Philippines (the): Economic and Political Overview
For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.
The Philippines' economy is considered as one of the most dynamic economies in East Asia and the Pacific. In 2022, GDP grew by an estimated 6.5%, mainly due to an increase in private domestic consumption and fixed investment. However, although the Filipino economy has been recovering since the outbreak of the COVID-19 pandemic, recovery has yet to reach full momentum due to persistent downside pressures. According to the IMF, GDP growth is expected to slightly decrease to 5% in 2023 before picking up to 6% in 2024. Key economic drivers include solid fundamentals, a competitive workforce, a stable job market, steady remittances, and investment in the construction sector (World Bank).
The Philippines' public deficit reached 5.4% of GDP in 2022 and it is expected to decrease to 4.7% in 2023 and 3.7% in 2024. Public debt increased to 59.3% of GDP in 2022 and is expected to further increase in 2023 and 2024, to 61% and 61.2%, respectively. Inflation rate also increased in 2022, reaching 5.3% and surpassing the Central Bank’s limit of 4%, mainly due to higher commodity prices and global supply factors. However, according to the IMF, inflation is expected to decrease to 4.3% in 2023 and 3.1% in 2024. Domestic consumption is expected to remain the main driver of the economy, accounting for 70% of GDP. Institutional reforms are needed in business freedom, investment freedom, and rule of law, according to the Heritage Foundation. The COVID-19 crisis has revealed long-existing cracks in the country’ systems and institutions, and the government estimates that the Filipino economy could take a decade to return to pre-pandemic growth. Nevertheless, the Philippines have been gradually recovering following the initial impact of the pandemic, mainly boosted by the government’s policy reforms and expansionary fiscal program.
In 2022, the unemployment rate decreased to 5.7% - a trend that's expected to continue in 2023 (5.4%) and 2024 (5.1%). Inequality in wealth distribution and poverty rates are estimated to have worsened after the pandemic, pushing around 2.7 million more Filipinos into poverty, to a total of 23.7% of the population living in poverty. Nevertheless, one of the government's main goals is to reduce the poverty rate and increase equality among Filipino society.
| Main Indicators | 2020 | 2021 | 2022 (E) | 2023 (E) | 2024 (E) |
| GDP (billions USD) | 361.75 | 394.09 | 404.26 | 440.90 | 475.65 |
| GDP (Constant Prices, Annual % Change) | -9.5 | 5.7 | 7.6 | 6.0 | 5.8 |
| GDP per Capita (USD) | 3,326 | 3,576 | 3,623 | 3,905 | 4,166 |
| General Government Balance (in % of GDP) | -3.3 | -5.4 | -5.4 | -4.3 | -3.7 |
| General Government Gross Debt (in % of GDP) | 51.6 | 57.0 | 57.5 | 56.7 | 56.8 |
| Inflation Rate (%) | 2.4 | 3.9 | 5.8 | 6.3 | 3.2 |
| Unemployment Rate (% of the Labour Force) | 10.4 | 7.8 | 5.4 | 5.3 | 5.1 |
| Current Account (billions USD) | 11.58 | -5.94 | -17.83 | -11.05 | -11.31 |
| Current Account (in % of GDP) | 3.2 | -1.5 | -4.4 | -2.5 | -2.4 |
Source: IMF – World Economic Outlook Database, October 2021
The Philippines' economy is based on food processing; production of cement, iron, and steel; and telecommunications, among others. According to the latest rates by the World Bank, the agricultural sector contributes to 10.1% of GDP and employs 22.9% of the labour force. The Philippines is the second largest producer of coconuts in the world. However, the agricultural sector suffers from low productivity, weak economies of scale and inadequate infrastructure. Still, the government is working on restructuring and modernising the sector, and have been implementing policies such as converting government lands to agriculture use. As for mining, the Philippines are one of the richest countries of the world in terms of minerals with an unexploited mineral wealth estimated at more than USD 840 billion (Inquirer). The Philippines reserves of copper, gold and zinc are also among the largest in the world. In 2021, Typhoon Odette hit the country, damaging hundreds of metric tons of rice crops and, despite efforts to improve production in 2022, the sector was still deeply affected by the lasting impacts of the typhoon.
The industry sector contributes 28.9% of GDP and employs 19.1% of the workforce. Industrial food processing is one of the Philippines' main manufacturing activities. The big industries are dominated by production of cement, glass, chemicals products and fertilisers, iron, steel and refined oil products. While the sector's growth was halted in the initial stages of the pandemic, as response measures impeded manufacturing activity and reduced the global demand for industrial products, he Filipino industry showed a gradual recovery in the past few years. The logistics industry was particularly dynamic, driven by recovery in both local and global demand in e-commerce, domestic manufacturing and the export sectors.
The tertiary sector - which represents 61% of GDP and employs 58% of the country’s workforce - has developed substantially, particularly in telecommunications, call centres and finance. Government goals for the sector include attracting investments in human resource development, design, R&D, finance, and infrastructure; bolstering manufacturing-derived services; and establishing new ecosystems linked with manufacturing (Department of Trade and Industry and Board of Investments). Although the services sector was hit the hardest during the pandemic, it showed a steady recovery in 2022, mainly driven by the wholesale, retail trade, information and communication, accommodation and food service activities, and human health and social work activities.
| Breakdown of Economic Activity By Sector | Agriculture | Industry | Services |
| Employment By Sector (in % of Total Employment) | 22.9 | 19.1 | 58.0 |
| Value Added (in % of GDP) | 10.1 | 28.9 | 61.0 |
| Value Added (Annual % Change) | -0.3 | 8.5 | 5.4 |
Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.
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The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}
Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation
The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.
Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024
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Latest Update: September 2023
