Economic Freedom of Philippines 2019

The Philippines’ economic freedom score is 63.8, making its economy the 70th freest in the 2019
Index. Its overall score has decreased by 1.2 points, with drops in scores for monetary freedom,
government integrity, and the tax burden outweighing a higher score for property rights. The Philippines
is ranked 15th among 43 countries in the Asia–Pacific region, and its overall score is above the regional
and world averages.

Continued strong economic growth, driven in part by ambitious state-funded infrastructure

projects, has allowed the government to prioritize domestic law-and-order issues over economic policy
concerns. Investors remain concerned about President Duterte’s heavy-handed rule, although Duterte
has consolidated support from Congress. The absence of entrepreneurial dynamism thwarts
development. Despite the adoption of some fiscal reforms, deeper institutional reforms are needed in
interrelated areas: business freedom, investment freedom, and the rule of law. The judicial system
remains weak and vulnerable to political influence.

Background

A former colony of Spain and then of the United States, the Philippines became a self-governing
commonwealth in 1935. Its diverse population speaks more than 80 languages and dialects and is
spread over 7,000 islands in the Western Pacific. Longtime Davao City Mayor Rodrigo Duterte succeeded
President Benigno Aquino III in 2016. Duterte has consolidated power by marginalizing his opponents,
and his brutal crackdown on illegal drugs reflects authoritarian tendencies. To improve economic
relations, Duterte has downplayed tensions with China. Agriculture is still a significant part of the
economy, but industrial production in such areas as electronics, apparel, and shipbuilding has been
growing rapidly. Remittances from overseas workers are equivalent to nearly 10 percent of GDP.

Rule of Law

Laws protecting property rights are weakly implemented. Judicial independence is strong, but the rule of
law is generally ineffective. Courts are inefficient, biased, corrupt, slow, and hampered by low pay,
intimidation, and complex procedures. Corruption and cronyism are pervasive. A few dozen leading
families hold a disproportionate share of land, corporate wealth, and political power. Anticorruption
measures are not enforced.

Government Size

The top individual income tax rate has increased to 35 percent, and the top corporate tax rate is
30 percent. Other taxes include value-added and environmental taxes. The overall tax burden equals
13.7 percent of total domestic income. Over the past three years, government spending has amounted
to 19.4 percent of the country’s output (GDP), with budgets effectively in balance. Public debt is
equivalent to 37.8 percent of GDP.

Regulatory Efficiency
 A series of reforms has been pursued to enhance the entrepreneurial environment. Gradual
improvement of the regulatory environment includes reduction of the time and cost involved in fulfilling
licensing requirements. The labor market remains structurally rigid, but existing regulations are not
particularly burdensome. The government budgeted a record $3.03 billion in subsidies to state-owned
enterprises in 2018 but decided to scrap agricultural subsidies.

Open Markets

The combined value of exports and imports is equal to 70.7 percent of GDP. The average
applied tariff rate is 3.4 percent. As of June 30, 2018, according to the WTO, the Philippines had 286
nontariff measures in force. Many agricultural imports face additional barriers. Investment in several
economic sectors is restricted. About 39 percent of adult Filipinos have access to an account with a
formal banking institution.

The U.S. launch of the 2018 Index of Economic Freedom Monday was a reminder that greater economic
freedom creates real and dynamic benefits for both individuals and societies.

There is no single formula for overcoming challenges to economic development and maintaining
prosperity, but one thing is clear: Around the world, governments that respect and promote openness
and free markets provide greater opportunities for innovation and progress, ultimately leading to
greater human flourishing.

The unemployment rate in the Philippines dropped to 5.1 percent in the June quarter 2019
from 5.5 percent a year ago. The number of unemployed persons fell by 75 thousand to 2.29 million
while the number of employed grew by 135 thousand to 42.24 million. Meanwhile, the labor force
participation rate increased to 61.4 percent from 60.9 percent. Among employed persons, workers in
the services sector made up 58.5 percent of the total, followed by those in the agriculture sector (22.3
percent) and industry (19.2 percent). Unemployment Rate in Philippines averaged 8.31 percent from
1994 until 2019, reaching an all time high of 13.90 percent in the first quarter of 2000 and a record
low of 4.70 percent in the fourth quarter of 2016.
https://tradingeconomics.com/philippines/unemployment-rate

Philippines's Unemployment Rate dropped to 5.10 % in Apr 2019, from the previously reported
number of 5.20 % in Jan 2019. Philippines's Unemployment Rate is updated quarterly, available from Jul
1982 to Apr 2019, with an average rate of 8.55 %. The data reached an all-time high of 14.40 % in Apr
1991 and a record low of 4.70 % in Oct 2016. The data is reported by reported by CEIC Data.
 In the latest reports, Philippines's Population reached 104.92 million people in Dec 2017. The
country's Labour Force Participation Rate increased to 61.40 % in Apr 2019.

https://www.ceicdata.com/en/indicator/philippines/unemployment-rate

Inequality in income among regions in the Philippines has widened, prompting the National
Economic and Development Authority (NEDA) to push for reforms.

n a briefing on Thursday, May 30, Socioeconomic Planning Undersecretary Adoracion

Navarro said the inequality in gross regional domestic product (GRDP) per capita, or the
average income of people in a region, has widened from 2009 to 2018, according to
data from the Philippine Statistics Authority.

The richest among all regions is the National Capital Region (NCR), where the GRDP
per capita as of 2018 stood at P253,893, a 40% jump from the P181,748 in 2009.

The poorest is the Autonomous Region in Muslim Mindanao (ARMM), with its GRDP
per capita barely improving from P14,052 in 2009 to P14,657 in 2018. (READ: How the
TRAIN law worsened poverty, inequality)

https://www.rappler.com/business/231871-charts-regions-get-richer-poor-ones-barely-improve-
philippines

“Data shows the richer regions are getting richer so it’s also quite possible that the upper
income classes are getting richer… The high-income classes are concentrated in the high-
income regions for example the National Capital Region,” Adoracion M. Navarro, NEDA
Undersecretary, told reporters during the #AskNEDA briefing in Pasig.

“We should be glad that we have a high growth trajectory and we have good poverty
figures. But income inequality is another story. We should be challenged by that,” according to
Ms. Navarro.

Citing data from the Philippine Statistics Authority (PSA), Ms. Navarro said the Eastern
Visayas and the Autonomous Region in Muslim Mindanao (ARMM) had the lowest average per
capita gross regional domestic product (GRDP) growth rates at 0.8% and 0.5%, respectively
between 2012 and 2018, with relatively high poverty rates.
 Income inequality in the Eastern Visayas was also high, while ARMM had the lowest
levels of inequality. The Eastern Visayas has a per capita GRDP of P38,598, while the
equivalent figure for the ARMM, know known as the Bangsamoro ARMM, was P14,657.

https://www.bworldonline.com/income-inequality-widening-amid-strong-economic-growth/