The Philippines continues to be Asia’s rising star due to its robust macroeconomic expansion in recent years, leaving behind its former label as the region’s sick man, according to Moody’s Analytics. Indeed, during the last 7 years, the resource-rich island nation has managed to trim its foreign debt and has shown an annual average economic growth rate of 6.3%, one the highest in South-Asia and one of the fastest in the world, remaining in positive expansion even during the global financial crisis.
In the third quarter of 2017, the Gross Domestic Product (GDP) of the Philippines grew to 6.9% at USD 304,905 million despite weak external demand and a reduction in agricultural production largely caused by drought. Economic growth was driven by strong domestic consumption, the boom in the Business Process Outsourcing (BPO) industry, Overseas Foreign Worker (OFW) remittances and the increase in public infrastructure spending. The Philippines ranks as the third largest economy in ASEAN based on GDP, following Indonesia (USD 932,359 million) and Thailand (USD 406,840 million).
Industry registered the fastest growth at 7.5% followed by services with 7.1% growth. Meanwhile, agriculture slowed down by 2.5% from 3.0% growth in the previous year. In 2016, the manufacturing subsector was the largest contributor to the growth, mostly through food manufacturing, which grew by 9.3%. Other industries such as chemicals, rubber products, machinery, transportation equipment, and construction also contributed to industry growth.
While the Philippines’ economic growth of the GDP grew by 6.9%,9 registering the highest growth among ASEAN member states, the Gross National Income (GNI) also grew by 6.7% (based on current pesos).
GDP per capita grew by 5.4% in Q3 of 2017. However, the Philippines still remains the second lowest of ASEAN 6 at USD3,020, after Vietnam (USD2,310), compared to USD6,340 in Thailand, USD3,860 in Indonesia, USD9,660 in Malaysia, and USD53,880 in Singapore.
Philippine inflation settled at 3.5% in the last quarter of 2017. According to the Philippine Statistics Agency, the growth of inflation is due to the growth recorded in the heavily-weighted food and non-alcoholic beverages index and the higher prices of housing, utilities, transport, education, and other miscellaneous services. In addition, higher growth observed in alcoholic beverages, tobacco, health, education and restaurant goods and services also contributed to this.
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GLOBAL COMPETITIVE INDEX 2017 - 2018
CURRENT ACCOUNT, EXPORT, IMPORT, REMITTANCES
The Philippines’ current account surplus was recorded at USD 601 million or 0.2% of GDP in 2016, 92% lower than the USD 73 billion surplus or 2.5% of GDP in 2015. Exports increased only on a small scale while imports rose rapidly, resulting in a merchandise deficit of 11.2% of GDP (2016). However, remittances and strong earnings from services exports, particularly from the BPO and tourism sectors, helped in maintaining the surplus.
On the other hand, the ratio of public debt to GDP declined to 41.7% in the third quarter of 2017, which allowed an increase in public spending. The Q3 fiscal deficit of P58.6 billion decreased from P93.4 billion of the same period last year.
The Big Three credit rating agencies, Standard & Poor’s, Fitch and Moody’s, reaffirmed the Philippines’ sound macroeconomic foundations and its strong external position maintaining the country’s 2015 ratings.
Standard & Poor BBB Stable (24 April 2016)
Fitch BBB Positive (8 April 2016)
Moody BAA2 Stable (22 March 2017)
POPULATION & WORKFORCE
With a population of 104.9 million in the third quarter of 2017, a median age of 23.4, and with 89.74% of the population under 54 years old, the Philippines offers a skilled workforce, fluent in English, which is considered as one of the competitive advantages of the Philippines. Despite an educated labor force, unemployment among people between 15 and 24 years old is still high at 5.6%.
However, underemployment in 2017 remained high at 16.3%, a difference of two points from last year’s 18%. This reflects the prevalence of informality and precarious jobs. On a positive note, the country has registered more inclusive growth in the last years as the poverty incidence among Filipinos dropped to 21.6% in 2015 from 25.2% in 2012, lifting 1.8 million Filipinos out of poverty.
In terms of international rankings, the Philippines ranked 56th out of 138 countries in the Global Competitiveness Index 2017-2018 edition, published by the World Economic Forum, with a score of 4.35 over 7. Out of the 12 pillars that were assessed in the Index, the Philippines scored highest in the third pillar, macroeconomic environment, with a ranking of 22 and a score of 5.8, which reaffirms the country’s sound macroeconomic fundamentals.
On the World Bank Doing Business 2018 Report, the Philippines ranked 113 out of 190 countries with a score of 58.74 over 100. Getting electricity, resolving insolvency, and trading across borders had the highest rankings in the said report.
As for the Corruption Perceptions Index, the Philippines went from 95 out of 168 countries in 2015 to 101 among 176 in 2016.