The Philippine economy is considered one of the most dynamic economies in the East Asia Pacific region. Solid economic fundamentals and a competitive workforce drive the growth momentum of its economy. The country’s average annual Gross domestic product (GDP) growth accelerated to 6.4% between 2010 to 2019. 

However, the Philippine GDP contracted by a record 9.6% in 2020, as the country imposed prolonged lockdowns to contain the Covid-19 spread. Stringent quarantine measures led to significant decreases in consumption and investment growth. It further caused a dramatic slowdown in exports, tourism, and remittances. 

Furthermore, the Philippines’ GDP per capita declined to $3,430 in 2020 from $3,850 in 2019, delaying the government’s goal of achieving upper middle-class status within a $4,096 to $12,695 income range.

In 2021, the Philippine economy expanded by 5.6% and returned to its pre-pandemic levels. The Philippine government is aiming for GDP growth rates of 7-9% in 2022, and 6–7% in 2023 and 2024. Public spending on major infrastructure projects is expected to support the country’s growth, while its aggressive vaccination campaign is expected to help the economy recover further.

Philippine GDP Annual Growth Rate (in %)

The Philippines’ population is currently around 112 million, with a median age of 25.7 years. The preliminary unemployment rate in 2021 declined to 7.8%, from a record 17.6% in April 2020. However, it is still lagging behind pre-pandemic jobs figures. The unemployment rate was at 5.3% in 2018 and 5.1% in 2019.


Philippine
Unemployment Rate (in %)

Currency and Central Bank

The Philippine peso (PHP), also referred to as piso in Filipino is the country’s official currency. It is subdivided into 100 centavos or sentimos. Prior to the adoption of the Filipino language on banknotes and coins in 1967, the English word peso appeared on Philippine money. 

The Bangko Sentral ng Pilipinas (BSP), serves as the country’s central bank. The BSP was established in 1993 in accordance with Republic Act 7653 or the New Central Bank Act of 1993. This was later amended under Republic Act 11211 or the New Central Bank Act of 2019.

The central bank has kept its key rate at a record low since November 2020 and vowed to prioritize economic recovery, suggesting it will not raise interest rates anytime soon. Key interest rate is at 2.0% while overnight deposit and lending facilities are at 1.5% and 2.5%, respectively. 


Philippine
Inflation (in %)

Inflation in 2021 was 4.5%. For this year, BSP expects an inflation rate of 3.3%, and 3.2% for 2023.

Industry and Trade

Services, industry, and agriculture are the main sectors of the Philippine economy. Food processing, cement, iron, and steel production, and telecommunications are among the country’s most significant contributors. 

The services sector makes an enormous contribution to the country’s GDP at 61% and provides 57.6% of the nation’s labour force. Over the past years, the sector has expanded tremendously, particularly in telecommunications, business process outsourcing (BPO), and finance. 

The BPO boom in the Philippines is attributed to several outsourcing advantages that companies enjoy, such as high spoken English proficiency, a highly educated labour force, and lower operational and labour costs. 

The Philippines’ industry sector is second in GDP contribution with 28,4% and employs 19.8% of the total workforce. Among the country’s major manufacturing activities are industrial food processing, cement, glass, chemicals production, and iron and steel manufacturing. 

Lastly, the agricultural sector’s contribution to the GDP has continued to decline in recent years and is currently at 10.8%. However, it still provides employment for 25% of the labour force. Coconut, sugar, and rice are among the top agricultural products of the Philippines. 

The country is currently ranked 39th globally in terms of total exports, with integrated circuits, office machine parts, insulated wire, semiconductor devices, and electrical transformers as its main export products. Its top export partners are China, the US, Japan, Hong Kong, and Singapore. 

Philippine economy Balance of Trade

Meanwhile, the Philippines is 33rd in total imports and its top import products are integrated circuits, refined petroleum, cars, crude petroleum, and broadcasting equipment. China, Japan, South Korea, the US, and Singapore are its main import partners. 

Survey and Rankings

In the Heritage Foundation’s Index of Economic Freedom, the Philippine economy fell from 73th freest in 2021 to 80th in 2022. Its overall score went down to 61.1 from 64.1, but the country has remained in the “Moderately Free” category. 

The Philippines improved its ranking to 95th place from the 124th spot in the World Bank’s 2020 Ease of Doing Business. It is currently in the 11th spot among countries in East Asia and the Pacific region. The country showed significant improvements, particularly in the area of protecting minority investors. 

Stock Exchanges and Capital Markets

The Philippine Stock Exchange or PSE is currently the country’s sole stock exchange. It was formed following the merger between the Manila Stock Exchange and the Makati Stock Exchange in 1992. PSE has been operating since 1927, making it one of the oldest stock exchanges in Asia. 

The PSE Composite Index or PSEi is the main index of the Philippines. It comprises 30 of the largest and most active stocks listed on the exchange. These companies were chosen based on a set of public float, liquidity, and market capitalisation criteria. 

The PSE has a total market capitalisation of $291.47 billion as of March 2, 2022. Exchange-Traded Funds (ETFs) are offered via the First Metro Philippine Equity Exchange Traded Fund, Inc. 

Bond Market

According to the Asian Development Bank (ADB), the Philippine bond market experienced the fastest quarter-on-quarter growth in the first quarter of 2021 among emerging East Asia countries due to higher government borrowings. 

With $178.4 billion in outstanding debt instruments, the local currency (LCY) bond market expanded by 28.9% in 2020. Government securities comprised 81.2% of the total LCY market, while corporate bonds make up the remaining 18.8%.

The ADB explained that Treasury bills and Treasury bonds were the main drivers of the growth due to the heavy government borrowing from the local market to finance its pandemic relief efforts. 

Real Estate Market

The Philippine real estate market has grown significantly between 2010 to 2018 as a result of the economic growth and expansion of the middle class. 

According to the country’s central bank, the overall residential real estate price index declined by 4.2% in the year to Q1 2021. The BSP attributed the nationwide decline to the downtrend of property prices in the country’s capital, Manila 

Countrywide condominium prices fell by 10.7% during the quarter, compared with the 23.6% increase during Q1 2020. Also, the prices of duplex homes went down by 20.7%, the largest decline since 2016. 

On the other hand, the prices of townhouses and single-detached and attached houses went up by 8.3% and 0.2%, respectively. 


Philippine
Housing Index (in %)

 

Source of charts: tradingeconomics.com