Economy of the Philippines

Economy of the Philippines

Makati Skyline
Currency	Philippine peso (PHP) = 100 centavos (English) piso = 100 sentimo (Filipino)
Fiscal year	Calendar year
Trade organizations	APEC, ASEAN, WTO, and others
Statistics
GDP	$161.0 billion (2009) (nominal 48th) $320.4 billion (2009) (PPP 36th)
GDP growth	7.9% (2010 2nd Quarter)
GDP per capita	$1,746 (2009) (nominal; 122nd) $3,521 (2009) (PPP; 125th)
GDP by sector	agriculture (14.9%), industry (29.9%), services (55.2%) (2009 est.)
Inflation (CPI)	0.7% (September 2009)
Population below poverty line	32.9% (2006 est.), approx. 22% (2001-2006)
Gini coefficient	45.8 (2006)
Labor force	37.89 million (2009 est.)
Labor force by occupation	services (51%) agriculture (34%), industry (15%) (2009 est.)
Unemployment	7.6% (July 2009)
Main industries	electronics assembly, garments, footwear, pharmaceuticals, chemicals, wood products, food processing, petroleum refining, fishing
External
Exports	$37.2 billion (2009 est.)
Export goods	semiconductors and electronic products, transport equipment, garments, copper products, petroleum products, coconut oil, fruits
Main export partners	United States 15.35%, Japan 14.19%, China 13.19%, Singapore 9.44%, Hong Kong 9%, South Korea 5.12%, Germany 4.1% (2009)
Imports	$45.8 billion (2009 est.)
Import goods	electronic products, mineral fuels, machinery and transport equipment, iron and steel, textile fabrics, grains, chemicals, plastic
Main import partners	Japan 15.32%, United States 11.47%, Singapore 9.54%, China 8.93%, Taiwan 8.27% (2009)
Gross external debt	$55.416 billion (1st Quarter, 2010)
Public finances
Government debt	$94.27 billion (58.7% of GDP) (2009 est.)
Revenues	$23.29 billion
Expenses	$29.23 billion (2009 est.)
Economic aid	$561.7 million ODA recipient. (2007)
All values, unless otherwise stated, are in US dollars.

The economy of the Philippines is the 4th largest economy in South East Asia and the 36th largest economy in the world by purchasing power parity according to the International Monetary Fund in 2009. A newly industrialized emerging market economy, it posted a real GDP growth rate of 5.3% in 2006 and 7.1% in 2007. Growth slowed to 3.8% in 2008 as a result of the global financial crisis. In 2009, the real growth rate was 0.9%. For the first quarter of 2010 the economy grew by 7.3% which was higher than the 3.6% forecast. At the end of the second quarter of 2010, GDP growth again exceeded expectations by coming in at 7.9%.

A mixed economic system, important sectors of Philippine industry include food processing, textiles and garments, and electronics and automobile parts. Most industries are concentrated in the urban areas around Metro Manila, while Metro Cebu is also becoming an attraction for foreign and local investors. Mining also has great potential in the Philippines, which possesses significant reserves of chromite, nickel, and copper. Recent natural gas finds off the islands of Palawan add to the country's geothermal, hydro, coal, and oil exploration energy reserves.

History

Since the end of World War II, the Philippine economy has had significant ups and downs. Initially a fast growing economy, the Philippines was at one time one of the richest countries in East Asia before slowing into a period of chronic underperformance. In recent years, however, attempts to reach the 7% growth threshold at which point it is thought the public will be able to more noticeably feel economic gains have started becoming more consistent.

During the regime of Ferdinand Marcos, the economy initially grew close to the earlier trend but eventually slowed considerably and even turned negative destabilized by corruption and political uncertainty and unrest. By the time of the People Power revolution, the economy had declined, falling severely below the growth of other nations in Southeast Asia. A severe recession in 1984-85 saw the economy shrink by more than 10%. Despite initial optimism, continued perceptions of political instability dogged the succeeding Corazon Aquino administration and daily blackouts in its later years further damped economic activity. Fidel V. Ramos restored electricity and managed to briefly uplift the economy during his term as president, posting modest but positive GDP growth rates.

