60 percent of Filipinos used digital banking (a sharp increase from 17 percent in 2019), and growth is expected to accelerate in 2023. 2 “2021 financial inclusion survey,” Bangko Sentral ng Pilipinas, 2021.

Growth in the Philippines’ energy sector contracted to 4.8 percent in 2022 and is expected to rebound to 5.5 percent in 2023. However, the sector needs to ensure that this growth target can be met given looming supply constraints and while accelerating the transition to green energy.

Due to a growing population, an economy coupled with the depletion of domestic gas from the Malampaya gas field, and a heavy reliance on imported fuel, a power supply shortage is expected closer to 2024 to 2025. 1 “Malampaya depletion expected by 1st quarter of 2027,” BusinessWorld, May 19, 2021. This will put sustained upward pressure on prices and an urgency to bring greenfield capacity online.

On the energy transition, major players are addressing the challenge by diversifying energy assets across the board, with investments in cleaner technologies such as solar, hydro, and battery energy storage systems. These efforts are underway in both the private and public sectors. For example, the Philippine government has introduced measures to improve the availability and sustainability of energy. Legislation has been passed to reduce fuel and power costs via subsidies for transport operators, boost investments in indigenous energy resources such as coal, and strengthen electric cooperatives for broader access to electrification. 2 Philippine energy plan 2020–2040, Department of Energy, Republic of the Philippines.

The Philippines may generate enough energy to cover its consumption needs, but the supply-demand balance will remain tight, with clear downside risks. Threats to the energy supply include rising oil and gas prices, supply-chain disruptions, and currency depreciation.

The healthcare sector experienced strong growth during the COVID-19 pandemic: in 2021, healthcare services increased by 14.1 percent and pharmaceutical manufacturing by 12.9 percent. Growth stalled in 2022 (3.9 percent and 8.25 percent for healthcare services and pharmaceuticals respectively), and this trend is expected to continue in 2023. While demand will continue to grow, the sector will have to address three major challenges.

First, rising inflation will impact costs for service providers and manufacturers, though prices will initially lag due to procurement contracts being set in advance. One of the biggest drivers of inflation is an increase in healthcare wages, especially of hospital staff such as nurses, who are in short supply locally and globally. Second, supply-chain disruptions will drive up medicine price variations and production inefficiencies, particularly as the Philippines is a net importer of pharmaceuticals. And third, turnover levels for health workers are expected to remain high, straining the capacity of service providers and potentially resulting in a poor quality of healthcare.

To address these challenges, the sector is renewing the emphasis on universal healthcare and building robust healthcare ecosystems. The Department of Health aims to close the supply-demand gap in healthcare by increasing facilities in areas outside Metro Manila and making medicines more affordable. 1 “Universal health care,” Department of Health, Republic of the Philippines.

In the private sector, key players are investing strategically to cover the healthcare value chain, and making concerted efforts to tap into growing online markets through electronic medical records, all-in-one telemedicine and consultation apps, and other ancillary services.

The Philippines’ healthcare sector is so vast that broad, sector-wide forecasts can sometimes obscure as much as they reveal. The outlook becomes clearer when subsectors are evaluated on their own terms, as they diverge widely in market size, are subject to different trends, and experience different rates of growth. The healthcare providers subsector, for example, boasts a larger market size than the products and payors subsectors combined.

Despite significant growth in 2022, the Philippines still has some catching up to do. There is no doubt that it faces global macroeconomic headwinds in 2023, however big pockets of opportunity exist within each of its biggest sectors. To grasp these as soon as possible, companies need to rethink how they deliver to customers and operate their businesses. With such strategies in place for possible future disruptions, the Philippines can stand strong and continue to grow its economy in the year ahead.

Jon Canto is a partner in the Manila office, where Kristine Romano is a partner and Danice Parel and Vicah Villanueva are consultants.

The authors wish to thank Aaron Ong, Ryan Delos Reyes, and Jeongmin Seong for their contributions to this article.

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[OPINION] 10 years of writing about Philippine economics

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ALEJANDRO EDORIA

Today marks my 10 th year contributing economics op-ed pieces for Rappler. How time flies! And what a blast it has been!

My longtime editor, Chay Hofileña, likes to joke about this by saying this is my longest relationship yet. Kidding aside, I’m truly grateful to her for taking a chance on the unsolicited email of a 23-year-old graduate student a decade ago, and liking my style of writing about economic issues.

Since then Ma’am Chay – as well as the other lovely and redoubtable Rappler manangs – showed me the ropes and taught me lots about journalism, which I didn’t really study formally. Now I’d like to think my writing is all the better for it.

To date I’ve written 322 articles for Rappler (including this one), initially appearing in the iSpeak and IMHO sections, then graduating into the Thought Leaders section starting September 10, 2016.

Through my pieces, I’ve captured some pretty big developments and shifts in Philippine economics and politics. Let me share with you 10 pieces that encapsulate that journey.

1. Kasambahay Law: Its unintended consequences (January 31, 2013)

The article that started it all. For one reason or another, I felt strongly about this piece of legislation when it was signed into law by the late former president Benigno Aquino III on January 18, 2013. Applying (rather naively, I admit) basic lessons from microeconomics, I argued that legislating the wages of househelps or kasambahay might lead to some of them becoming unemployed if their employers’ couldn’t afford it.

Unfortunately, years later, the implementation of the Kasambahay Law remains poor . Although there are now help desks in DOLE regional offices catering to househelps specifically, many househelps remain unaware of the benefits they’re entitled to under the law. Many employers are also not complying. Monitoring of househelp remains difficult because of DOLE’s lack of staff, as well as the difficulty of gaining access to many househelps’ areas of work.

Economists’ understanding of the minimum wage has also drastically shifted since then. Whereas before economists were deathly afraid of minimum wage hikes (because they supposedly lead to unemployment), the empirical evidence for that is a lot weaker now. In certain contexts, higher minimum wages may even lead to higher employment.

The lessons: just because a law is approved doesn’t mean it will be implemented, and the feared of unintended consequences will pan out. (Maybe the poor implementation itself is also an unintended consequence?) Also, don’t take textbook economic models and theories too seriously.

