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Economic 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 2021, GDP grew by an estimated 3.2%, 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 pick up to 6.3% in 2022 and 7% in 2023. 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 6.3% of GDP in 2021 and it is expected to decrease to 5.8% in 2022 and 4.9% in 2023. Public debt increased to 59.1% of GDP in 2021 and is expected to further increase in 2022 and 2023, to 62.3% and 63.3%, respectively. Inflation rate also increased in 2021, reaching 4.3% 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 3% in 2022 and remain stable in 2023. 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. In 2021, the country's economic recovery was boosted by the government’s policy reforms and expansionary fiscal program.

Although the unemployment rate was heavily affected by the pandemic, it partially recovered in 2021, decreasing to 7.8% - a trend that's expected to continue in 2022 (6.8%) and 2023 (5.9%). 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, Duterte's administration wants to reduce the poverty rate to 17% and expects the economy to reach upper-middle income status by 2022.

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 376.82361.49e385.74406.11438.18
GDP (Constant Prices, Annual % Change) 6.1-9.6e4.66.36.9
GDP per Capita (USD) 3,5123,3233,4923,6213,848
General Government Balance (in % of GDP) -1.6-3.5e-6.3-5.8-4.9
General Government Gross Debt (in % of GDP) 37.051.7e59.162.363.3
Inflation Rate (%) 2.52.64.33.03.0
Unemployment Rate (% of the Labour Force) 5.110.47.86.85.9
Current Account (billions USD) -3.0512.981.50-7.51-7.94
Current Account (in % of GDP) -0.83.6e0.4-1.8-1.8

Source: IMF – World Economic Outlook Database , October 2021

Note: (e) Estimated Data

Country Risk

See the country risk analysis provided by La Coface.

 

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Main Sectors of Industry

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 contributed to 10.1% of GDP in 2020 and employed 22.8% of the labour force in 2019. 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, the Philippines’ agricultural output dropped despite more relaxed COVID-19 restrictions. The decrease in agricultural production was mainly due to Typhoon Odette, which damaged hundreds of metric tons of rice crops.

The industry sector contributes 28.3% 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 2021. 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 61.4% 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 2021. The growth in the sector was 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) 10.2 28.4 61.4
Value Added (Annual % Change) -0.2 -13.2 -9.2

Source: World Bank - Latest available data.

 
Monetary Indicators 20162017201820192020
Philippine Peso (PHP) - Average Annual Exchange Rate For 1 USD 47.4950.4052.6651.8049.62

Source: World Bank - Latest available data.

 

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Foreign Trade

Foreign trade represented 58.2% of the country's GDP in 2020, according to the World Bank. Main exports included electronic integrated circuits and microassemblies (31.9%), automatic data processing machines and units (5.2%), machine parts and accessories (3.6%), wires and cables (3.3%), and printing machinery (2.9%); while imports are focused on electronic integrated circuits and microassemblies (14.6%), petroleum oils (4.9%), electrical apparatus for line telephony (3.6%), machinery parts and accessories (2.4%), and motor vehicles (2.1%). According to IMF Foreign Trade Forecasts, the volume of exports of goods and services increased by 5.3% in 2021 and is expected to increase by 17.1% in 2022, while the volume of imports of goods and services increased by 15.9% in 2021 and is expected to increase by 23.1% in 2022.

Main export destinations include Japan, the U.S., China, Hong Kong, and Singapore; while main imports arrive from China, Japan, the U.S., South Korea, and Indonesia. The main risk factor to foreign trade in the Philippines and countries in the region is the trade dispute between the U.S. and China, which slows exchanges in the world. The Philippines has recently lifted quantitative restrictions on imports of all food products, including rice. However, Tariff-Rate Quotas still remain on a number of sensitive products such as corn, poultry meat, pork, sugar, and coffee. The country is part of a number of trade agreements, including the Asia Free Trade Agreement, the Asia Europe Meeting (ASEM), the Japan-Philippines Economic Partnership Agreement (JPEPA), the ASEAN-Australia-New Zealand Free Trade Agreement; and the ASEAN-China Free Trade Area.

Traditionally, the country's trade balance has been in deficit due to high imports of raw materials and intermediate goods. The 2020 trade balance (including services) closed at USD - 18,7 million, while the trade deficit without services was higher, at USD - 31.8 million. Deficit increases are expected due to a slower rise of exports and the need for imported infrastructure goods to fulfil the ambitious 2017-2022 Development Plan. Membership to ASEAN (the Association of Southeast Asian Nations) has also played a key role in the Philippines' expanding commerce overseas. According to WTO data, in 2020, the Philippines exported USD 36.7 million worth of goods and imported USD 90.6 million worth of goods. As with regards to services, the country's exports value exceeded the imports value by reaching USD 31.3 million and USD 17.7 million, respectively.

