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

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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

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

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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how to solve the economic problems of the philippines

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Addressing high inflation in the Philippines

how to solve the economic problems of the philippines

MAP Insights

By Raymond A. Abrea

how to solve the economic problems of the philippines

This policy memo was submitted to the Harvard Kennedy School as final requirement to API 121 Recession, Growth and Macroeconomic Policy under Professor Karen Dynan. A copy of this was forwarded to the Department of Finance, the Senate, and the House of Representatives for their consideration in addressing high in fl ation in the Philippines which is at 8% for November 2022.

INTRODUCTION While contractionary monetary policy seems to be the preferred method of controlling inflation, a cyclical slowdown in economic growth to avoid recession (or what economists refer to as “soft landing”) is hard to pull off. Thus, fiscal policy tools are recommended to ease the task of monetary policy (i.e., increasing interest rates) in reducing inflation. This is owing to the fact that high inflation tends to worsen inequality and poverty because it hits income and savings harder for the poor and middle-income earners.

BACKGROUND According to the Philippine Statistics Authority (PSA), our gross domestic product (GDP) posted a growth of 7.6% in the third quarter of 2022. In spite of the 14-year high in fl ation of 7.7% in October 2022, GDP continues to expand mainly because of household consumption which contributes more than 70% of economic growth on the demand side while the services sector contributes about 67% on the supply side.

Higher annual growth rate in the index for food and non-alcoholic beverages at 9.4% contributed to the October inflation. Other commodity groups also contributed to the overall inflation like housing, water, electricity, gas and other fuels with a 7.4% increase.

Following the US Federal Reserve’s (Fed) aggressive stance against high inflation, the BSP (Bangko Sentral ng Pilipinas) further increased its policy rate from 5% to 5.5% making the cost of borrowing in the Philippines more expensive. The BSP is now targeting in fl ation of 5.8% in 2022 and 4.3% in 2023. Prior to the expected policy rate increase in December to 5.5%, BSP Governor Felipe Medalla already offered forward guidance, saying the BSP would prefer to match any rate increase by the Fed to maintain a 100 basis points differential between the BSP interest rate and the Fed’s policy rate.

With the November annual in fl ation surging to 8%, both fi scal and monetary policies may be needed to temper the increasing prices of food, electricity, and agricultural products. In many emerging markets and developing countries (EMDC), fi scal restraint can lower in fl ation while reducing debt.

Supply shocks, like high fuel prices, natural disasters, the Russia-Ukraine conflict, and the continuing impact of COVID-19, among others, disrupt supply chain and production, resulting in lower productivity and higher costs. Initial data shows that these supply shocks may be causing the “cost-push” inflation and that contractionary monetary policy may not be enough to temper it — notwithstanding the responsive policy rate adjustments made by BSP, inflation has continued to rise.

In view of this, the following fiscal policy tools are recommended to the Philippine government, through the Department of Finance, with the aim of easing the hardship brought by high inflation especially to the poor and low-income earners: 1.) increasing excise taxes on non-essential goods, 2.) imposing corporate income tax to non-resident foreign tech giants, 3.) improving tax collections through digitalization, 4.) cutting government spending, and, 5.) other government interventions.

INCREASING TAXES While increasing taxes may be politically challenging, Congress can enact a law to increase taxes on non-essential goods like luxury cars, alcoholic drinks, cigarettes including vapes, which are not considered basic commodities. Revisiting the Tax Reform for Acceleration and Inclusion (TRAIN) Law to further increase excise tax on luxury cars from 60% to 200% will generate more revenues from the top 10% of households in terms of income as this is a highly progressive tax. There may be an initial slowdown in the sales of cars, alcohol, and cigarettes but it will quickly recover as it did in the past once in fl ation is brought back down to healthy levels.

IMPOSING CORPORATE INCOME TAX Congress is presently considering the imposition of the 12% value-added tax (VAT) on digital services, expecting that it will generate an estimate of P19 billion in revenues or less than 0.1% of GDP. Instead of doing that, however, imposing an income tax or digital service tax to non-resident foreign tech giants and digital transactions including cryptocurrency may yield higher revenues without burdening the low-income earners. How it will be collected may still be a question but it’s worth pursuing rather than simply imposing a 12% VAT on digital services which will burden local consumers.