2. Marcos years marked ‘golden age’ of PH economy? Look at the data (March 5, 2016)

This piece was inspired by the BusinessWorld piece of my former professor, Dr. Emmanuel de Dios of the UP School of Economics, on the same topic. After reading that, I decided to dig deeper, and that got me obsessed about Martial Law economics. I discovered for myself that there’s a ton of empirical data showing that Martial Law was not the country’s “golden age,” and in this piece I shared some of those data.

At that time, I was elated by the splash this article made. But I overestimated the power of data to change people’s minds about an issue, and underestimated the strength of the Marcoses’ propaganda machine, the social media echo chambers, and the cognitive biases that could lead people to prefer falsehoods to truth.

Since then Martial Law economics has been a key research interest. In February 2023, I will be publishing my first book – False Nostalgia: The Marcos Golden Age Myths and How to Debunk Them – combining 7 years’ worth of research on Martial Law economics. The starting point of that journey was this Rappler piece.

3. Free tuition alone won’t make college any more accessible (March 9, 2017)

Through my pieces, I get to indirectly participate in legislative debates and proposals. One of the memorable pieces of legislation in the past years was the free tuition law, that made college education free in all state universities and colleges, as well as local ones.

Using past research and government data, I showed that the richest fifth of tertiary students are overrepresented vis-à-vis the poorest fifth. So, arguably, the free tuition law stands to give billions worth of subsidies to rich kids who can actually afford to pay for college tuition. What a waste! This subsidy of course posed as a fiscal strain: why should the government subsidize the rich this way?

I remember receiving praise from colleagues saying the original article (there was also a follow-up piece in 2019) was a great use of statistics to argue for sound economics. But I remember receiving a lot of flak as well on Twitter from those from the Left (especially the young ones), saying I should stop spewing such “neoliberal” BS. The attacks were so intense I had to leave Twitter for a few days and let things subside.

As with many legislative proposals, politics and populism trump economics. Former president Rodrigo Duterte signed the free tuition law in August that year.

I realized then that my pieces can be quite triggering for some groups ascribing to certain closely held narratives or ideologies. But so long as I’m using data and evidence to back up my claims, I should be fine.

4. Why is Philippine inflation now the highest in ASEAN? (September 6, 2018)

Discussing macroeconomic statistics and trends is a recurring theme of my Rappler pieces. In fact, macro developments have significantly shifted my teaching and research interests in this direction (vis-à-vis microeconomics).

One of the more memorable trends I wrote about was the spell of high inflation in 2018. That year inflation reached a nine-year high, and was also the highest inflation rate in ASEAN around September and October. I had fun triangulating the reasons for this, with factors ranging from the rice shortage brought about by the Duterte administration, the rising trade deficit, inflation expectations, and the ill timing of the TRAIN law, which raised excise taxes just as world oil prices were rising.

I also rebutted claims by the Duterte economic managers then that rising inflation was “not alarming” and “quite normal in a fast-growing economy.” Such rebuttals have irked the economic managers a number of times, based on reports from my friends in different agencies. Little do those officials know that I receive a lot of positive feedback (even encouragement) as well from many economist colleagues, who are just constrained from speaking out in one way or another.

5. Dengvaxia scare: How rumors caused viral outbreaks (January 16, 2019)

I use my Rappler pieces to show that economics can be related to other fields of study, such as public health.

I particularly liked writing this piece about the ill effects of the Dengvaxia scare perpetrated by certain personalities of the Duterte administration. In a nutshell, disinformation surrounding the new dengue vaccine spilled over to other vaccines, and parents ended up not having their children take basic shots for measles and like diseases. Hence, all sorts of otherwise preventable epidemics spread across the country. The opening sentence captured it rather nicely: “Fake news can kill, and the Dengvaxia scare is a perfect example of it.”

This was a perfect illustration of so-called “negative externalities” in economics. And I remember incorporating this piece in my microeconomics classes back then. Little did we know that the Dengvaxia scare would presage the even greater troubles wrought by the global pandemic just one year later.

6. Dismal PISA rankings: A wake-up call for Filipinos (December 4, 2019)

Education issues have always been close to my heart, and I was particularly devasted by news that we ranked so poorly in the 2018 Programme for International Student Assessment (PISA). Specifically, we ranked dead last in reading, and second to last in math and science.

Later, even more bad news came when we also ranked dead last in the 2019 TIMSS (Trends in International Mathematics and Science Study). Meanwhile, the first ever Southeast Asia Primary Learning Metrics in 2019 also showed that 9 in 10 schoolchildren in the Philippines can’t read basic texts.

Long story short, we’re experiencing a full-blown education crisis – undoubtedly worsened by the pandemic, what with the extremely long school closures and the “learning losses” from online classes.

I argued that all these studies ought to be a wake-up call for Filipinos. But the attitude from education officials has been characterized by denialism and gaslighting. The Department of Education, for instance, complained that they were not consulted for a World Bank education report. After that, the World Bank took down their report from their website. I wrote about this in “ 8 facts from WB education report they don’t want you to read .”

7. Why Filipinos need to stay at home until June (or even longer) (March 19, 2020)

By far my most viral piece ever (pun unintended). I wrote about this days after Duterte imposed the first COVID lockdown nationwide. At the time, everyone was at a loss about what’s going on, and nobody knew until when Duterte’s strict lockdowns would last.

I saw some analyses on Facebook by experts in biomedical data and biostatistics, showing the exponential rise of COVID-19 cases that necessitates prolonged lockdowns up to at least June that year. This was quite concerning to a lot of people: many people thought the lockdowns would just last days or a few weeks.

But little did we know that the lockdowns would be a lot longer than that, with some form of mobility restrictions lasting up to 2 years or more, with varying degrees of strictness nationwide (I discovered recently that the lockdowns were very severe in places like Camiguin Island). Also, the lockdowns would turn out to be a political tool of the Duterte administration to subjugate people, especially the poor.

COVID would dominate a lot of my Rappler pieces since then: constituting maybe a fourth of all my pieces, ranging from the economics of lockdowns , the health versus economy trade-off , the inadequate and slow distribution of economic aid , the glacial pace of vaccination , the Duterte government’s wrong budget priorities (I collaborated a lot with my friends Zy-za Suzara and Luis Abad on this topic), and pandemic-related corruption (e.g., Pharmally).

Fast-forward to 2023, our lives are normalizing now. But I’m glad to be able to document the economics of the pandemic through Rappler; later I might just write a book about it.

