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Economy of the Philippines

The economy of the Philippines is an emerging market, and considered as a newly industrialized country in the Asia-Pacific region. In 2024, the Philippine economy is estimated to be at ₱26.55 trillion ($471.5 billion), making it the world's 32nd largest by nominal GDP and 13th largest in Asia according to the International Monetary Fund.

The Philippine economy is transitioning from one based on agriculture to one based more on services and manufacturing. It has experienced significant economic growth and transformation in recent years. With an average annual growth rate of around 6 percent since 2010, the country has emerged as one of the fastest-growing economies in the world. The Philippines is a founding member of the United Nations, Association of Southeast Asian Nations, Asia-Pacific Economic Cooperation, East Asia Summit and the World Trade Organization. The Asian Development Bank (ADB) is headquartered in the Ortigas Center located in the city of Mandaluyong, Metro Manila.

The country's primary exports include semiconductors and electronic products, transport equipments, garments, chemical products, copper, nickel, abaca, coconut oil, and fruits. Its major trading partners include Japan, China, the United States, Singapore, South Korea, the Netherlands, Hong Kong, Germany, Taiwan, and Thailand.

In 2017, the Philippine economy was projected to become the 9th largest in Asia and 19th largest in the world by 2050. By 2035, the Filipino economy is predicted to be the 22nd largest in the world.

The Philippines has been named as one of the Tiger Cub Economies, alongside Indonesia, Malaysia, Vietnam, and Thailand. However, major problems remain, mainly related to alleviating the wide income and growth disparities between the country's different regions and socioeconomic classes, reducing corruption, and investing in the infrastructure necessary to ensure future growth.

In 2024, the World Economic Forum chief Børge Brende said that “there is a real opportunity for this country to become a $2-trillion economy.”

Overview

The Philippine economy has been growing steadily over decades and the International Monetary Fund in 2014 reported it as the 39th largest economy in the world. The Philippines posted a high GDP growth rate of 7.6 percent in 2022. However, the country is not a part of the Group of 20 nations; instead, it is grouped in a second tier for emerging markets or newly industrialized countries.

Notes for economic growth (1980-2023):

1980-82: Slower economic growth due to mismanagement

1983-86: Recession due to factors like corruption

1987-90: Recovery from 1984 crisis

1991-1992: Inflation and natural disasters (notably Mount Pinatubo eruption) caused slower growth

1993-97: Fast growth

1998: Minor recession due to the 1997 Asian Financial Crisis

1999: Recovery

2002-2008: Post-EDSA II recovery

2009: Effects of the Great Recession

2010-2019: Philippines as a Tiger Economy

2020: Coronavirus Outbreak

2021-2023: Rebound

A chart below outlines selected statistics showing trends in the gross domestic product of the Philippines using data taken from the International Monetary Fund.

Composition by sector

As a newly industrialized country, the Philippines is still an economy with a large agricultural sector; however, the country's service industry has expanded recently. Much of the industrial sector is based on processing and assembly operations in the manufacturing of electronics and other high-tech components, usually from foreign multinational corporations.

Filipinos who go abroad to work–-known as Overseas Filipino Workers or OFWs—are a significant contributor to the economy but are not reflected in the below sectoral discussion of the domestic economy. OFW remittances is also credited for the Philippines' recent economic growth resulting in investment status upgrades from credit ratings agencies such as the Fitch Group and Standard & Poor's. From more than US$2 billion worth of remittance from Overseas Filipinos sent to the Philippines in 1994, this significantly increased to a record US$37.2 billion in 2023 and represented 8.5 percent of the country's GDP.

Agriculture

As of 2022, agriculture employs 24 percent of the Filipino workforce accounting for 8.9 percent of the total GDP. The type of activity ranges from small subsistence farming and fishing to large commercial ventures with significant export focus.

The Philippines is the world's third largest producer of coconuts, and the world's largest exporter of coconut products. Coconut production is generally concentrated in medium-sized farms. The Philippines is also the world's third largest producer of pineapples, producing 2,862,000 metric tons (2,817,000 long tons; 3,155,000 short tons) in 2021.

Rice production in the Philippines is important to the food supply in the country and economy. The Philippines is the 8th largest rice producer in the world as of 2019, accounting for 2.5 percent of global rice production. Rice is the most important food crop, a staple food in most of the country; it is produced extensively in Central Luzon), Western Visayas, Cagayan Valley, SOCCSKSARGEN, and Ilocos Region.

