Economic Development of Philippines from 2015-2019

2015

 Economic growth slowed down to 5.3 percent in the third quarter of 2014, due to weak
government spending on the demand side and agricultural production on the supply
side.
 Government consumption contracted by 2.6 percent while infrastructure spending fell
by 6.2 percent. Contributing to weak government spending are the Supreme Court
decision which found some provisions of the Disbursement Acceleration Program
unconstitutional, budget execution bottlenecks, and slow disbursement for Typhoon
Yolanda reconstruction.
 Despite the slowdown, more than a million jobs were created in October 2014, although
the quality of jobs remains a challenge. The 2013 Annual Poverty Indicator Survey (APIS)
finds that real income of the bottom 20 percent grew much faster than the rest of the
population. The survey also confirms that the government’s conditional cash transfer
program is reaching the poor, as reflected in the substantial growth of domestic cash
transfers to the bottom 20 percent.
 Lower government spending, investment delays and slowdown, and weaker exports are
likely to limit economic growth to 6 percent in 2014 and 6.5 percent in 2015. Provided
that government can fully commit to utilizing the budget as planned, as well as
accelerating reforms, achieving growth of above 6.5 percent can be achieved.
 Translating higher growth into inclusive growth can help the government achieve its
poverty target of 18 to 20 percent by 2016.
 Eradicating poverty requires a commitment to implement key reforms in the areas of
infrastructure, health and education; enhancing competition to level the playing field;
simplifying regulations to promote job creation; and protecting property rights.
 Higher investments need to be supported by tax policy reforms as tax administration
reforms are inadequate to fully fund the investment gap. Worsening port and road
congestion and possible power shortages in 2015 underscore the need to urgently raise
investments.
 Tax policy reform should aim for a more equitable, efficient and simpler tax system.
 Reforms to strengthen tax administration and improve the transparency and
accountability of government are essential to make it a success. Key reforms include the
passage of the Freedom of Information bill, which institutionalizes open data, enhancing
budget reporting, and simplifying tax procedures and processes.
 Higher investments in infrastructure, health, and education need to be complemented
by reforms to enhance competition. Essential reforms include crafting and implementing
 a clear competition policy, liberalizing key sectors of the economy to directly benefit
poor Filipinos, and opening up the economy to more foreign competition.

2016

Economic and policy developments

 The Philippines remained a strong performer in the region, despite slow global growth.
Coming from a slow start in the first half (H1) of 2015 due to weak government
spending, the economy bounced back in H2, bringing full year growth to 5.8 percent in
2015. Among the major economies in the region, the Philippines is behind China and
Vietnam only.
 Sustained high non-agricultural growth and effective government programs are helping
to improve the welfare of the poor. Recent estimates suggest that extreme poverty
decreased gradually between 2012 and 2014. Extreme poverty is estimated to have
decreased from 10.6 percent in 2012 to nine percent in 2014. After a decrease of only
0.3 percentage points between 2009 and 2012, poverty fell more rapidly between 2012
and 2014, according to revised purchasing power parity (PPP) estimates. However, high
rates of structural poverty remain, especially among households depending on
agriculture.
Prospects and risks
 In the near-term, economic growth is likely to remain strong and is projected to
accelerate to 6.4 percent in 2016 before tempering slightly to 6.2 percent in 2017.
Faster growth in 2016 would be driven by favorable domestic factors. Private
consumption would remain robust, aided by low inflation and spillovers from increased
spending due to the upcoming general elections. Investments will likely support growth
as implementation of private sector, budgeted infrastructure, and public-private
partnership (PPP) projects accelerates.
 These growth projections incorporate a number of risks which have remained broadly
the same since the October 2015 edition of the Philippine economic update. The key
risks are uneven recovery of high income economies, slower than anticipated growth of
large emerging market economies, financial market volatilities, slower remittance
growth from oil exporting economies, the continuation of El Niño in H1 2016, delays in
PPP projects, and uncertainty around the outcome of the election.
Policies: A retrospective and forward look on how to create more and better jobs
 With solid macroeconomic fundamentals and significant fiscal space in place, the
Philippines can now accelerate the reforms needed to achieve more inclusive growth to
reduce poverty and boost shared prosperity. Trends in recent years point to the
beginnings of a more inclusive growth pattern, which needs to be sustained over a
longer period before the poor can feel the impact of higher growth and better
 governance in their daily lives. In the last six years, the government preserved
macroeconomic stability, promoted transparency, and directed the growing fiscal space
towards pro-poor infrastructure and social services.
 What is needed now is to consolidate the reforms made, embark on the next set of
reforms and move ahead at full speed. In the short-term, deepening reforms in budget
execution will allow the country to use its growing fiscal space to increase investments
in both human and physical capital, with positive contributions to near-term growth and
quality of jobs. Over the medium-term, accelerated structural reforms are needed to
enhance competition in sectors with high impact on jobs (such as rice, shipping, and
telecoms), securing property rights through more systematic and administrative
adjudication of land rights, and simplifying business regulations to encourage the
growth of firms of all sizes, while increasing tax effort and reforming the budget
execution system in order to sustainably ramp up public investments in infrastructure
and social services. In all these, priority is needed in Mindanao, where decades of
conflict and weak, Manila-centric policies have kept it from reaching its potential. To
accelerate reforms in the future, the government, business, labor, and civil society need
to work more closely together to support a package of reforms that will help the
country move full speed ahead to create more and better jobs.