IMPROVING TAX COLLECTIONS

Revenue collections from audit and investigation contribute less than 2% to the total tax collections. The government must instead prioritize the full digitalization of the Bureau of Internal Revenue (BIR) so that they can catch up with the fast-paced developments in the e-commerce and digital economy. This will require at least an additional 10% of their P11.12-billion fi scal year 2022 budget and a reallocation of Personnel Services which comprised 72% of its total budget. This can be used to fund full digitalization and the hiring of software engineers, developers, and data analysts to support its new IT infrastructure.

Implementing a general tax amnesty and lifting the Bank Secrecy Law will also generate more revenues without relying on regular audit and investigation. This will allow the BIR (Bureau of Internal Revenue) to run after big-time tax evaders since they would no longer be able to hide behind the Bank Secrecy Law.

However, both pieces of legislation will require more political will from the President to make it a priority bill of his Administration.

A risk-based audit will also generate more tax collections than the random audit. Using data analytics and industry benchmarking, the BIR can allocate their resources in auditing high-risk industries and taxpayers, especially large corporations which contribute more than 60% of the total tax collections.

CUT GOVERNMENT SPENDING While checks and balances are in place, the government must cut spending, address loopholes in budget allocation, and deal with procurement issues that led to an average of P1-trillion unused and misused/abused annual budget from 2010-2020. Transparency and accountability must be upheld, especially given the proposed P5.268-trillion budget for 2023 and the increasing debt at P13.5 trillion as of November 2022.

Targeted subsidy and financial support to farmers and fisher folk must also be prioritized to increase domestic productivity which will reduce prices and importation of agricultural products .

OTHER GOVERNMENT INTERVENTIONS While subsidies are helpful, it is high time to revisit the Oil Deregulation Law in order to give the government the power to intervene when there is a prolonged increase of oil prices.

RECOMMENDATIONS Addressing high inflation requires a whole-of-government approach. It requires fiscal consolidation through budget rationalization and more tax revenues. While the BSP uses monetary policy to temper inflation with the least possible job losses, the government must exercise fiscal restraint to lower inflationary pressures.

First, government deficits and debts must be lowered. Rationalizing the government budget will not only cut unnecessary spending but also reduce the budget deficit. PPP (public-private partnerships) may also be helpful in funding infrastructure projects to avoid incurring more foreign debts.

Moreover, revenue efforts must be increased through tax policy and administration reforms. Increasing the excise tax on non-essential goods will serve as both a revenue and a health measure, and imposing corporate income tax or a digital service tax on non-resident foreign tech giants will generate more collections from the digital economy.

Fiscal consolidation aimed at taxes and spending that help the rich can help reduce inflation. There could be trade-offs in terms of jobs to a slower economy but inflation is already hurting the poor and vulnerable. Thus, keeping targeted subsidy will help ease their hardships while the government continues to address high inflation.

This article re fl ects the personal opinion of the author and does not re fl ect the of fi cial stand of the Management Association of the Philippines or MAP.

Raymond “Mon” A. Abrea is an MPA/mason fellow at the Harvard Kennedy School. He is a member of the MAP Tax Committee and the MAP Ease of Doing Business Committee, co-chair of Paying Taxes on Ease of Doing Business Task Force, and chief tax advisor of the Asian Consulting Group.

[email protected]

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Labor Markets in Asia pp 367–502 Cite as

Unemployment, Labor Laws, and Economic Policies in the Philippines

  • Jesus Felipe 2 &
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Unemployment and underemployment are the Philippines’ most important problems and the key indicators of the weaknesses of the economy. Today, around 4 million workers (about 12% of the labor force) are unemployed and another 5 million (around 17% of those employed) are underemployed. This Reserve Army of workers is a reflection of what happens in the economy, particularly because of its incapacity to provide jobs (especially in the formal sector) to its growing labor force. The social costs of this mass unemployment range from income losses to severe social and psychological problems resulting from not having a job and feeling insecure about the future. Overall, it causes a massive social inefficiency.

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The authors thank participants at the workshop, Employment Creation, Labor Markets, and Growth in the Philippines (19 May 2005, Manila) for their comments and suggestions on an earlier draft of the chapter. They also thank Rana Hasan for useful discussions on labor market issues.

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Teodosio, V. A. 2001. “Tripartism and the Role of the State in a Period of Restructuring Under Flobalization.” In L. Lanzona, ed., The Filipino Worker in a Global Economy . Philippine APEC Study Center Network and Philippine Institute of Development Studies, Makati City.

Thirlwall, A. P. 2003. Growth and Development . 7th ed. New York: Palgrave Macmillan.

