Country risk of the Philippines : Economy

The Philippines’ economy has strengthened in the recent years, a fact that protected it from the direct impacts of the global financial crisis and the recession in 2009, but without sparing it totally.  After recovering in 2010, growth slowed down in 2011, due to the downturn in exports which followed the economic slowdown of the country’s trading partners, the decrease in public investments and the typhoons which affected the agricultural and fishing sectors. In spite of unfavorable international context, growth remained steady at around 6.6% in 2012, thanks to domestic consumption, employment and vigorous FDI flows. Growth of more than 5% of the GDP is expected in 2013.

The economy is in a relatively good shape. Large foreign exchange reserves have allowed the country to have its rating raised by the rating agency Standards & Poor’s in July 2012. The president has even offered the EU a €773m loan as a contribution to resolving the eurozone crisis. The main challenge for the Philippine government is to maintain economic stability and strengthen the foundations for more inclusive growth. The government’s priority remains fighting against poverty and unemployment. More than a third of the 2013 budget has been allocated to social services, including healthcare, education and subsidies to the most vulnerable. A number of public-private partnerships should also be implemented, together with infrastructure projects, to stimulate growth. A rise in the prices of alcohol and tobacco is planned to help reduce the level of debt and fund state spending. Given the weak debt/GDP ratio, the country’s rating has a great chance of attaining investment grade in 2013.

On a social level, the country faces several challenges: the population living under the poverty threshold has increased in these recent years (33% of the population), in 2009 the crisis aggravated the unemployment rate (7% of the active population), although it is now decreasing, there is a significant demographic growth and the inequality in wealth distribution persists.

Score:

58.2 /100

Position:

Mostly Unfree

World Rank:

97/177

Regional Rank:

17/41

Distribution of Economic freedom in the world
Source: 2013 Index of Economic freedom, Heritage Foundation