8. 10 Build, Build, Build projects that started in previous admins (June 23, 2021)

My Rappler columns are often a venue to debunk some of the lies and misconceptions said by government officials. And quite a few people look forward to my pieces when it comes to economic mistruths.

The Duterte administration was particularly fond of boasting about its “flagship” economic project, an infrastructure spending spree called “Build, Build, Build” (BBB). However, upon closer inspection, many of projects under BBB were in fact started by previous administrations. My friend Zy-za Suzara, formerly with the Department of Budget and Management, co-wrote this piece with me on the rampant credit-grabbing of the Duterte administration.

Some other pieces I wrote on economic lies include those about the “ Duterte Legacy ,” the statistics behind the war on drugs , the TRAIN law , and the recurring claim that we would soon be an “ upper-middle income country ” (we’re still not).

9. Malubha ang state of the nation (July 23, 2021)

Up until the middle of 2021, I’ve been writing almost exclusively in English. But months before the pivotal 2022 elections, there was growing concern about the looming possibility of another Marcos presidency. And I figured I needed to write more in Filipino (if not exclusively in Filipino) to try to reach a wider audience with my economics pieces, especially those that would figure in the electoral debates and discussions. I started with this piece, on the last State of the Nation Address of former president Duterte.

Writing in Filipino was quite liberating for me: I could write quicker, and I could use the nuances of everyday language in a way I couldn’t do with English. For instance, I found myself incorporating more jokes and witticisms, as well as pop culture references. Most of all, I discovered that there was indeed a huge reader base of articles in Filipino: interactions and engagement with my pieces blew up.

I wrote in Filipino until end of 2022, and switched back to English just recently. But I may still put in some Filipino pieces here and there.

10. Budol of the century (May 12, 2022)

Even if my column is primarily about economics, I can’t avoid writing about politics from time to time. This piece was written a few days after the 2022 elections, when the partial and unofficial results showed that another yet Marcos would sit in Malacañang.

Apart from showing some of the election results across the regions, I explored possible reasons for the landslide win of the teamup between Bongbong Marcos and Sara Duterte. These include intense regionalism (which pervades much of everyday life, culture, and politics), “networked disinformation,” historical distortions, and the broken educational system. These are pretty much the same issues that led to the landslide win of administration senators in the 2019 midterm elections, which I also wrote about in “ Why is Duterte still so popular ?”

All in all, writing for Rappler in the past decade has been an unalloyed boon for me and my career. My writing has made me grow as a writer and economist, and I’ve also made a ton of new friends along the way. (I’ve irked some people, too, from all sides of the political spectrum. But I guess that’s an occupational hazard, and one more measure of the impact of one’s writing.)

Here’s to another 10 years of writing for Rappler! – Rappler.com

JC Punongbayan, PhD is an assistant professor at the UP School of Economics and the author of the forthcoming book, False Nostalgia: The Marcos Golden Age Myths and How to Debunk Them . JC’s views are independent of his affiliations. Follow him on Twitter ( @jcpunongbayan ) and Usapang Econ Podcast .

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Philippines: The Economic Situation during Pre-Colonial and Early Colonial

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The period from the 15th to the 17th centuries CE in the Southeast Asian region has been termed as the ‘Age of Commerce’. It is characterised by marked delineation of societies, unprecedented urban expansion and the formation of states largely derived from a vibrant sea-borne trade not only within the countries of the region but also with China in the east and India and the Arab states in the west. Historical and archaeological sources indicate that the 15th century set the stage for the entry of Southeast Asia into the maritime economy that linked east and west prior to the arrival of the Europeans in the 16th century CE. What was the impact of this regional trade in the Philippines? Recent archaeological research has generated a significant corpus of data from terrestrial and submerged sites during the Philippine protohistoric period (c. 9th – 16th centuries CE). This paper will present the archaeological investigation results of three shipwrecks (Pandanan, Lena Shoal and Santa Cruz) and three terrestrial sites (Tanjay, Cebu, Calatagan) in an attempt to elucidate the process of how foreign archaeological materials were brought into the Philippines and if these materials used by the existing local societies during that period.

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Junko Habu, Peter V. Lape and John W. Olsen (ed.), Handbook of East and Southeast Asian Archaeology, Springer Science+Business Media New York, New York, pp. 633-658.

Hsiao-chun Hung 洪曉純

This chapter explores the archaeological record of cultural interactions in Southeast Asia (SEA), from the Neolithic past up through the period of historically reported kingdoms, from approximately 2000 BC through AD 200. Cultural interactions have been evidenced in different forms, such as human migrations in a large scale, traveling craftsmen and merchants in smaller scales, and overlapping patterns of exchange of knowledge, raw materials, finished products, new ideas, and people throughout SEA. Rivers and seas provided natural conduits for such networks across SEA, while overland routes also were developed. Communities were interconnected across SEA and with other civilizations (e.g., China, India, Arabia, and Rome) by river, sea, and land. Through examining these networks, we can learn about the long-term and inter-linked developments of SEA cultures that we see today. Archaeology has a long history of examining cross-community interactions. Precious stone ornaments, distinctively decorated pottery, glass beads, casting molds for metal-production, and other tangible artifacts constitute the hard evidence of materials that were transported from one place to another in dated contexts. With these indisputable facts in hand, archaeologists can reconstruct maps of ancient networks of communications and trade contacts during specific time periods. We further can consider how the material evidence relates with larger themes of economic production, social meaning of trade and exchange, and opportunities for political and ideological developments. The geographic setting of SEA is highly propitious for several inter-community networks, often overlapping. River systems flow in reticulate patterns of waterways throughout much of Mainland SEA, while the Red River and Mekong River connect farther in two major routes with southern China. Additionally, coastlines enable contacts across the sea in all directions, linking Mainland and Island SEA with each other and with distant lands. Inter-community trading and other networking activities have greatly shaped the cultures, histories and languages of SEA over long time scales, through both "bottom-up" and "top-down" processes. The bottom-up developments entailed regular routines among local families who traded foods, exchanged finished craft goods and perhaps formed alliances at various scales within their communities and throughout whatever networks were available.