Tullao, T. 2001. “An Evaluation of the Readiness of Filipino Professionals to Meet International Competition.” In L. Lanzona, ed., The Filipino Worker in a Global Economy . Philippine APEC Study Center Network and Philippine Institute of Development Studies, Makati City.

-. 1993. “Streamlining the Bureaucracy: Education Sector.” Philippine Institute of Development Studies, Makati City. Mimeo.

World Bank. 2001. Philippines: Growth with Equity—The Remaining Agenda . A World Bank Social and Structural Review. World Bank Office, Manila.

-. 2005. World Development Report 2006 . World Bank, Washington, DC.

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Felipe, J., Lanzona, L. (2006). Unemployment, Labor Laws, and Economic Policies in the Philippines. In: Felipe, J., Hasan, R. (eds) Labor Markets in Asia. Palgrave Macmillan, London. https://doi.org/10.1057/9780230627383_7

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Government Solutions To The Philippine Economic Problems

how to solve the economic problems of the philippines

The Philippine Economy and Its Contemporary Problems and Issues

The Philippines, like many nations of the world, is a mixed economy . While it manifests capitalist market economy in its cities and more advanced municipalities and a command economy most especially in its major industries like energy and transport, the agricultural and subsistence economy persist among its barrio folks and indigenous groups. The Philippines is in a transition stage from an agricultural to an industrial economy. Land-ownership is still concentrated in the hands of a few. Statistics show that a high proportion of rural households live below the poverty line. The Philippines has vast natural resources but the economy is basically extractive and its population has substandard levels of living. Thus the Filipinos have been aporically described as “beggars sitting on top of a mountain of gold.”

Issues and problems that confront contemporary Philippine economy include the following:

  • Defects in the economic structure, such as great disparity in the distribution of wealth and material goods; gross inefficiency and lack of dynamism of the manufacturing sector and the subsequent persistent balance of payments deficits and recurrent huge public sector deficits as a major problem.
  • Slow economic growth and rapidly rising population make it difficult to expand education and health services and improve their quality.
  • Government reliance on and support of foreign investors, MNC’s and foreign debts and foreign aid.
  • Lack of political will on the part of government to support local entrepreneurs and develop local industries as well as to assert its self-determination by promoting Filipino First and protectionism policy
  • Low real wages and little job opportunities
  • Huge foreign and domestic debts
  • Bureaucracy and massive graft and corruption in government.
  • Inefficient tax collection, tax evasion, tax credits and tax holidays given to foreign investors rob the nation of needed revenues.
  • Colonial mentality of the people to patronize foreign goods rather than their locally made products.
  • Economic instability brought about by peso devaluation, political instability, and high cost of gasoline and crude oil products, military threats, coups d’ etat, and unstable peace and order situation in the country.
  • Unemployment and underemployment.

Government Solutions to the Economic Problems

The government institutes the following solutions to the economic problems:

  • Among the plans/programs that aim to make the Philippine economy grow is the conversion of the former American naval base, Subic Naval Base into a free port zone under the management of the Subic Bay Metropolitan Authority (SBMA).
  • Inviting foreign investors to set up business in the country and providing incentives, such as tax breaks, tax credits, and tax holidays.
  • Organized livelihood projects to help the poor be self-reliant.
  • Entering into treaties and joint ventures agreements with foreign nationals and foreign corporations in the exploration and development of our natural resources.
  • Opening the Philippine markets to world commerce, import liberalization policy, lifting of protectionist policies, and adherence to the idea of globalization.
  • More foreign debts and foreign aids from the World Bank and the IMF to solve budget deficits.
  • Privatization and commercialization of government-owned or controlled corporations.
  • Joining in treaties and agreements with world trade bodies whose goals and objectives are advantageous to the more technological advanced economies. Example: WTO, APEC, GATT, etc.
  • Imposing dictatorship or strong presidency to control political and economic power.