The Philippines is one of the largest producers of sugar in the world. At least 17 provinces located in eight regions of the nation have grown sugarcane crops, of which the Negros Island Region accounts for half of the country's total production. As of Crop Year 2012–2013, 29 mills are operational divided as follows: 13 mills in Negros, 6 mills in Luzon, 4 mills in Panay, 3 mills in Eastern Visayas and 3 mills in Mindanao. A range from 360,000 to 390,000 hectares (890,000 to 960,000 acres) are devoted to sugarcane production. The largest sugarcane areas are found in the Negros Island Region, which accounts for 51 percent of sugarcane areas planted. This is followed by Mindanao which accounts for 20 percent; Luzon with 17 percent; Panay with 7 percent and Eastern Visayas with 4 percent.

Automotive and aerospace

The ABS used in Mercedes-Benz, BMW, and Volvo cars are made in the Philippines. Automotive sales in the Philippines increased to 352,596 units in 2022 from 268,488 units a year prior. Toyota sells the most vehicles in the country; this is followed by Mitsubishi, Ford, Nissan, and Suzuki. Honda and Suzuki produce motorcycles in the country. Since around the 2010s, several Chinese car brands have entered the Philippine market; these include Chery and Foton Motor.

Aerospace products in the Philippines are mainly for the export market and include manufacturing parts for aircraft built by both Boeing and Airbus. Moog is the biggest aerospace manufacturer with base in Baguio; the company produces aircraft actuators in their manufacturing facility. Total export output of aerospace products in the Philippines reached US$780 million in 2019.

Electronics

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. Toshiba hard disk drives are manufactured in Santa Rosa, Laguna. Printer manufacturer Lexmark has a factory in Cebu City. Electronics and other light industries are concentrated in Laguna, Cavite, Batangas and other CALABARZON provinces with sizable numbers found in Southern Philippines that account for most of the country's export.

The Philippine Electronics Industry is classified into (73%) Semiconductor Manufacturing Services (SMS) and (27%) Electronics Manufacturing Services (EMS) according to SEIPI, the largest organization of foreign and Filipino electronics companies in the Philippines. Electronic products continued to be the country's top export with total earnings of US$45.66 billion and accounted for 57.8 percent of the total export of goods in 2022.

Mining and extraction

The Philippines is rich in mineral and geothermal energy resources. In 2019, it produced 1,928 megawatts (2,585,000 hp) of electricity from geothermal sources (7.55% of total electricity production). A 1989 discovery of natural gas reserves in the Malampaya oil fields off the island of Palawan is being used to generate electricity in three gas-powered plants. Philippine gold, nickel, copper, palladium and chromite deposits are among the largest in the world. Other important minerals include silver, coal, gypsum, and sulphur. Significant deposits of clay, limestone, marble, silica, and phosphate exist.

About 60 percent 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 percent. Philippine mineral exports amounted to US$4.22 billion in 2020. 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 upheld the constitutionality of an important law permitting foreign ownership of Philippines mining companies. In 2019, the country was the 2nd largest world producer of nickel and the 4th largest world producer of cobalt. According to Philippine Statistics Authority, the total monetary value of four key metallic minerals which were appraised to Class A namely: copper, chromite, gold and nickel were valued at US$9.01 billion in 2022. Class A mineral resources are commercially recoverable that could contribute to economy annually.

Offshoring and outsourcing

Business process outsourcing (BPO) and the call center industry contribute to the Philippines' economic growth resulting in investment status upgrades from credit ratings agencies such as Fitch and S&P. In 2008, the Philippines has surpassed India as the world leader in business process outsourcing (BPO). The industry generated 100,000 jobs, and total revenues were placed at US$960 million for 2005. In 2011, BPO sector employment ballooned to over 700,000 people and is contributing to a growing middle class; this increased to around 1.3 million employees by 2022. BPO facilities are concentrated in IT parks and centers in economic zones across the Philippines: Metro Manila, Metro Cebu, Metro Clark, Bacolod, Davao City, and Iloilo City; other areas with significant pressence of the BPO industry include Baguio, Cagayan de Oro, Dasmariñas, Dumaguete, Lipa, Naga, and Santa Rosa, Laguna. The majority of the top ten BPO firms of the United States operate in the Philippines.

Call centers began in the Philippines as plain providers of email response and managing services and is a major source of employment. Call center services include customer relations, ranging from travel services, technical support, education, customer care, financial services, online business to customer support, and online business-to-business support. The Philippines is considered as a location of choice due to its many outsourcing benefits such as less expensive operational and labor costs, the high proficiency in spoken English of a significant number of its people, and a highly educated labor pool.

