The Philippine economy under the pandemic: From Asian tiger to sick man again?
Subscribe to the center for asia policy studies bulletin, ronald u. mendoza ronald u. mendoza dean and professor, ateneo school of government - ateneo de manila university.
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
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
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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Adrien Chorn provided editing assistance on this piece. The author thanks Jurel Yap and Kier J. Ballar for their research assistance. All views expressed herein are the author’s and do not necessarily reflect the views and policies of his institution.
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Philippine economic development, looking backwards and forward: an interpretative essay.
Over the past decade, the Philippine development story has attracted international attention as it transformed from being the “Sick Man of Asia” to “Asia’s Rising Tiger”. However, the country’s strong growth momentum was abruptly interrupted by the COVID-19 pandemic, which continues to cast a huge shadow over its development outlook. With the country now at the crossroads, this paper reflects on and draws lessons for economic development and policy by examining the country’s three main economic episodes over the post-independence era: (a) the period of moderately strong growth from 1946 to the late 1970s, (b) the tumultuous crisis years from the late 1970s to the early 1990s, and (c) the period from the early 1990s to the 2019 when it rejoined the dynamic East Asian mainstream. Through comparative analysis, the paper also seeks to understand the country’s development dynamics and political economy. We conclude by highlighting elements of a recovery and reform agenda in the post-pandemic era.
Key Words: Philippines, economic development, economic history, political economy, institutions, COVID-19, ASEAN, comparative analysis
JEL codes: E02, I0, N15, O10, O43, O53, P52
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Philippines Economic Update October 2019
Key Findings
- Economic growth slowed in the first half of 2019, driven by a rapid deceleration in investment growth due to contraction in public spending and weaker global economy. Nevertheless, the Philippines expects to sustain progress in poverty reduction.
- Amidst rising global uncertainties, the Philippine economy remains strong and is projected to grow 5.8% in 2019, before recovering to 6.1% and 6.2% in 2020 and 2021, respectively.
- In the short term, fast tracking the implementation of recently approved game-changing reforms would help to achieve inclusive growth. In the long-term, promoting competition to generate quality jobs will enhance the impact of growth on poverty reduction in the Philippines.
Recent Economic Developments
- In the first half of 2019, economic growth slowed to its lowest level in eight years amid challenging external environment and a significant slowdown in investment growth.
- Private consumption was the main growth driver, as growth recovered to 5.8% year-on-year in the first half of 2019 from 5.3% during the same period last year, driven by moderating inflation, steady remittance inflows, an improving job market, and an increase in economic activity from election-related spending.
- Declining inflation driven by stabilizing prices of food and energy prompted the Bangko Sentral ng Pilipinas (Central Bank of the Philippines) to adopt a more accommodative policy stance in 2019. Inflation fell to 1.7% in August 2019, the lowest in almost 3 years.
- The Philippine government’s expansionary fiscal policies for 2019 was put on hold as the delayed passage of the 2019 public budget impacted the pace of public spending significantly in the first half of the year, resulting in substantial underspending. Nevertheless, the implementation of previous tax-policy reforms led to robust revenue, resulting in a lower than programmed fiscal deficit for the first half of 2019.
- Improving labor market conditions, and sustained growth in real household incomes, led to progress in poverty reduction.
Outlook and Risks
- The Philippines’ growth outlook is weakened by a difficult external environment and domestic challenges, as growth is expected to slow from 6.2% in 2018 to 5.8% in 2019, before recovering to 6.1% in 2020 and 6.2% in 2021. Both fiscal and monetary policy remain supportive of growth, while a weak global economic environment and a slow recovery in public investments, constitute the main downside risks.
- Poverty reduction is expected to continue based on the current economic outlook. The country’s poverty rate measured by the World Bank middle-income poverty line of US$3.20/day is estimated to have declined from 26% in 2015 to 20.8% in 2019, and further declining to 19.7% in 2020, and 18.7% in 2021.
- In the short-term, resuming public investment and fast tracking the effective implementation of game-changing reforms such as the Ease of Doing Business Law, the Rice Tariffication Law, the creation of a foundational ID system, and other such transformational policy changes would be critical to set the country to a higher path toward accelerating inclusive growth. While in the long-term, promoting competition to foster quality job creation will enhance the impact of economic growth on poverty reduction and shared prosperity.
Fostering Competition and the Challenge of Restrictive Regulations
- Philippine markets are highly concentrated limiting market competition.
- The lack of competition in key sectors has negatively impacted Philippine firms and consumers, resulting in sub-optimal outcomes in key sectors such as electricity, telecommunications, transport and logistics.
- Reducing restrictions to market competition would yield significant payoffs for households and firms in the country to boost the economy’s overall competitiveness.
- Address unclear or restrictive regulations in infrastructure sectors and professional services to create more competitive conditions;
- Eliminate restrictions on foreign and domestic investors to help level the playing field;
- Minimize the scope of controlled prices to incentivize firms to compete;
- Lessen the involvement of state-owned enterprises and other operations in typically competitive markets to promote a more effective use of public funds; and
- Streamline burdensome administrative procedures for businesses to make it easy to enter the market.