Nationalist Alternatives

Filipino nationalists suggest the following alternatives as solutions to the economic problems:

  • Governmental support to local entrepreneurs and development of local industries.
  • Industrialization of agriculture
  • Development of the national steel industry.
  • Provision of real wages and profit sharing in business.
  • Free education for all through state-funded education and more emphasis on science and technology and mathematics.
  • Countryside development and regional development
  • Moratorium on payment of foreign debts repudiation on those debts which were not used for public welfare.
  • Intensive and more efficient tax collection especially among big-time tax evaders and erring corporations.
  • Political will to stop graft and corruption in government
  • Protectionism policy and governmental regulations on prices of commodities.
  • Campaigns on Filipino First Policy, patronizing local goods and product, and pride in being a Filipino.
  • Strict adherence to the constitutional provision on the exploitation of our natural resources.
  • A realistic appraisal of the costs and benefits of dealing with MNC’s in a pragmatic context and where these are advantageous to both.
  • For the Philippines to be truly self-reliant the government should enact foolproof laws against the abuses of the MNC’s and TNC’s and recognizing only legitimate and fair foreign trade.
  • A planned economy based on a grand strategy as to which industries should be supported and which to be abandoned and involving close control over the standards of living, employment and minimal inflation.
  • Genuine land reform
  • More trade and commercial relations with Asian neighbour countries. 

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How can we overcome the economic crisis?

How can we improve the economic system, what is economic crisis in the philippines, what are the basic economic problems in the philippines, how do you survive a recession in 2020, what causes economic crisis, how can we improve our country, what are the 3 basic economic questions, what are the 3 main economic systems, is the philippines in recession 2020, will the philippine economy crash, how can we solve unemployment in the philippines.

  • Identify the Problems. The first step to overcoming financial crisis is to identify the primary problem that is causing difficulties. ...
  • Create a Budget. One of the best ways to deal with financial problems is creating a budget plan. ...
  • Set Financial Priorities. ...
  • Address the Problem. ...
  • Develop a Plan and Track Progress.
  • Tax Cuts and Tax Rebates.
  • Stimulating the Economy With Deregulation.
  • Using Infrastructure to Spur Economic Growth.

MANILA, Philippines—The Philippine economy fell to its worst post-war recession in 2020 amid the COVID-19 pandemic, aggravated by the onslaught of natural disasters, like Taal Volcano's eruption and a string of strong typhoons, that devastated both lives and livelihoods.

Low economic mobility, poverty and income inequality, poor health care and nutrition, and environmental degradation are some of the key challenges the Philippines is facing in its development trajectory. sustainable development.

  • Pay Off All Debt. Debt is a problem even when the economy is booming. ...
  • Cash is King. There are two primary reasons to stock up on cash in advance of a recession, and they're equally important.
  • Keep Investing. When the financial markets get shaky, people panic. ...
  • Building Your “IA's” – Intellectual Assets. ...
  • Create a Side Hustle.

Housing starts, interest rates, oil prices, unemployment numbers, auto sales, wage inflation, quarterly GDP growth or contraction, consumer prices and personal bankruptcy filings are factors that cause financial crisis.

  • Share resources. Obviously, the fewer resources an average family uses, the lower the nation's ecological footprint. ...
  • Promote education. ...
  • Empower women. ...
  • Negotiate strategic political relations. ...
  • Reform the systems of food and aid distribution.

Economic systems answer three basic questions: what will be produced, how will it be produced, and how will the output society produces be distributed? There are two extremes of how these questions get answered.

This module introduces the three major economic systems: command, market, and mixed. We'll also discuss the characteristics and management implications of each system, such as the role of government or a ruler/ruling party.

MANILA (Reuters) - The Philippine economy fell into recession for the first time in 29 years with a record slump in the second quarter, as strict lockdown measures ravaged economic activity and prompted the government to sharply cut its GDP forecast for 2020. ... The government sees the economy rebounding in 2021 and 2022.

IMF sees deeper 2020 economic crash, partial rebound in 2021 Metro Manila (CNN Philippines, January 26) — The Philippine economy shrank deeper than expected in 2020, the International Monetary Fund said ahead of the release of official government figures.

  • Reducing Occupational Immobility. Labour resources are usually occupationally immobile because it takes time for people to gain the sufficient skills that are necessary for working in a certain industry. ...
  • Employment Subsidies. ...
  • Sustained Economic Growth.

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Opinion Front

Opinion Front

All About the Economic Problems of the Philippines

Though a fast-growing economy, Philippines still needs to address the issues of poverty, unemployment, and poor infrastructure. Here is some information on the economic problems of the Philippines.

Economic Problems of the Philippines

Did You Know?

In January 2015, out of the 62.87 million Filipinos in the age group of 15 years and above, the labor force comprised 40.11 million. Out of these, 2.65 million were unemployed.

Located in Southeast Asia, the Republic of the Philippines comprises 7,107 islands. With more than 100 million people currently living in the Philippines, it is ranked as the 12 th most populous country in the world. Philippines’ economy largely depends on the remittances from the Filipinos residing overseas and investing in the homeland. More than 10 million Filipinos are currently living abroad.