 
Foreign Trade Values 20162017201820192020
Imports of Goods (million USD) 86,290101,901119,329117,37490,654
Exports of Goods (million USD) 56,31368,71369,30770,92763,767
Imports of Services (million USD) 24,23325,84526,27127,68617,746
Exports of Services (million USD) 31,35734,81338,37841,24531,391

Source: World Trade Organisation (WTO) ; Latest available data

Foreign Trade Indicators 20162017201820192020
Foreign Trade (in % of GDP) 61.868.272.268.858.2
Trade Balance (million USD) -35,549-40,215-50,972-49,312-31,839
Trade Balance (Including Service) (million USD) -28,506-31,522-39,364-36,272-18,759
Imports of Goods and Services (Annual % Change) 18.815.114.62.3-21.6
Exports of Goods and Services (Annual % Change) 9.217.411.82.6-16.3
Imports of Goods and Services (in % of GDP) 35.138.641.940.533.0
Exports of Goods and Services (in % of GDP) 26.729.630.228.425.2

Source: World Bank ; Latest available data

Foreign Trade Forecasts 20212022 (e)2023 (e)2024 (e)2025 (e)
Volume of exports of goods and services (Annual % change) 7.317.210.413.011.7
Volume of imports of goods and services (Annual % change) 16.023.110.513.110.7

Source: IMF, World Economic Outlook ; Latest available data

Note: (e) Estimated Data

 
International Economic Cooperation
The Philippines is a member of the following international economic organisations: IMF, Asia-Pacific Economic Cooperation (APEC), ICC, Association of Southeast Asian Nations (ASEAN), Colombo Plan, G-24, G-77, WTO, among others. For the full list of economic and other international organisations in which participates the Philippines click here. International organisation membership of the Philippines is also outlined here.
Free Trade Agreements
The Philippines is a member of Regional Comprehensive Economic Partnership (RCEP) signed on 15 November 2020. The complete and up-to-date list of Free Trade Agreements signed by the Philippines can be consulted here.
 

Main Partner Countries

Main Customers
(% of Exports)
2020
Japan 15.5%
United States 15.2%
China 15.1%
Hong Kong SAR, China 14.2%
Singapore 5.9%
See More Countries 34.1%
Main Suppliers
(% of Imports)
2020
China 23.1%
Japan 9.6%
United States 7.8%
South Korea 7.7%
Indonesia 6.5%
See More Countries 45.2%

Source: Comtrade, Latest Available Data

 

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Political Outline

Current Political Leaders
President: Rodrigo Duterte (since 30 June 2016)
Vice-President : Leni Robredo (since 30 June 2016)
Next Election Dates
Presidential: May 2022
Senate: May 2022
House of Representatives: May 2022
Current Political Context
Since his election for a six-year term in 2016, President Rodrigo Duterte has launched an intense campaign against drug crime, has distanced the Philippines from the U.S. to strengthen relations with China (even though some tensions linger with relation to territorial disputes in the South China Sea), and has establish closer ties with neighbouring Indonesia and Malaysia. As a result of their tightening relations, the Chinese government is looking into to financing some infrastructure projects in the Philippines, with an overall equivalent to USD 24 billion in form of soft loans and direct investments. Still, most of these projects have yet to be approved. Combating maritime piracy and terrorist groups are the other security priorities on the presidential agenda. Duterte also intends to introduce universal health-care (currently 93%) and free education from pre-school up to a basic university degree level. However, the pandemic slowed his agenda, notably in infrastructure. Still, Filipinos continue to hold their president in high regard, as Rodrigo Duterte’s approval ratings are higher than ever, indicating most of the population agree with Duterte's agenda, as well as the way he has dealt with the pandemic and its aftermath.
Main Political Parties
The Philippines has a multi-party system and political parties usually have diverse ideologies. As a result, parties generally work together to form coalition governments. The largest political parties in the country are:

