The Philippines’ economy is considered as one of the most dynamic economies in East Asia and the Pacific. In 2019, GDP growth rate decreased but remained high, reaching 5.9% according to IMF estimates. This slowdown is mainly due to a deceleration in investment growth and a weak external environment. According to the updated IMF forecasts from 14th April 2020, due to the outbreak of the COVID 19, GDP growth is expected to fall to 0.6% in 2020 and pick up to 7.6% in 2021, subject to the post-pandemic global economic recovery. Key economic drivers include solid fundamentals, a competitive workforce, a stable job market, steady remittances, and investment in the construction sector. The Philippines’ public deficit was moderate at 1.6% of GDP in 2019; it is expected to remain at 1.6% in 2020 and 1.7% in 2021. Public debt also remained at a reasonable 39.3% of GDP in 2019 and is expected to stabilise in 2020 and reduce in 2021 to 38.8%. Economic policy is expected to be supportive of growth. The inflation rate reached 5.2% in 2018 but slowed in 2019 to 2.5%, respecting the central bank’s target 2 to 4%. Inflation rate should decrease to 1.7% in 2020 and increase to 2.9% in 2021 according to the latest World Economic Outlook of the IMF report released April 2020. 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. According to Reuters, gross international reserves could go from $85 billion in 2019 to $86 billion at the end of 2020. The unemployment rate decreased in 2019 to 5.1% and is expected to continue its slow decline in the following years. The country’s Labour Force Participation Rate also increased to 61.5% as of October 2019, compared to the previous year. Duterte administration wants to reduce the poverty rate to 17% and expects the economy to reach upper middle income status by 2022. The Philippines’ economy is based on food processing; production of cement, iron, and steel; and telecommunications, among others. The agricultural sector employs 25% of the labour force but contributes only 9.3% of GDP. The sector only grew by 0.9% in 2018, showing signs of stagnation. The Philippines is the second largest producer of coconuts. However, the agricultural sector suffers from low productivity, weak economies of scale and inadequate infrastructure. President Rodrigo Duterte ordered government lands to be converted to agriculture use. As for mining, Philippines is one of the richest countries of the world in terms of minerals with an unexploited mineral wealth estimated at more than 840 billion dollors. The Philippines reserves of copper, gold and zinc are also among the largest in the world. The industry sector contributes 30.7% of GDP and employs 18.4% of the population. 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. In 2018, the growth rate for the industrial sector was 6.7%.
The tertiary sector – which represents 59.9% of GDP and employs 56.7% of the country’s work force – has developed substantially, particularly in telecommunications, call centres and finance. Service sectors government goals include attracting investments in human resource development, design, R&D, finance, and infrastructure; bolstering manufacturing-derived services; and establishing new ecosystems linked with manufacturing. The sector grew by 7.4% in 2018. Thanks to a rapid productivity growth in construction, real estate activities are expected to grow in 2020. The building construction industry in the Philippines is expected to record at14.4% to reach PHP 871.1 billion by 2024. The residential construction industry in value terms increased at 9.7% during 2015-2019. The commercial building construction market in value terms is expected to record at 15.3% over the forecast period.
The Philippines’ construction sector is expected to expand at a quicker pace in 2020 than last year, boosted by heightened government spending and big-ticket infrastructure projects that are funded by foreign assistance and private capital.
In a bid to supercharge economic growth, the Duterte administration plans to spend trillions of pesos to upgrade the country’s outdated roads, ports and railways through the ambitious program called “Build, Build, Build”.
Source: IMF; WORLD BANK; FITCH.
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