- Press Release: Philippines: High impact projects and critical reforms key to regaining higher growth
- Full Report: Philippines Economic Update, October 2019
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Philippines economic outlook 2022
Companies doing business in the Philippines are assessing the implications of COVID-19 on the country’s economy. They are likely to find that three shifts introduced during the pandemic will persist into the future: economic activity will be digitally enabled but also hyperlocal; the wealth gap is widening, and new consumer segments have emerged; and the pandemic is likely to result in a greener and more sustainable economy.
Meanwhile, the consensus view shows the Philippines economy recovering by the fourth quarter of 2022 under a muted scenario, even taking the Omicron wave into account (Exhibit 1).
The economic outlook varies by industry; companies in the consumer and retail sector are likely to see a muted recovery through 2022 (Exhibit 2), but consumer demand for essentials remains strong, while some discretionary spending is likely to rebound in line with other countries in the region. The consumer behaviors learned during the pandemic—digital migration, value hunting, and the homebody economy—may stick.
The travel and hospitality sectors are poised to surpass 2019 growth in 2022, although headwinds could stall tourism recovery until 2024. In the interim, companies can take targeted actions to reinvent themselves and grow out of the pandemic. In financial services, the banking sector could take up to five years to recover from its 2020 drop in return on equity (Exhibit 3). Among Filipino consumers, active use of digital banking and e-wallet services has increased significantly.
The healthcare sector is expected to grow through 2022, while pharmaceutical manufacturing is likely to remain steady. Certain consumer behaviors—digital-care adoption, focus on preventive care and wellness, and interest in value for the money—are likely to stick after the pandemic.
Likewise, the energy and power sector is expected to expand through 2022. Finally, the outlooks for IT business process outsourcing (BPO) and remittances from overseas Filipino workers, a resilient lifeline for the Philippine economy, remain strong (Exhibit 4).
Jon Canto is an associate partner in McKinsey’s Manila office, where Kristine Romano is a partner.
The authors wish to thank Johann Co, Ryan Delos Reyes, Justine Eligio, Jazmin Jabines, Miguel Morales, Danice Parel, Patrick Roasa, and Carlos Syquia for their contributions to this article.
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Home — Essay Samples — Sociology — Globalization — The Impact of Globalization on the Philippine Economy
The Impact of Globalization on The Philippine Economy
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Philippine economic development, looking backwards and forward: An interpretative essay
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The Economic System of the Philippines: An Analysis
What is the economic system of the Philippines? The economy of the Philippines is based on a mixed economy. The country’s economic system combines elements of a market economy and a planned economy.
The Philippine economy relies on agriculture (e.g., rice, coconuts), manufacturing (electronics, garments), services (BPO, tourism), mining, and overseas remittances.
In the Philippines, the economy is composed of a private sector, consisting of individuals and businesses that make autonomous decisions based on self-interest, and a public sector, where the state determines the production and distribution of certain goods and services . No country is purely capitalist or purely communist.
Table of Contents
What do the freedom indexes tell about the economic system of the Philippines?
Now, to determine if a country is mostly a market economy or a planned economy, it is useful to examine some economic indexes. For instance, according to the 2022 Index of Economic Freedom, which measures the ability of every human to control his own labor and property, the Philippines is ranked 80th globally and 15th in Asia-Pacific indicating that the country has a moderately free economy.
In a similar way, the 2022 Freedom House index evaluates the state of political rights and civil liberties globally. Generally, market economies tend to align more with democracy and freedom, while command economies tend to be characterized by greater state control and fewer democratic and civil liberty protections.
The Philippines gets a score of 55/100, which qualifies it as Partly Free. The Philippines is considered to have a government that does not control what people do, and people can make their own economic decisions. Still, it is only considered an electoral democracy, lacking full liberal democratic protections.
The Link Between Public Sector Employment and the Economic System of the Philippines
An indicator of the extent to which the State is involved in the economy is the number of public sector employees. In the Philippines, according to ILOSTAT, the number of public sector employees as a percentage of the total workforce is 9.1% (2019).
In the country’s mixed economy, the number of public sector employees as a percentage of the total workforce varies based on the specific policies and practices adopted by the State. Some economic activities are left to the private sector while others are under government control. The bigger the public sector the closer the economy is to being a command economy.
What do the biggest companies in the Philippines say about the country’s economic system?
The biggest company in the Philippines should also be looked at, as well as whether it is a state-owned or private company. In this case, SM Investments is a conglomerate with interests in banking, retail, property, and mining. It is the country’s dominant player in retail with 208 stores nationwide. Of these, 47 are SM Department Stores; 38 are SM Supermarkets; 37 are SM Hypermarkets, and 86 are SaveMore branches.
The company is owned by multiple private shareholders.
The historical factors that have influenced the economic system of the Philippines
The current mixed economy system of the Philippines in the last century is a result of a combination of factors, including the country’s colonial history, its post-independence economic policies, and the global economic environment.
Colonial rule left the country with a legacy of unequal land distribution, a weak industrial base, and a reliance on foreign capital. Post-independence economic policies focused on import substitution and export promotion, while the global economic environment has been characterized by increased economic integration and globalization.