Czarita Aguja

Since pre-Hispanic until the early 18th century period, Laguna de Bay had been a significant geographic area for collective identity building as evidenced by the archaeological discoveries and historic records. This paper takes a multidisciplinary approach in studying the site by discussing the recovered artifacts and tracing significant literary works penned since the Spanish occupation up to the contemporary period. The findings, which demonstrated vast settlements, widespread industrial work, sustained trade relations with China and Indochina, and uniform burial styles were indications of environmental, cultural, political, industrial, and philosophical realities and activities which existed around the area.

Archaeological and Anthropological Sciences

Nancy Beavan , Sokha Tep

Abstract In mainland Southeast Asia, the so-called water frontier unified an otherwise geographically broad and culturally disparate economic network of long-, medium-, and short-distance trading of the 14th–17th century CE "Age of Commerce." Focus on the rise of the larger port towns supporting this burgeoning maritime trade (e.g., Ayutthaya, Melaka, Hoi An) has overshadowed smaller maritime operations that must have serviced less regulated coastlines. In this paper, we evaluate the evidence of likely supply lines for relatively remote sites in the Southern Cardamom Ranges of southwestern Cambodia.We present the results of a geochemical analysis of ceramics from two contemporary and short-lived assemblages: comprehensively dated mid-15th c. to mid-17th c. CE burial complexes in the Cardamom Mountains, and a dated shipwreck (Koh S’dech) recovered from waters off the adjacent coastline. We compare the shipwreck assemblage with other wreck assemblages to contextualize it within larger maritime exchange patterns. The Koh S’dech wreck assemblage appears typical of a Southeast Asian short-haul coastal trader of this period, with a cargo consisting of a range of utilitarian household ceramics: large, medium, and small glazed stoneware storage jars, earthenware cooking pots, stoves and mortars, and Btableware^ bowls. Comparison of burial, shipwreck, and reference ceramic compositional data confirms the jars and fine wares predominantly came from multiple production centers in Central and Northern Thailand. The few Angkorian jars identified in the burials were evidently heirlooms from what was, by the mid-15th c. CE, a defunct Khmer production complex east of Angkor. The results of this provenience analysis highlight (a) the Cardamom burials as an example of previously undocumented unregulated coastal interaction and (b) the relatively sophisticated and coordinated market-oriented strategies of inland ceramic producers at this time. For mainland Southeast Asia, the water frontier integrated not only ethnically diverse maritime port communities, but also those in more remote inland regions. Keywords Age of Commerce . Neutron activation analysis . Shipwreck

Maritime Contacts of the Past: Deciphering Connections Amongst Communities

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A new vision for the Philippine economy after Covid-19

The Philippines | Economy

The Philippines is one of the fastest-growing economies of the past decade, averaging 6.4% growth per year in 2010-19. Indeed, an expanding and youthful population, combined with reforms and an ambitious infrastructure programme, have made it an enticing investment destination. Nevertheless, as is often the case in emerging markets, challenges regarding inequality – particularly the distribution of wealth and services – remain barriers to growth. The Covid-19 pandemic tested the country’s resilience in 2020, impacting major sectors. However, the government mobilised to support vulnerable industries with two major stimulus bills, which aim to create jobs and sustain growth into 2021.

The Philippines has shifted from an agricultural to a broadly services-focused economy. According to the central bank, Bangko Sentral ng Pilipinas (BSP), in 2019 agriculture, forestry and fisheries made up 9.2% of GDP, behind industry (30.2%) and services (60.6%). Services overtook industry as the leading contributor to GDP in the 1980s and accounted for almost 60% of total employment by 2019 – highlighting the growing importance of IT-business process outsourcing (IT-BPO). In addition to IT-BPO, export services, including those delivered by overseas Filipino workers (OFWs), play a significant role. Remittances from OFWs reached a record $33.5bn in 2019, representing 9.3% of GDP.

Industry accounted for 19.1% of workers in 2019 and is centred around manufacturing and agri-business. The development of a number of special economic zones should help bolster industrial growth in the years to come. The agriculture sector, which has shrunk considerably since 1980, has nevertheless been highlighted as a strategic sector for economic recovery amid Covid-19: the government identified food security as a primary concern. The sector employed 22.9% of workers in 2019, and its main products include rice, coconuts, maize, sugarcane, bananas, pineapples and mangoes.

Government Oversight

The Philippines’ primary socio-economic and policy planning body is the National Economic and Development Authority (NEDA). President Rodrigo Duterte has been head of the Cabinet since 2016, serving a six-year term, and also chairs the NEDA board. Karl Kendrick Chua occupies the positions of vice-chairperson and acting socio-economic secretary. The board includes the heads of various government departments, the governor of the BSP and the chairperson of the Mindanao Development Authority.

Development Plans

The Philippine Development Plan (PDP) 2017-22 is the medium-term economic blueprint for inclusive growth. Its primary aims include tackling poverty and regional growth disparities, and transforming the nation into a globally competitive knowledge economy. Its three pillars are building trust and transparency between government and society; reducing inequality and increasing opportunities; and accelerating growth through innovation and human-capital development. Prior to the pandemic, goals included achieving upper-middle-income status, reducing the poverty rate to 14%, and lowering rural poverty from 30% in 2015 to 20% by 2022. As of mid-2020 revisions to PDP targets were under discussion in light of the pandemic; however, poverty-reduction goals look set to remain a priority. In July 2020 Chua stated that “the immediate objective under the PDP will now focus on a healthy and more resilient Philippines”. Furthermore, in October 2020 NEDA and the World Bank published a report underscoring the importance of digitalisation and digital adoption, and decreasing the digital divide to meet economic aspirations.

Longer-term planning is anchored in the AmBisyon Natin 2040 vision, formulated in 2016, which aims to eradicate poverty and create a middle-income country. This would require tripling GDP per capita from $2892 to $9350 by 2040, and growing the economy by an average of 6.5% per year from 2018. Priority sectors highlighted under the plan include manufacturing, health, agriculture and financial services. The plan, which is being implemented by NEDA, is aligned with the administration’s 10-point socio-economic agenda, which includes tax reforms and improvements to the ease of doing business, and the UN 2030 Sustainability Development Goals. In July 2020, at an online World Bank forum, Chua said the country had achieved seven of the 10 points on the socio-economic agenda, highlighting the passage of the Tax Reform for Acceleration and Inclusion (TRAIN) among other reforms.