In 1998, the Philippine economy deteriorated again as a result of spill over from the Asian financial crisis, although not as much as other Asian nations, and a wave of natural disasters also dragged the economy down. Growth fell to about -0.6% in 1998 from 5.2% in 1997, but recovered to 3.4% by 1999. President Joseph Estrada attempted to resist protectionist measures, and efforts to continue the reforms begun by the Ramos administration made significant progress. A major bank failure in April 2000 and the political disturbances following the impeachment and subsequent departure of President Estrada in the beginning of 2001 led to lower growth.

The administration under President Gloria Macapagal-Arroyo pushed toward faster economic growth. Arroyo's stance towards economic improvement since 2004 has seen the Philippines re-emerge as one of the growing economies in Southeast Asia. In 2004, the Philippine economy grew by 6.1%, beating most analysts and even the government's estimates. In 2005, the Philippine peso posted an appreciation rate of 6%—the fastest in the Asian region for that year. However, higher oil prices led to growth amounting to 5.1%. The Philippines is still faced with the challenge of generating income internally. In comparison to other countries, it relies disproportionately on remittances from overseas which are equivalent to around 11.17% of GDP. During 2006, the economy posted a 5.4% growth, dampened by two typhoons which wreaked havoc on the agricultural sector.

The local stock market hit a record high in June 1, 2007 while the peso was trading at around PHP41.31 to a US dollar, making it then Asia's best performing currency by sharply appreciating nearly 19%. As of April 2010, Peso is trading at around Philippine Peso 44.24:$1.

GDP in 2007 grew 7.3%, the fastest in 31 years: its economy grew a seasonally adjusted 1.8%, faster than expected in the 4th quarter while inflation was tamed at 2.8% amidst sharp increases in oil prices.

In 2009, the nominal GNP Per capita was US $ 1,746 and the PPP GNP Per capita was US$ 3,521. The total nominal GNP was US $ 167 billion and the total PPP GNP was US $ 320 billion.

Macro-economic trend

Year	GDP Millions of PhP	PhP:US$	Implied PPP PhP:US$
1980	243,749	7.51	2.324
1985	571,883	18.60	4.507
1990	1,074,510	24.32	5.742
1995	1,905,951	25.23	8.105
2000	3,354,727	44.19	10.998
2005	5,444,038	55.09	12.755
2006	6,031,164	51.31	13.344
2007	6,647,338	46.01	13.838
2008	7,423,213	44.32

GDP Growth at constant 1985 prices in Philippine pesos:

Year	1980	1981	1982	1983	1984	1985	1986	1987	1988	1989
GDP Growth	5.149	3.423	3.619	1.875	-7.324	-7.307	3.417	4.312	6.753	6.205

Year	1990	1991	1992	1993	1994	1995	1996	1997	1998	1999
GDP Growth	3.037	-0.578	0.338	2.116	4.388	4.679	5.846	5.185	-0.577	3.396

Year	2000	2001	2002	2003	2004	2005	2006	2007	2008	2009
GDP Growth	5.968	1.756	4.449	4.93	6.38	4.952	5.341	7.079	3.839	0.918

Sectors

As a newly industrialized nation, the Philippines is still an economy with a large agricultural sector, however services are beginning to dominate ASEAN. Much of the industrial sector is based on manufacturing electronics and other high-tech components, usually from American corporations.

Government Sector

The proposed national government budget for 2011 has set the following budget allocations

Budget Allocation	Millions of Pesos (PhP)	Millions of US Dollars (US$)
Department of Education	207,300	4,573
Department of Public Works and Highways	110,600	2,439.8
Department of National Defense	104,700	2,309.7
Department of Interior and Local Government	88,200	1,945.7
Department of Agriculture	37,700	831.7
Department of Social Welfare and Development	34,300	756.7
Department of Health	33,300	734.6
Department of Transportation and Communications	32,300	712.5
State Universities and Colleges	23,400	516.2

Private Sector

Filipino exports in 2006

Industrial production is centered on processing and assembly operations of the following: food, beverages, its production yield to meet domestic demands. The Philippines currently hosts the International Rice Research Institute (IRRI), which studies high yielding rice varieties. It has played a key role in the Green Soil Revolution and was able to increase rice yields and rice production during the 1970s .