- Partido Demokratiko Pilipino-Lakas ng Bayan (PDP-Laban): centre-left, democratic socialism, populism
- Nationalist Party (NP): centre-right, conservatism, populism. Oldest party in the country and historically dominated the political arena
- Nationalist People's Coalition (NPC): centre-right, social and liberal conservatism
- Lakas-Christian Muslim Democrats (Lakas-Kampi-CMD): centre to centre-right, conservative political party with religious overtones
- Liberal Party (LP): centre to centre-left, liberal, endeavours to tackle poverty and promote economic growth
- United Nationalist Alliance (UNA): centre-right, Filipino nationalism, conservatism

Other notable parties include:
National Unity Party (NUP), Aksyon Demokratiko (Democratic Action), Pwersa ng Masang Pilipino (Force of the Filipino Masses PMP), Laban ng Demokratikong Pilipino (LDP), Kilusang Bagong Lipunan (New Society Movement KBL), Lapiang Manggagawa (Philippine Labour and Peasant Party)

Executive Power
The President is both the Head of State and of Government, and is directly elected by a popular vote to serve a single six-year term without the possibility of re-election, even if non-consecutive. He or she presides over and appoints the cabinet members, and is also the Commander-in-Chief of the Armed Forces. The President holds the executive powers which include the implementation of the law in the country and running the day-to-day affairs. If the President resigns, is impeached or dies, the Vice President assumes the presidency.
Legislative Power
The legislature in the Philippines is bicameral. The parliament, called the Congress, consists of: the Senate (the upper house) having 24 seats with its members elected mostly by popular vote to serve (renewable) six-year terms, and the House of Representatives (the lower house) having 304 seats, with its members elected by popular vote to serve three-year terms - with a limit of three consecutive terms. The President has the power to veto acts of the legislature, and in turn a supermajority (generally two-thirds) of legislators may act to override his veto. The people of the Philippines enjoy considerable political rights.
 

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COVID-19 Country Response

COVID-19 epidemic evolution
To find out about the latest status of the COVID-19 pandemic evolution and the most up-to-date statistics on the COVID-19 disease in the Philippines please visit the Department of Health’s Updates on Novel Coronavirus Disease (COVID-19) website.
For the international outlook you can consult the latest situation reports published by the World Health Organisation as well as the global daily statistics on the coronavirus pandemic evolution including data on confirmed cases and deaths by country.
Sanitary measures
To find out about the latest public health situation in the Philippines and the current sanitary measures in vigour, please visit the Department of Health’s COVID-19 Advisories. The government has set up a community-driven contact tracing, health condition reporting and social distancing systems called StaySafe.
Travel restrictions
The COVID-19 situation, including the spread of new variants, evolves rapidly and differs from country to country. All travelers need to pay close attention to the conditions at their destination before traveling. Regularly updated information for all countries with regards to Covid-19 related travel restrictions in place including entry regulations, flight bans, test requirements and quarantine is available on TravelDoc Infopage.
It is also highly recommended to consult COVID-19 Travel Regulations Map provided and updated on the daily basis by IATA.
The US government website of Centers of Disease Control and Prevention provides COVID-19 Travel Recommendations by Destination.
The UK Foreign travel advice also provides travelling abroad advice for all countries, including the latest information on coronavirus, safety and security, entry requirements and travel warnings.
Import & export restrictions
For the up-to-date information on all the measures applicable to movement of goods during the period of sanitary emergency due to the COVID-19 outbreak (including eventual restrictions on imports and exports, if applicable), please consult the website of the Department of Finance and that of the Bureau of Customs.
For a general overview of trade restrictions due to COVID-19 pandemic, please consult the section dedicated to the Philippines on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.
Economic recovery plan
For  information on the economic recovery scheme put in place by the Philippines government to address the impact of the COVID-19 pandemic on the national economy, refer to the Department of Finance’s "4-pillar socioeconomic strategy against COVID-19" and the website of the National Economic and Development Authority. Further details can be found on KPMG's website.
For a general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) taken by the Philippine government to limit the socio-economic impact of the COVID-19 pandemic, please consult the section dedicated to the Philippines in the   IMF’s Policy Tracker platform.
Support plan for businesses
For information on the local business support scheme established by the Philippine government to help small and medium-sized companies to deal with the economic impacts of the COVID-19 epidemic on their activity, consult Department of Finance’s "4-pillar socioeconomic strategy against COVID-19", which provides some details about loans and support programs. KPMG Philippines offers an overview of the measures.
For a general overview of international SME support policy responses to the COVID-19 outbreak refer to the OECD's SME Covid-19 Policy Responses document.
You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.
Support plan for exporters
For the up-to-date information on possible support plans for exporters in the Philippines, if applicable, please consult the website of the Department of Trade and Industry.
 

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