2019 Performance

Average economic growth of 6.4% in 2010-19 was up from 4.5% over the previous 10 years. Indeed, despite subdued global growth and uncertainty, GDP growth of 6% in 2019 – while slightly down from 6.3% in 2018 – marked the Philippines as one of the fastest-growing nations in the world. These fundamentals were reflected on the World Bank’s ease of doing business index in 2020: the Philippines rose 29 places to rank 95th out of 190. The bank highlighted improvements in starting a business, dealing with construction permits and protecting minority investors.

Economic expansion in 2019 was driven by the services sector, which grew by 7.5% to total P11.7trn ($232.7bn), according to the BSP. This was propelled by growth in numerous subsectors, notably public administration, defence and social security, which grew by 13.4%, and financial and insurance activities, up 11.9%. The IT-BPO segment grew by 7.1%, recording $26.3bn in revenue, according to figures from the IT and Business Process Association of the Philippines.

Meanwhile, industry growth eased from 7.3% to 4.7%, to reach P5.8trn ($115.4bn). Expansion was driven by construction (7.8%); electricity, steam, water and waste management (6.6%); mining and quarrying (3.6%); and manufacturing (3.2%). Construction’s growth rate, while high, was down from the 14.3% growth seen the previous year due to the delayed passage of the 2019 budget and the subsequent ban on public works during the mid-term election in May 2019. Likewise, manufacturing grew slower than the 5.1% expansion seen in 2018, marking the weakest growth for the subsector since 2009 (see Industry and Agri-business chapter).

Agriculture posted growth of 1.2% in 2019, up from 1.1% in 2018, to contribute P1.9trn ($37.8bn). Performance was attributed to key agricultural products such as maize, which expanded by 3.3%; mangoes (4.3%); and poultry and eggs (5.8%). However, contractions in segments such as sugarcane (-8.9%), palay (unhusked rice) (-5.9%) and bananas (-2.1%) weighed on growth, prompting the government to rethink agricultural programmes and projects that favour resilient crops.

Impact of Covid-19

The first case of Covid-19 on Philippine soil was confirmed in January 2020, and strict quarantine measures were imposed to varying degrees from mid-March onwards. As a result, the economy shrunk by 0.7% year-on-year (y-o-y) in the first quarter, 16.5% in the second and 11.5% in the third – a stark contrast to the 5.4% growth seen in the second quarter of 2019. This was driven by weaker remittances from OFWs, which were down 9.3% y-o-y in the second quarter, and slower growth in investment, exports and tourism earnings. According the IMF’s October 2020 “World Economic Outlook”, real GDP is forecast to contract by 8.3% in 2020 – the largest drop in Southeast Asia. This projected recession is deeper than the IMF’s June forecast of -3.6%, as the country continued to face one of the highest confirmed case rates in ASEAN, with over 435,000 cases as of December 2020.

Services, meanwhile, contracted by 15.8% y-o-y in the second quarter, compared to growth of 7.5% one year earlier. Given its sizeable share of GDP, the segment’s contraction translated into a 9.7-percentage-point drop in overall GDP, primarily due to stay-at-home measures and the grounding of land, sea and air travel. However, certain segments posted positive growth, including financial and insurance activities (6.8%) and ICT (6.6%), with e-commerce platforms moving customers to online transactions and e-payments (see Digital Economy chapter). Industry, for its part, contracted by 22.9% y-o-y, compared to growth of 2.5% in the same quarter of 2019. The decline shaved 6.9 percentage points off overall GDP, with construction and manufacturing contracting by 33.5% and 21.3%, respectively, due to restrictions on non-essential services under enhanced community quarantine (ECQ) – the country’s strictest lockdown category. However, as with services, certain segments grew during this period: pharmaceutical products and preparations, for example, expanded by 7.7%, following 27.3% y-o-y growth in the first quarter. Lastly, the agriculture sector, driven mainly by higher palay, maize, sugar cane and rubber production, grew by 1.6% y-o-y. The sector will continue to play an important role in economic recovery due to its connection to food security and poverty reduction.

Government Response

In response to the pandemic, and following a sharp increase in community transmission, ECQ was enforced across the most populous island of Luzon from March 16. The lockdown prompted the government to pass the Bayanihan to Heal as One (Bayanihan 1) Act on March 25, 2020, which granted President Duterte emergency powers to address the crisis. Among the mitigation efforts was a P595.6bn ($11.8bn) fiscal package for vulnerable individuals and groups, which included P205bn ($4.1bn) in cash aid for 18m low-income households; some P57bn ($1.1bn) in social-protection measures for workers; over P58bn ($1.2bn) for the medical response; and a P120bn ($2.4bn) credit guarantee for small and medium-sized enterprises (SMEs) and support for agriculture.

The Bayanihan to Recover as One Act (Bayanihan 2) was subsequently signed into law on September 11 to extend emergency relief, expand health care, and help businesses and OFWs. The P165.5bn ($3.3bn) stimulus included P140bn ($2.8bn) for hard-hit industries and a standby fund of P25.5bn ($507.2m) for the government to spend until the 2021 budget takes effect (see analysis). “Under Bayanihan 2 we allotted P820m ($16.3bn) to boost assistance to OFWs. OFW remittances will always be a significant factor in our post-pandemic recovery, as these will support consumption, savings and investment,” President Duterte told OBG. “We have therefore launched programmes such as the BaLinkBayan Portal and the Overseas Filipinos Remittances for Development project, which aim to harness remittances for investment and capital mobilisation.”

Other legislative measures include the Corporate Recovery and Tax Incentives for Enterprises ( CREATE) bill, which includes gradually lowering corporate income tax from 30% to 20% by 2027, among other pro-business incentives, and is the second package of the Comprehensive Tax Reform Programme (CTRP). Now approved by both the House of Representatives and the Senate, it is set to be enacted before the end of 2020 (see analysis). In a similar vein, in August 2020 the Securities and Exchange Commission (SEC) issued a regulatory framework for the creation and operation of a new corporate debt vehicle intended to support medium and large firms dealing with liquidity issues. “In addition to CREATE and Bayanihan 2, the government has worked on corporate debt vehicle programmes that are attractive to local and foreign investors,” Jose Luis Gomez, president and CEO of RCBC Capital, told OBG.