Automotive

The ABS used in Mercedes-Benz, BMW, and Volvo cars are made in the Philippines. Ford, Toyota, Mitsubishi, and Nissan are the most prominent automakers that make cars in the country. A 2003 Canadian market research report predicted that further more investments in this sector were expected to grow in the following years. Toyota has been the most used vehicle in the country.

Electronics

Intel has been in the Philippines for 28 years as major producer of Intel's advanced products including the Pentium 4 processor. A Texas Instruments plant in Baguio has been operating for 20 years and is the largest producer of DSP chips in the world. Texas Instruments' Baguio plant produces all the chips used in Nokia cell phones and 80% of chips used in Ericsson cell phones in the world. Until 2005, Toshiba laptops were produced in Santa Rosa, Laguna. Presently the Philippine plant's focus is in the production of HDD's. Printer manufacturer Lexmark has a factory in Mactan Island in the Cebu region.

Outsourcing

Main article: Business process outsourcing in the Philippines

The Philippines has the Asia-Pacific’s second-largest call center industry, next only to India's, according to a June 2008 study released by Oracle Corp. The majority of the top ten BPO firms of the United States operate in the Philippines. Total jobs in the industry grew to 100,000 and total revenues are placed at $960 million for 2005. BPO facilities are mainly in Metro Manila and Cebu City although other regional areas such as Baguio City, Bacolod City, Cagayan de Oro, Tacloban City, Clark (Angeles City), Dagupan City, Davao City, Dumaguete City, Lipa City, Iloilo City and Legazpi City are now being promoted and developed for offshore operations.

Mining and natural resources

Geothermal power station in Negros Oriental.

The country is rich with mineral and geothermal energy resources. In 2003, it produced 1931 MW of electricity from geothermal sources (27% of total electricity production), second only to the United States, and a recent discovery of natural gas reserves in the Malampaya Oil fields off the island of Palawan is already being used to generate electricity in three gas-powered plants. Philippine gold, nickel, copper and chromite deposits are among the largest in the world. Other important minerals include silver, coal, gypsum, and sulfur. Significant deposits of clay, limestone, marble, silica, and phosphate exist. About 60% of total mining production are accounted for by non-metallic minerals, which contributed substantially to the industry's steady output growth between 1993 and 1998, with the value of production growing 58%. In 1999, however, mineral production declined 16% to $793 million. Mineral exports have generally slowed since 1996. Led by copper cathodes, Philippine mineral exports amounted to $650 million in 2000, barely up from 1999 levels. Low metal prices, high production costs, lack of investment in infrastructure, and a challenge to the new mining law have contributed to the mining industry's overall decline.

The industry rebounded starting in late 2004 when the Supreme Court deemed an important law permitting foreign ownership of Philippines mining companies constitutional.

The Department of Environment and Natural Resources (DENR) is ill equipped to address the renewed interest in mining. There are several companies that mine under the Small Scale Mining (SSM) that should rightly be classified and taxed under the large scale mining laws. The DENR is taking some time to inform these companies that they are violating the SSM laws by mining more than 50,000 tons of ore per year.

The DENR has yet to approve the revised Department Administrative Order (DAO) that will provide the Implementing Rules and Regulations of the Financial and Technical Assistance Agreement (FTAA), the specific part of the 1994 Mining Act that allows 100% foreign ownership of Philippines mines. The current DAO 99-56 is deficient because it is confusing and open to abuse.

Transportation

The Philippine Airlines is Asia's first commercial airline

Main article: Transportation in the Philippines

Transport of people, goods and services in the country is done mostly by motorized vehicles, boats and planes. Land transportation vehicles are mostly imported; jeepneys and tricycles are usually locally manufactured.

Statistics

Percentage of population in 2007 living below poverty line, by province. Provinces with darker shades have more people living below the poverty line.

Economic Growth
Year	% GDP	% GNP
2000	4.5	4.8
2001	3.2	3.4
2002	4.6	5.2
2003	4.7	5.6
2004	6.0	6.2
2005	5.0	5.6
2006	5.4	6.2
2007	7.3	7.8
2008	3.8	6.2
2009	1.1	4.0
2010Q1	7.8	8.6
2010Q2	7.9	7.9
* Computed at Constant 1985 Prices
** Source: NEDA

Most of the following statistics are sourced from the CIA World Factbook - Philippines page retrieved on May 15, 2010 (currency is US dollars except where otherwise indicated).