Philippines has emerged as one of the fastest growing economies in Asia, with an annual GDP growth rate of 6.1% in 2014. According to the Asian Development Bank, the GDP growth, Inflation, and Current Account Balance (share of GDP) in 2015 is estimated to be 6.4%, 2.8%, and 4%, respectively. While these figures might paint a rosy picture, there are certain serious issues that need to be addressed.

Economics Problems of the Philippines

Like most other southeast Asian regions, Philippines too has a history of European colonization. It was a colony of Spain and the USA. The country is now home to multiple cultures and ethnic groups. It is also looked upon as a perfect example of a ‘mixed economy’. Traditionally, the economy stabilized on the agrarian contributions and the manufacture of garments, pharmaceutical products, and semiconductors. In the last decade, electronic exports added to the exports, along with various products obtained by mining. Though Philippines too suffered in terms of exports, remittances from overseas Filipino workers, and foreign direct investments, during the 2008 global economic crisis, there has been steady economic growth in the recent years. However, there are certain economic problems that cannot be ignored. The following sections list out some of the economic problems of the Philippines.

Unemployment

Unemployment

In 2012, 10 million Filipinos were either unemployed (three million) or underemployed (seven million). In October 2013, unemployment rate was 6.5% in comparison to 6.8% in 2012. According to the Labor Force Survey, the unemployment rate was 6% and 6.6% in October 2014 and January 2015, respectively.

Only one-fourth of the Filipinos that enter the labor force are able to find good jobs in the country, and the rest of them find jobs overseas, leave the labor force, or end up becoming unemployed/underemployed. Thus, three-fourth of the workers are unemployed or informally employed, with lack of opportunities to find good jobs. Though jobs are being generated, there’s a need to generate jobs at a much faster rate, to be able to bring down the unemployment rate. Many of the unemployed individuals are college graduates. Many wait for job opportunities abroad, and many families depend on remittances from family members who are staying abroad.

Poverty

Despite the talk about economic growth, the poverty rates have not changed significantly since 2006. As per the National Statistical Coordination Board (NSCB), poverty incidence of the population improved from 26.3 percent in 2009 to 25.2 percent in 2012.

Even though Philippines is a fast-growing economy, there’s been just a minor decline in the incidence of poverty. Poverty is very much linked to unemployment. Unfortunately, the growth is restricted to the BPO, retail, and real estate sector, and a large number of Filipinos remain without jobs. On top of that, natural calamities further push people below the poverty line. Thus, economic disparity is a common feature. In general, the gains from higher economic growth have not really trickled down to the poor.

Poor Infrastructure

Poor Infrastructure

Infrastructure is one of the biggest challenges. In the Global Competitiveness Report 2014-2015 of the World Economic Forum, Philippines didn’t fare well in terms of the quality of the overall infrastructure. It ranked at number 91 among 144 countries. This can be attributed to underinvestment in infrastructure.

In order to host global companies, Philippines will have to pay more attention to enhancing the infrastructure. A well-developed transportation (roads, railroads, ports, and air transport) and communication system is extremely essential for economic activities. As per the World Bank’s Ease of Doing Business 2015 report, Philippines ranked 95 out of 189 economies. It needs to improve its ranking in certain categories. It ranked 161 in the category of starting a business, 124 in dealing with construction permits, 108 in registering property, 104 in getting credit, 154 in protecting minority investors, 127 in paying taxes, and 124 in enforcing contracts. Thus, the policy makers should take steps to attract global companies or investors.

Heavy Dependence on Remittances

Heavy Dependence on Remittances

Philippines was the third-highest recipient of migrant remittances in 2013, after India and China. According to the Philippine Central Bank, remittances from overseas Filipino workers (OFWs) reached USD 25.1 billion in 2013. It was 7.6% higher than the remittances from the last year, and accounted for 8.4 % of Philippine gross domestic product (GDP) in 2013.

The source countries for the remittances included the United States, Saudi Arabia, the United Kingdom, the United Arab Emirates, Singapore, Canada, and Japan. The country heavily relies on these funds. Their economic growth can primarily be associated to the remittances from the overseas Filipino workers, as well as the growth in the Business Process Outsourcing (BPO) sector. Also, one cannot rule out that the growth is connected to the global economy. In the event of any crisis, economic growth is bound to suffer. Thus, greater attention has to be paid to addressing to the internal problems of the economy and enhancing domestic-oriented growth. A policy of removing structural impediments to growth has to be adopted, with lesser focus on foreign investors and exporters.