Fiscal Policy

Government spending had been increasing in the years leading to 2020 due to major infrastructure upgrades called for under the PDP 2017-22. Full-year public expenditure amounted to a record P3.8trn ($75.6bn) in 2019, or 19.5% of GDP, up 11.4% on the previous year. According to the Department of Budget Management, the bulk of public spending went to infrastructure projects under the Build, Build, Build programme, which increased by 9.7% to P881.7bn ($17.5bn) in 2019. With regard to public sector inflows, tax revenue grew by 10.2% and non-tax revenue by 8.9%, leading to overall government revenue growth of 10.1%, totalling P3.1trn (P61.7bn). Overall, however, this amounted to a budget deficit of 3.2% of GDP, equivalent to 2018. Meanwhile, the government’s outstanding debt-to-GDP ratio fell from 41.9% in 2018 to 39.6% in 2019, the lowest since 1986. Tax reform under TRAIN contributed to overall state revenue and narrowed the fiscal gap, enabling the Philippines to enter 2020 in a relatively strong position, with a P4.1trn ($81.5bn) state budget – up 12% on the amount earmarked in 2019.

Government expenditure rose by 7% and 22.1% in the first and second quarters of 2020, respectively, due to the pandemic. Total expenditure equated to a deficit of P473.3bn ($9.4bn) in the second quarter, reversing the P47.6bn ($946.7m) surplus one year earlier and equivalent to 11.4% of GDP. On the income side, revenue stood at P690.2bn ($13.7bn), or 16.6% of GDP, down 17.7% y-o-y. Higher spending was attributed to Bayanihan 1 and measures to protect vulnerable industries. By the end of August the deficit had risen to P740.7bn ($14.7bn), state revenue was down 8.3% and spending had increased by a further 20.8%. However, while state revenue in January-August fell by 12.2% y-o-y, a combined P1.6trn ($31.8bn) was collected, exceeding the period’s adjusted target by 7.2%.

In October 2020 the House of Representatives approved the 2021 budget and the Senate gave its approval in late November. Set at P4.5trn ($89.5bn), the budget – which will undergo a final review in December – is 9.9% larger than in 2020 and equal to 21.8% of projected GDP for 2021. It includes P203.1bn ($4bn) for health care to address the pandemic and P1.1trn ($21.9bn) for infrastructure to kick-start the economy.

Monetary Policy

Headline inflation decreased from an average of 5.9% in 2018 to 2.5% in 2019 – which sits within the BSP’s target range of 3% plus or minus one percentage point – and was attributed to slower price increases for food and energy items. In turn, household spending grew by 5.9% in 2019, with food and non-alcoholic beverages up 5.1%, and housing, water, electricity, gas and other fuels rising by 6.3%. Over the course of 2019 the BSP cut the key policy rate by 75 basis points (bps) as inflation eased, bringing the overnight reverse repurchase rate to 4%. In addition, after a cumulative 200-bp cut to the banking reserve requirement ratio (RRR) in 2018, it made 400 bps of cut in 2019, bringing the rate to 14% (see Financial Services chapter). To soften the impact of Covid-19, the BSP cut the RRR by 200 bps in March 2020, releasing P200bn ($4bn) into the financial system, with a maximum of 400 bps in cuts authorised for the year. This followed a reduction in the key policy rate by 50 bps in March to 3.25%. In the second quarter of 2020 the bank reduced its key policy rate by a further 100 bps, bringing the overnight reverse repo rate to 2.25%, a historic low. In October 2020 the BSP decided to hold the rate at 2.25%. Headline inflation, meanwhile, eased to 2.4% in the second quarter, down from 2.7% in the first quarter of 2020.

Trade & Investment

Despite sluggish global growth and trade uncertainty arising from US-China tensions, the Philippines exported $70.3bn of goods in 2019, up from $69.3bn in 2018, according to the Philippine Statistics Authority (PSA). This narrowed the trade deficit from $43.5bn to $37.1bn, marking a shift away from the deficit pressure of construction materials imported for the Build, Build, Build programme. The top-three export destinations were the US, up 7.7% at $11.46bn; Japan (3%, $10.63bn); and China (9.2%, $9.63bn). The top-three export groups were electrical products, at $40bn, or 57% of the total; other manufactured goods ($4.2bn, 6%); and machinery and transport equipment ($2.8bn, 4%). Imports, meanwhile, totalled $107.4bn, down from $112.8bn in 2018. The top-three import markets were China, up 11.5% at $24.5bn; Japan (-6.4%, $10.1bn); and South Korea (-27.2%, $8.2bn). The top-three import groups were electronic products, at $28.1bn, or 26% of the total; mineral fuels, lubricants and related materials ($12.8bn, 12%); and transport equipment ($11bn, 10.2%). Foreign direct investment (FDI), however, dipped to $7.7bn in 2019, a four-year low. Despite marking a 21.3% drop, the total was nonetheless higher than the $6.8bn forecast. Stakeholders attributed uncertainty over the passage of CREATE as one reason for the subdued FDI inflows. While the delay from its first approval in September 2019 may have caused some investors to adopt a wait-and-see approach, there is optimism that the lower tax rates and incentives outlined in the act will boost investment appeal in the longer term – strengthening the Philippines’ bid to attract players seeking to diversify operations away from China.

International trade faced a challenging environment in 2020 as Covid-19 curtailed economic activity. The Philippines recorded steep contractions in both imports and exports in the first eight months of the year, according to the PSA. Export earnings totalled $39.3bn in January-August, a 16.6% y-o-y decrease. FDI inflows, meanwhile, were down 11% y-o-y in January-July, at $3.8bn, according to the BSP. On a positive note, however, FDI net inflows rose for the third consecutive month in July on the back of improving investor sentiment due in part to easing of containment measures.

Labour Market

The labour market, characterised by a young and English-speaking workforce, has long been attractive. Efforts are under way to unlock further potential, such as digitalisation initiatives to upskill the IT-BPO workforce and modernise agriculture via innovation. In 2019 the labour participation rate was 61.3%, with 42.4m employed. As a result of Covid-19 and related lockdowns, unemployment rose to 17.7% in April 2020 – and the labour participation rate dropped to 55.6%. Declines were seen across the main economic sectors: services registered a 22.8% decrease in employment; industry fell by 28.2%; and agriculture was down 9.5%. On a positive note, according to the PSA, things have improved somewhat, with an additional 7.5m employed in July compared to April. Gains were seen across virtually all regions and sectors. Notably, agriculture saw an increase of 2.1m due to higher output, and construction registered an additional 1.2m employees as construction activity resumed. The passage of Bayanihan 2 is expected to offset some employment losses through subsidies and cash relief for affected households and workers. Around 50,000 micro- and SMEs, for example, should benefit from a further P10bn ($198.9m) allocation under the stimulus.