2017

 Gross Domestic Product (GDP) grew by 6.9 percent in the third quarter of 2017.
Manufacturing, Trade, and Real Estate, Renting and Business Activities were the main
drivers of growth for the quarter.
 Among the major economic sectors, Industry recorded the fastest growth of 7.5 percent
followed by Services with 7.1 percent growth. Meanwhile, Agriculture slowed down by
2.5 percent from 3.0 percent growth in the previous year.
 Net Primary Income from the Rest of the World (NPI) grew by 5.7 percent compared
with the 4.1 percent growth recorded in the same quarter of the previous year. As a
result, Gross National Income (GNI) posted a growth of 6.7 percent.
 With the country’s projected population reaching 104.9 million in the third quarter of
2017, per capita GDP grew by 5.4 percent. Meanwhile per capita GNI and per capita
Household Final Consumption Expenditure grew by 5.2 percent and 3.0 percent,
respectively.

2018

 Philippine economy grew by 6.8 percent in the first quarter of 2018. This was faster than
the growth recorded in the same quarter of 2017. Manufacturing, Other Services, and
Trade were the main drivers of growth for the quarter.
  Among the major economic sectors, Industry recorded the fastest growth at 7.9
percent. This was followed by Services with a growth of 7.0 percent. Agriculture also
grew at a slower pace of 1.5 percent.
 Net Primary Income increased to 4.3 percent during the quarter. Meanwhile, Gross
National Income (GNI) posted a growth of 6.4 percent, faster than previous year’s
growth of 6.3 percent.
 With the country’s projected population reaching 105.8 million in the first quarter of
2018, per capita GDP grew by 5.1 percent. Meanwhile, per capita GNI and per capita
Household Final Consumption Expenditure grew by 4.7 percent and 4.0 percent,
respectively.

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.
Implementing these reforms will be critical:
 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.

Economic Development of Thailand

Thailand’s economic freedom score is 68.3, making its economy the 43rd freest in the 2019

Index. Its overall score has increased by 1.2 points, the result of improved scores for property

rights, business freedom, and government integrity. Thailand is ranked 10th among 43

countries in the Asia–Pacific region, and its overall score is above the regional and world

averages.

To revive economic growth, the military-controlled government has prioritized policies to boost

consumption and investment, including increased public spending on infrastructure, and has

gradually made the regulatory framework more efficient and transparent to attract investment

and better integrate the economy into the global marketplace. Business-formation procedures

have been streamlined, and the financial sector has been opened to competition. The level of

trade freedom is relatively high, but nontariff barriers still undercut gains from trade. The

judicial system remains vulnerable to political interference, and pervasive corruption

undermines government integrity.