Besides the aforementioned issues, corruption is another aspect that needs to be taken care of. The current administration needs to prepare an industrialization program that encourages value-addition manufacturing or services and builds Filipino-owned industries. Being overly dependent on global economy or remittances from Filipinos living abroad will make the nation vulnerable to external shocks. Thus, the aim should be to encourage inclusive growth in the country by creating employment opportunities and reducing poverty.

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Stronger Climate Action Will Support Sustainable Recovery and Accelerate Poverty Reduction in the Philippines

MANILA, November 09, 2022 – Climate change is exacting a heavy toll on Filipinos’ lives, properties, and livelihoods, and left unaddressed, could hamper the country’s ambition of becoming an upper middle-income country by 2040. However, the Philippines has many of the tools and instruments required to reduce damages substantially, according to the World Bank Group’s Country Climate and Development Report (CCDR) for the Philippines, released today.

With 50 percent of its 111 million population living in urban areas, and many cities in coastal areas, the Philippines is vulnerable to sea level rise. Changes due to the variability and intensity of rainfall in the country and increased temperatures will affect food security and the safety of the population.

Multiple indices rank the Philippines as one of the countries most affected by extreme climate events. The country has experienced highly destructive typhoons almost annually for the past 10 years. Annual losses from typhoons have been estimated at 1.2 percent of GDP.

Climate action in the Philippines must address both extreme and slow-onset events. Adaptation and mitigation actions, some of which are already underway in the country, would reduce vulnerability and future losses if fully implemented.

“Climate impacts threaten to significantly lower the country’s GDP and the well-being of Filipinos by 2040. However, policy actions and investments – principally to protect valuable infrastructure from typhoons and to make agriculture more resilient through climate-smart measures -- could reduce these negative climate impacts by two-thirds,” said World Bank Vice President for East Asia and Pacific, Manuela V. Ferro.

The private sector has a crucial role to play in accelerating the adoption of green technologies and ramping up climate finance by working with local financial institutions and regulators.

“ The investments needed to undertake these actions are substantial, but not out of reach, ” said IFC Acting Vice President for Asia and the Pacific, John Gandolfo . “ The business leaders and bankers who embrace climate as a business opportunity and offer these low-carbon technologies, goods and services will be the front runners of our future. ”

The report also undertakes an in-depth analysis of challenges and opportunities for climate-related actions in agriculture, water, energy, and transport. Among the recommendations are:

  • Avoiding new construction in flood-prone areas.
  • Improving water storage to reduce the risk of damaging floods and droughts. This will also increase water availability.
  • Extending irrigation in rainfed areas and promoting climate-smart agriculture practices such as Alternate Wetting and Drying (AWD).
  • Making social protection programs adaptive and scalable to respond to climate shocks.
  • Removing obstacles that private actors face in scaling investments in renewable energy.
  •  Ensuring new buildings are energy efficient and climate resilient.

Many climate actions will make the Philippines more resilient while also contributing to mitigating climate change.

“The Philippines would benefit from an energy transition towards more renewable energy.  Accelerated decarbonization would reduce electricity costs by about 20 percent below current levels which is good for the country’s competitiveness and would also dramatically reduce air pollution,” said Ferro.

Even with vigorous adaptation efforts, climate change will affect many people. Some climate actions may also have adverse effects on particular groups, such as workers displaced by the move away from high-emission activities. The report recommends that the existing social protection system in the country be strengthened and scaled up to provide support to affected sectors and groups.

World Bank Group Country Climate and Development Reports : The World Bank Group’s Country Climate and Development Reports (CCDRs) are new core diagnostic reports that integrate climate change and development considerations. They will help countries prioritize the most impactful actions to reduce greenhouse gas (GHG) emissions and boost adaptation while delivering on broader development goals. CCDRs build on data and rigorous research and identify main pathways to reduce GHG emissions and climate vulnerabilities, including the costs and challenges as well as benefits and opportunities from doing so. The reports suggest concrete, priority actions to support the low-carbon, resilient transition. As public documents, CCDRs aim to inform governments, citizens, the private sector, and development partners and enable engagements with the development and climate agenda. CCDRs will feed into other core Bank Group diagnostics, country engagements, and operations to help attract funding and direct financing for high-impact climate action.

  • 10 Things You Should Know About the World Bank Group’s First Batch of Country Climate and Development Reports
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