While 2020 was a challenging period for the Philippine economy, the government is striving to turn the pandemic into opportunity. The signing of Bayanihan 1 and 2, the reopening of vital industries and the imminent passage of the CREATE bill should support recovery. While 2020 GDP is forecast to contract significantly, the Asian Development Bank expects a rebound in 2021, with GDP growth projected at 6.5%.

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BUSINESSWORLD INSIGHTS: Philippine economy during and after COVID-19

By Adrian Paul B. Conoza Special Features Writer, BusinessWorld

The deep impact of the coronavirus disease 2019 (COVID-19) pandemic to the economy has been widely observed and discussed around the world. As the fight against this crisis continues, both the global and local economic situation, as well as the outlook upon the end of the crisis, is gradually being unraveled.

Keeping this conversation going, the first iteration of BUSINESSWORLD INSIGHTS: An Online Forum Series, held last April 29, shed light on the current situation of the Philippine economy in light of the present crisis and the direction it is headed to when the dust of the pandemic settles.

Moderated by BusinessWorld editor-in-chief Wilfredo Reyes, the forum gained insights from Antonio Lambino II, assistant secretary of the Department of Finance (DoF); Souleymane Coulibaly, World Bank’s lead economist and program leader for Brunei, Malaysia, Philippines, and Thailand; Benedicto Yujuico, president of the Philippine Chamber of Commerce and Industry (PCCI); and Calixto Chikiamco, co-founder and president of the Foundation for Economic Freedom (FEF) and a columnist for BusinessWorld.

Calibrated reopening informed by data

Talking about the government’s initiatives in helping the economy, Mr. Lambino initially pointed out that the most urgent priority for the present administration is to save lives and protect communities amid the ongoing pandemic.

Their action plan to achieve these, he added, is outlined in the administration’s 4-Pillar Socioeconomic Strategy, namely: to support vulnerable sectors through emergency support initiatives; to marshall resources to help the Department of Health (DoH) and frontline healthcare workers fight COVID-19; to take fiscal and monetary actions to finance emergency and short-to-medium term initiatives to keep the economy afloat and; to formulate and implement an economic recovery plan to create jobs and sustain growth.

The DoF assistant secretary also pointed out that strong macroeconomic fundamentals have put the country in a good position to respond to the pandemic, citing recent economic figures such as the 5.9% gross domestic product (GDP) growth in 2019 and the annual GDP growth of 6.4% from 2016-2019, among many others.

“We attribute these strengths to the economic and fiscal policy continuity from one administration to the next, and to President Duterte’s conservative approach to fiscal and economic policy,” Mr. Lambino added.

When asked when the Development and Budget Coordination Committee (DBCC) will finalize new macroeconomic assumptions, Mr. Lambino said that such decisions are continuously being deliberated, since the decisions they are faced with are not only economic but are also ethical and moral.

“It’s not just about the economic slowdown; it’s also about how many people will get infected as we open up. Slowly, in a moderate way, or in a quick way? How many people will die after getting infected? What is the mortality rate? What are the estimates given various scenarios?” he explained.

The decisions the economic team and the administration have to make, he pointed out, should be driven by science and informed by data.

“We need to make sure that the effectiveness of our response in terms of this economic recovery plan depend on the accuracy of our diagnosis,” Mr. Lambino said. “That’s why we are trying to understand the needs of the business sector as much as possible as we craft this response plan.”

He also added that the plan to be implemented will have a focus on infrastructure “to improve the connectivity backbone, both physical and digital”, coupled with continued investments on social programs and a transformation of the education system “to operate and educate youth under a new normal”

Addressing and preparing for ‘shocks’

“It is a supply shock to the economies around the world including the Philippines…because labor supply is constrained by direct health impact (i.e., people getting sick and dying) and indirect health impact (i.e., self-quarantine and time taken to care for family members),” he explained.

Measures to suppress or contain the propagation of the virus such as travel bans, social distancing, and lockdowns, Mr. Coulibaly added, have also contributed to this ‘supply shock’ as they directly affect the production of some sectors that are currently deemed nonessential.

“The immediate impact of this supply shock is an incoming shortfall of workers and entrepreneurs that can aggregate into a demand shock,” he further explained.

To address these shocks, Mr. Coulibaly said that the health crisis has to be put under control in the first place.

“The longer it takes to address the health crisis, the deeper the combined supply and demand shocks might be, with the additional risk of the stability of the financial sector weakening,” he said.

The lead economist added that the pandemic provides an opportunity for the Philippine economy to accelerate its move towards digitalization, “which would, in turn, improve the aggregate productivity of the economy over the medium term.”

For Mr. Coulibaly, the current crisis is also teaching countries a big lesson on preparedness, specifically in terms of the health system, continuity of businesses, and “securing monetary and fiscal space” in policymaking.

“By strengthening its preparedness, I think the Philippines will be ready for the big shocks that will come in the future,” he said.

Reopening of business hoped

Small firms are expecting from the government drastic measures concerning financial assistance as the health crisis alters the economy, he added.

“In the short term, our members are requesting support in the forms of tax breaks and loan assistance and a review of processes to accelerate the movement of goods,” he said.

Mr. Yujuico also observed that while MSMEs are very thankful for the avowed support of the government, they are much aware that this assistance will not be sustainable in the long run.

“It is not that they are not thankful. It’s that they are worried. They know whatever assistance is given to them, it’s not sustainable, and so they want to be able to help themselves. That is why they want to open as soon as they can and they want to try,” he said.

This pandemic, according to Mr. Yujuico, should teach the country to work together in fighting an enemy they cannot see.

“Each and every Filipino must realize that we have a common enemy to fight, and to win this war we have to act as one and be united as a nation to achieve a common goal,” he said. “If we do this, I think we will overcome.”

Moreover, he proposes that strong incentives be given to health professionals in order to keep them from going abroad to seek employment opportunities and fulfill their dreams.

“If we have all of these health workers here, the Philippines will be better able to cope with whatever pandemic there is,” he said.