The growth in the BPO industry is promoted by the Philippine government. The industry is highlighted by the Philippines Development Plan as among the 10 high potential and priority development areas. The government provides incentive programs such as tax holidays, tax exemptions, and simplified export and import procedures. Additionally, training is also available for BPO applicants.

Renewable energy resources

The Philippines has significant potential in solar energy; however, as of 2021, most of the domestically produced electricity is based on fossil fuel resources, particularly coal. The country produced 7,399 megawatts (9,922,000 hp) of renewable energy in 2019.

On November 15, 2022, the renewable energy sector was granted the ability to operate with 100 percent foreign ownership, an increase from the previous 40 percent limit. This change allows for the infusion of foreign capital into the renewable energy (RE) industries. The Department of Energy is targeting an increase in the share of renewable energy in the country's power generation mix, aiming for 35 percent by 2030 and 50 percent by 2040, up from the current 22 percent. Danish firm Copenhagen Infrastructure Partners (CIP) is investing US$5 billion to develop three offshore wind energy projects with a potential capacity of 2,000 megawatts (2,700,000 hp); it will be located in Camarines Norte and Camarines Sur (1000 MW), Northern Samar (650 MW), Pangasinan and La Union (350 MW). In 2022, the share of RE in the energy mix was at 22.8 percent.

Shipbuilding and repair

The Philippines is a significant player in the global shipbuilding industry with 118 registered shipyards in 2021 distributed in Subic, Cebu, Bataan, Navotas and Batangas. As of 2022, it is the seventh largest shipbuilding nation by gross tonnage. Subic-made cargo vessels are exported to countries where shipping operators are based. South Korea's Hanjin started production in Subic in 2007 of the 20 ships ordered by German and Greek shipping operators. Bulk carriers, container ships and big passenger ferries are built in the country's shipyards. General Santos' shipyard is mainly for ship repair and maintenance.

Surrounded by waters, the country has abundant natural deep-sea ports ideal for development as production, construction and repair sites. In the ship repair sector, the Navotas complex in Metro Manila is expected to accommodate 96 vessels for repair. Shipbuilding is part of Philippines' maritime heritage; employing over 600,000 people and contributing almost 15 percent of revenues to the ocean-based industries.

Tourism

Regional accounts

For the year 2022, all economies of the 17 regions in the Philippines recorded positive growths; Western Visayas had the highest growth (9.3 percent), followed by Cordillera Administrative Region (8.7 percent), and Davao Region (8.15 percent).

According to the Philippine Statistics Authority (PSA), gross regional domestic product (GRDP) is GDP measured at regional levels. Figures below are for the year 2019.

International comparisons

Statistics

GDP-related data can be found here:

Industries: electronics assembly, aerospace, agribusiness, automotive, IT and business process outsourcing, shipbuilding, garments, footwear, pharmaceuticals, chemicals, wood products, financial services, food processing, petrochemical, metalcasting and mining, real estate, textile, tourism
Electricity – production: 106,115 GWh (2021)
Agriculture – products: abaca, bananas, sugarcane, coconuts, durian, rice, corn, cassavas, mangoes; pork, eggs, beef, pineapples, fish
Exports – commodities/products: Semiconductors and electronic products, machinery, transport equipment, aerospace/parts, automotive/parts, garments, chemicals, copper,nickel, petroleum products, coconut oil, fruits
Imports – commodities/products: electronic products, machinery, telecommunication and transport equipments, automotive, chemicals, petroleum, cereals, livestocks, cement and steel, fruits
Manufacturing Growth: 11.1% (February 2023)
PMI Manufacturing: 52.5 (March 2023)
Yield Curve: 10-Year Bond 6.15% (April 2023)
Net International Investment Position: –$28.12 billion (2021 est.)

Government budget

The national government budget for 2024 has set the following budget allocations:

References

Notes

External links

Bangko Sentral ng Pilipinas (Central Bank of the Philippines)
Department of Trade and Industry
Department of Finance Archived February 28, 2009, at the Wayback Machine
Philippine Stock Exchange
Department of Tourism
Philippine Economic Zone Authority

Trade

World Bank Summary Trade Statistics Philippines 2020

Text submitted to CC-BY-SA license. Source: Economy of the Philippines by Wikipedia (Historical)

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