These factors have all contributed to the current mixed economy system of the Philippines.
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Review of the Philippine Economic Situation and Analysis of the State of the Nation in 2021
ASOG WORKING PAPER 21-022
36 Pages Posted: 10 Aug 2021
Philip Arnold Tuaño, PhD
Ateneo de Manila University - Economics Department; Ateneo de Manila University - Ateneo School of Government
Date Written: July 14, 2021
At the start of its term, the Duterte administration reaped the benefits of the Philippines’ momentum of economic growth and poverty reduction; the country’s GDP continued to expand at above six percent during the 2016 to 2019 period while poverty incidence significantly declined to 16 percent in 2018. The government’s economic strategy was founded on the expansion of the national infrastructure program popularly known as the Build-Build-Build, funded by additional public revenues brought about by the Tax Reforms for Acceleration and Inclusion which it planned to further accelerate the country’s growth path. However, the COVID-19 pandemic shock in 2020 has dented this trajectory and impaired the short-run prospects of the country; at the same time, the lack of a robust fiscal response to the social and economic impacts of the pandemic may have further diminished the ability of the country to immediately continue its pre-pandemic growth trajectory. This paper illustrates the current economic situation in the country and lays down key recommendations for the final year of the Duterte administration.
Keywords: Philippines, Economy, Duterte
Suggested Citation: Suggested Citation
Philip Tuano (Contact Author)
Ateneo de manila university - economics department ( email ).
Quezon City Philippines
Ateneo de Manila University - Ateneo School of Government ( email )
ASOG – Ateneo de Manila University Loyola Heights Quezon City, Metro Manila 1108 Philippines
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Essay on Economic Issues In The Philippines
Students are often asked to write an essay on Economic Issues In The Philippines in their schools and colleges. And if you’re also looking for the same, we have created 100-word, 250-word, and 500-word essays on the topic.
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100 Words Essay on Economic Issues In The Philippines
The Philippines suffers from high poverty rates. Many people lack basic needs like food, shelter, and clothing. This is because jobs are scarce and many are low paying. The government is trying to create more jobs and improve living conditions, but progress is slow.
Unemployment
Unemployment is another big issue. There aren’t enough jobs for everyone. This leads to people not having money to buy things they need. The government is working on this problem by trying to attract more businesses to the Philippines.
Education in the Philippines is not always good quality. Many schools lack resources like books and computers. This makes it hard for students to learn and succeed. The government knows this is a problem and is working to improve schools.
Infrastructure
The Philippines needs better infrastructure, like roads and buildings. Poor infrastructure can make it hard for businesses to operate and for people to get to work. The government is investing in infrastructure to try to fix this problem.
250 Words Essay on Economic Issues In The Philippines
Introduction.
The Philippines, a Southeast Asian country, faces numerous economic problems. These issues include poverty, unemployment, and corruption. Let’s explore these issues in detail.
Poverty is a significant problem in the Philippines. Despite the country’s economic growth, many people still live in harsh conditions. They struggle to afford basic needs like food, shelter, and education. The government is trying to reduce poverty, but progress is slow.
Another big issue is unemployment. Many Filipinos do not have jobs, especially young people. This problem is due to a lack of job opportunities and skills mismatch. A lot of people have skills that do not match the jobs available.
Corruption is also a major issue in the Philippines. It affects the economy because money that should be used for public services ends up in the wrong hands. This problem hinders economic development and increases poverty.
To sum up, the Philippines faces several economic issues. These problems include poverty, unemployment, and corruption. Solving these issues is not easy, but with the right policies and actions, the country can improve its economy.
500 Words Essay on Economic Issues In The Philippines
The economy of the philippines, issue 1: poverty.
One of the main economic problems in the Philippines is poverty. Despite economic growth, a big part of the population still lives in poverty. This means many people don’t have enough money for basic needs like food, shelter, and education. Poverty is more common in rural areas where farming is the main source of income.
Issue 2: Unemployment
Unemployment is another big problem. This means there are people who want to work but can’t find jobs. The COVID-19 pandemic made this worse, as many businesses had to close. The government is trying to create more jobs, but it’s a slow process.
Issue 3: Inequality
Issue 4: natural disasters.
The Philippines is often hit by natural disasters like typhoons, earthquakes, and volcanic eruptions. These disasters damage homes, roads, and businesses, which hurts the economy. The government has to spend a lot of money to repair the damage and help people recover.
Issue 5: Dependence on Overseas Workers
A lot of Filipinos work in other countries and send money back home. This money is a big part of the country’s income. But it also means the country depends a lot on other countries’ economies. If these countries face economic problems, it can hurt the Philippines too.
Ways to Improve
In conclusion, while the Philippines has made progress, it still faces many economic challenges. By focusing on reducing poverty, creating jobs, reducing inequality, and improving resilience to natural disasters, the country can continue to grow and improve the lives of its people.
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Home / Essay Samples / Government / Philippine Government / Navigating the Complexities of the Philippine Economy
Navigating the Complexities of the Philippine Economy
- Category: Economics , Government , World
- Topic: Economic Problem , Philippine Government , Philippines
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