Mr. Yujuico also raised the need to utilize technology and innovation to address this kind of crisis, such as in implementing a national citizen registration system, using artificial intelligence for contact tracing and early hotspot risk detection, and taping on big data for national monitoring of health statistics.

“We do have the young people now in our country that know how to do this,” he added. “So it is the challenge of the private sector and the government to try to find who these people are, utilize their talents, and put them to good work.”

Reforms, partnerships needed

For him, the weakness of institutions in implementing a strategy to counter the effects of the crisis is in face aggravating it. He cited as an example the lack of a national ID system, which could have made the distribution of social amelioration funds easier.

“If we don’t make structural reforms as a result of this crisis, the painful experience we underwent would have gone for nothing,” he said.

Commenting on the Balik Probinsya program that proposes to bring people back to their provinces in order to decongest Metro Manila, Mr. Chikiamco stressed that if the program will be successful there should be jobs in the countryside.

“I think what the government has to do is to make investing in the countryside attractive…[T]he government should look into mining, forestry, and agriculture,” he added. “Those are the things we should really focus on if you really want people to move on the countryside or move on the second-tier cities.”

The FEF co-founder and president also emphasized that the private sector could be trusted to behave responsibly when businesses reopen, “especially that they want to protect their own workers and also make sure that they do not endanger their customers.”

He also noted that the private sector has taken the initiative for mass testing, which he suggests the government should be ramping up with the private sector.

“Government should really work closely with the private sector in finding a way out of this crisis that we have,” he said, adding that the private sector is much eager to work with the government not only to do business but to help people.

Upcoming BUSINESSWORLD INSIGHTS legs will discuss“Understanding the ‘New Normal’ for Businesses after the COVID Crisis” on May 6; and “COVID-19 and The Philippine Stock Market: Uncertainties and Opportunities” on May 13.

BUSINESSWORLD INSIGHTS is made possible by sponsors Megaworld Corporation and Globe Telecom; eLearning platfrom partner Olern; partner organizations Management Association of the Philippines, Philippine Chamber of Commerce and Industry, Philippine Association of National Advertisers, and Bank Marketing Association of the Philippines; and media partner The Philippine STAR.

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Essay on Economic Issues In The Philippines

Students are often asked to write an essay on Economic Issues In The Philippines in their schools and colleges. And if you’re also looking for the same, we have created 100-word, 250-word, and 500-word essays on the topic.

Let’s take a look…

100 Words Essay on Economic Issues In The Philippines

The Philippines suffers from high poverty rates. Many people lack basic needs like food, shelter, and clothing. This is because jobs are scarce and many are low paying. The government is trying to create more jobs and improve living conditions, but progress is slow.

Unemployment

Unemployment is another big issue. There aren’t enough jobs for everyone. This leads to people not having money to buy things they need. The government is working on this problem by trying to attract more businesses to the Philippines.

Education in the Philippines is not always good quality. Many schools lack resources like books and computers. This makes it hard for students to learn and succeed. The government knows this is a problem and is working to improve schools.

Infrastructure

The Philippines needs better infrastructure, like roads and buildings. Poor infrastructure can make it hard for businesses to operate and for people to get to work. The government is investing in infrastructure to try to fix this problem.

Corruption is a big problem in the Philippines. It makes it hard for the government to improve the economy because money is not always used correctly. The government is trying to stop corruption, but it is a difficult problem to solve.

250 Words Essay on Economic Issues In The Philippines

Introduction.

The Philippines, a Southeast Asian country, faces numerous economic problems. These issues include poverty, unemployment, and corruption. Let’s explore these issues in detail.

Poverty is a significant problem in the Philippines. Despite the country’s economic growth, many people still live in harsh conditions. They struggle to afford basic needs like food, shelter, and education. The government is trying to reduce poverty, but progress is slow.

Another big issue is unemployment. Many Filipinos do not have jobs, especially young people. This problem is due to a lack of job opportunities and skills mismatch. A lot of people have skills that do not match the jobs available.

Corruption is also a major issue in the Philippines. It affects the economy because money that should be used for public services ends up in the wrong hands. This problem hinders economic development and increases poverty.

To sum up, the Philippines faces several economic issues. These problems include poverty, unemployment, and corruption. Solving these issues is not easy, but with the right policies and actions, the country can improve its economy.

500 Words Essay on Economic Issues In The Philippines

The economy of the philippines.

The Philippines is a country in Southeast Asia made up of over 7,000 islands. Its economy is mixed, meaning it has both private businesses and government involvement. The country’s economy has seen growth in recent years, but it still faces many challenges.

Issue 1: Poverty

One of the main economic problems in the Philippines is poverty. Despite economic growth, a big part of the population still lives in poverty. This means many people don’t have enough money for basic needs like food, shelter, and education. Poverty is more common in rural areas where farming is the main source of income.

Issue 2: Unemployment

Unemployment is another big problem. This means there are people who want to work but can’t find jobs. The COVID-19 pandemic made this worse, as many businesses had to close. The government is trying to create more jobs, but it’s a slow process.

Issue 3: Inequality

Inequality is another issue. This means that the wealth in the country is not shared equally. A small group of people own a big part of the country’s wealth, while many others have very little. This makes it hard for people to improve their lives.

Issue 4: Natural Disasters

The Philippines is often hit by natural disasters like typhoons, earthquakes, and volcanic eruptions. These disasters damage homes, roads, and businesses, which hurts the economy. The government has to spend a lot of money to repair the damage and help people recover.

Issue 5: Dependence on Overseas Workers

A lot of Filipinos work in other countries and send money back home. This money is a big part of the country’s income. But it also means the country depends a lot on other countries’ economies. If these countries face economic problems, it can hurt the Philippines too.

Ways to Improve

To solve these problems, the government is working on several things. They are trying to help farmers by providing better tools and training. They are also trying to create more jobs, especially in manufacturing and services. They are investing in education to give people better skills for these jobs. And they are working on improving the country’s infrastructure to make it more resilient to natural disasters.

In conclusion, while the Philippines has made progress, it still faces many economic challenges. By focusing on reducing poverty, creating jobs, reducing inequality, and improving resilience to natural disasters, the country can continue to grow and improve the lives of its people.

That’s it! I hope the essay helped you.

If you’re looking for more, here are essays on other interesting topics:

• Essay on Breakfast
• Essay on Economic Inequality
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Apart from these, you can look at all the essays by clicking here .

Happy studying!

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