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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 5.7% and returned to its pre-pandemic levels. Last year, growth even stood at 7.6%. The Philippine government aims for GDP growth rates of 6–7% in 2023 and 2024. However, the IMF is predicting 5% growth for 2023.
Philippine GDP Annual Growth Rate (in %)
The Philippines’ population is currently around 112 million, with a median age of 25.7 years.
Unemployment rates in the Philippines are on the decline. In December 2022, the rate was 4.3%, down from 7.8% in October 2021 and a record 17.6% in April 2020. The December figure is the second lowest since April 2005, and also better than pre-pandemic levels, when the Philippines’ unemployment rate stood 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.
Average inflation in the Philippines in 2021 stood at 3.9% and 5.8% in 2022. The central bank’s target is in the range of 2% to 4%.
Philippine Inflation (in %)
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 8.5%. 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 46th 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 37th 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.
Stock Exchanges and Capital Markets
The Philippine Stock Exchange or PSE is 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
The Philippine domestic bond market is constituted of short- and long-term bonds issued mainly by the national government. Treasury notes and bonds dominate the market. Although the Philippine corporate bond market is still small compared to government bonds, it has grown rapidly over the years.
In 2020, government bonds gave the Philippine bond market a boost in the midst of the pandemic and this trend has continued.
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.
In the same year, the local currency bond market grew by 14%, reaching $190 bn in outstanding debt securities. Government and corporate bonds comprised 85.5% and 14.5% of the market, respectively.
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.
However, the Covid-19 pandemic has taken its toll, but with the revival of the Philippine economy, the property market is experiencing an upward trend again. According to Lamudi, the leading real estate platform in the Philippines, there is a high demand for rental properties in the Philippine real estate market. Especially property seekers from abroad are entering the market, a trend that has been on the rise since Q4/2021, according to the platform’s observations.
“More and more developed countries are undoubtedly setting their sights on building a Philippine base, which means that the domestic real estate market is expected to be busier than ever,” said Philippines Country Head Anurag Verma.
Philippine Housing Index (in %)
Residential property prices rose by 5.6% year on year (YoY) in Q1 2022, faster than the 4.9% YoY increase in Q4 2021 and reversing a 4.2% YoY contraction in Q1 2021, according to the latest release of the BSP’s Residential Real Estate Price Index.
In terms of property types, increases were observed in the prices of townhouses by 25.6% YoY, duplex housing units by 20.9% YoY, and residential condominiums by 14.7% YoY, while prices of single-detached/attached houses slid by 2.5% YoY.
Source of charts: tradingeconomics.com