• GDP - purchasing power parity: $324.4 billion (2009 est.)
• GDP - real growth rate: 0.9 % (2009)
• GDP PPP: $320.4 billion (2009 est.)
• GDP per capita purchasing power parity: $3,300 (2009 est. in 2009 US dollars)
• GDP nominal: $161.0 billion (2009 est.)
• GDP per capita: $1,746
• GDP - composition by sector:

  agriculture: 14.9%

  industry: 29.9%

  services: 55.1% (2009 est.)

• Population below poverty line: 32.9% (2006 est.)
• Household income or consumption by percentage share:

  lowest 10%: 2.4%

  highest 10%: 31.2% (2006)

• Inflation rate (consumer prices): 3.3% (2009 est.), 0.7% (September 2009)
• Labor force: 37.89 million (2009 est.)
• Labor force by occupation:

  agriculture 34%

  industry 15%

  services 51% (2009 est.)

• Unemployment rate: 7.5% (2009)
• Budget:

  revenues: $23.56 billion (2009 est.)

  expenditures: $29.82 billion (2009 est.)

• Industries: electronics assembly, garments, footwear, pharmaceuticals, chemicals, wood products, food processing, petroleum refining, fishing
• Industrial production growth rate: -2% (2009 est.)
• Electricity - production: 56.57 billion kWh (2007 est.)
• Electricity - consumption: 48.96 billion kWh (2007 est.)
• Electricity - exports: 0 kWh (2007)
• Electricity - imports: 0 kWh (2007)
• Agriculture - products: sugarcane, coconuts, rice, corn, bananas, cassavas, pineapples, mangoes; pork, eggs, beef; fish
• Exports: $37.51 billion (2009 est.); $48.25 billion (2008 est.)
• Exports - commodities: semiconductors and electronic products, transport equipment, garments, copper products, petroleum products, coconut oil, fruits
• Exports - partners: United States 15.35%, Japan 14.19%, China 13.19%, Singapore 9.44%, Hong Kong 9%, South Korea 5.12%, Germany 4.1% (2009)
• Imports: $45.39 billion (2009 est.)
• Imports - commodities: electronic products, mineral fuels, machinery and transport equipment, iron and steel, textile fabrics, grains, chemicals, plastic
• Imports - partners: Japan 15.32%, United States 11.47%, Singapore 9.54%, China 8.93%, Taiwan 8.27% (2009)
• Debt - external: $53.14 billion (30 September 2009 est.)
• Currency: 1 Philippine peso (P) = 100 centavos
• Exchange rates: Philippine pesos (PHP) per US dollar - 47.8 (2009), 44.439 (2008), 46.148 (2007), 51.246 (2006), 55.086 (2005)

See also

• Action For Economic Reforms (Research and public interest organization in the Philippines)
• Bangko Sentral ng Pilipinas
• Communications in the Philippines
• Department of Finance
• Department of Trade and Industry
• List of companies of the Philippines
• Next Eleven
• Newly Industrialized countries
• Philippine Dealing Exchange
• Philippine peso
• Philippine Stock Exchange

Further reading

• Balisacan, Arsenio (2003), The Philippine Economy: Development, Policies, and Challenges, New York: Oxford University Press, p. 496, ISBN 9780195158984 {{citation}}: Unknown parameter |coauthors= ignored (|author= suggested) (help)
• Balisacan, Arsenio (2007), The Dynamics of Regional Development: The Philippines in East Asia (PDF), Cheltenham, UK: Edward Elgar {{citation}}: Unknown parameter |coauthors= ignored (|author= suggested) (help)
• State of the Philippine Islands A book written by a Spaniard during the early 1800s that studies the economic conditions of the Philippines which was then, a colony of Spain. An online book published by Filipiniana.net.

External links

• Bangko Sentral ng Pilipinas (Central Bank of the Philippines)
• National Statistical Coordination Board
• Department of Trade and Industry
• Department of Finance
• Philippine Stock Exchange
• National Federation of Sugarcane Planters
• Department of Tourism
• Philippines Business Brokers
• Philippine Economic Zone Authority