• Forum
• SITREP

• Military

• Introduction
• Systems
• Facilities
• Agencies
• Industry
• Operations
• Countries
• Hot Documents
• News
• Reports
• Policy
• Budget
• Congress
• Links

• WMD
• Intelligence
• Homeland Security
• Space
• Public Eye

Further Reading

Economy

The economy of the Philippines is an anomaly in the Asia-Pacific region in that it has lagged behind other economies, such as those of Singapore, South Korea, and Taiwan. From a position as one of the wealthiest countries in Asia after World War II, the Philippines is now one of the poorest. Since the 1970s, which were a relatively prosperous decade, the Philippines has failed to achieve a sustained period of rapid economic growth and has suffered from recurring economic crises. This persistent underperformance has occurred in spite of the Philippines' rich natural and human resources.

The reasons are rooted partly in history, partly in policy. As a legacy of the U.S. colonial period, oligopolies have dominated the economy, particularly in agriculture, where farmland continues to be concentrated in large estates. In the post-World War II period, the Philippines pursued a strategy of import substitution industrialization, whereby domestic goods are substituted for imports. This strategy required protectionist measures, which led to inefficiencies and the misallocation of resources.

Although some trade protectionist measures were relaxed in the early twenty-first century, the Supreme Court continues to support restrictions on foreign ownership of land and other assets in effect since the constitution of 1935. These restrictions, plus widespread graft and corruption, have suppressed inbound foreign direct investment. A historically low rate of taxation - only about 15 percent of gross domestic product (GDP), partly as a result of widespread tax evasion - has led to under-investment in infrastructure and uneven economic development.

The industrial sector continues to decline relative to services, an economic bright spot in which the Philippines apparently enjoys a comparative advantage, although some argue that services represent an employer of last resort.

Although trade barriers were scaled back, industrial cartels split up, and limited reform measures taken in the late twentieth century, political instability, continuing high levels of corruption, and resistance to reforms by entrenched interests have prevented the Philippines from pursuing a consistent and effective economic course.

From the end of the Marcos era to the present, the Philippine economy has begun a gradual transformation from inwardto outward looking orientation. Successive administrations have managed togradually lower trade barriers, privatize government corporations, reform financialmarkets and ease restrictions on foreign investment, despite political upheavals,external shocks like the Asian financial crisis, and natural disasters. During this period, national income (Gross Domestic Product - GDP) increased by an average of 3percent per year. The annual population growth rate of 2.36 percent of the estimated 90 million Filipinos, however, has meant that the Philippines has fallen behind most ofits Asian neighbors in terms of per capita income. Roughly 37 percent of the Philippine population is below 15 years of age with the number of males marginally higher than those of females. Annual average income for a household of five persons is around $4,200.

Agriculture plays a significant role in the Philippine economy. Roughly 70 percent of the country's population is in the rural areas and agriculture contributes about 18 percent to the country's GDP.Two-thirds of the country's population depends on farming for its livelihood, and about 38 percent of the labor force is engaged in agricultural activities.

Significant remittances from the millions of overseas Filipino workers (OFWs) play an increasingly important role in the economy. OFW remittances in 2007 reached over $14 billion, equal to about 11 percent of GDP. The remittances help curb inflation (2.8 percent) and helped personal consumption fuel the economy's growth. The same remittances also enhanced the 19 percent appreciation the Philippine Peso relative to the United States dollar in 2007, making it the best performing currency in Asia in 2007.

Economic growth has averaged 5% since President MACAPAGAL-ARROYO took office in 2001. Nevertheless, the Philippines will need still higher, sustained growth to make progress in alleviating poverty, given its high population growth and unequal distribution of income. The Philippine economy grew at its fastest pace in three decades in 2007 with real GDP growth exceeding 7%, but growth slowed to 4.5% in 2008 as a result of the world financial crisis. High government spending has contributed to the growth, but a resilient service sector and large remittances from the millions of Filipinos who work abroad have played an increasingly important role.

Corruption and conflict continue to impede the Philippines' economic and social development. Forty-six percent of the country's population lives on $2/day or less, and per capita income growth between 1975 and 2001 was 86 percent -- a fraction of its neighbors: Indonesia registered 423 percent, Thailand 261 percent, Malaysia 169 percent, and China 235 percent. The Philippines continues to suffer some of the worst effects of underdevelopment.