Difference between revisions of "Economy of the philippines"

At $8.6 billion, the overall balance of payments ended 2007 with a record surplus resulting from higher overseas workers remittances, tourism receipts, BPO-related revenues, portfolio investments, and official development assistance funds. Growth in merchandise exports, relying heavily on electronics shipments for about two-thirds of export revenues, slowed to 6 percent (from 15 percent in 2006). January-August 2008 merchandise exports decelerated further to 4.4% growth year-on-year. Although there has been some improvement over the years, the local value added of electronics exports remains relatively low at about 30 percent. Net foreign direct investment (FDI) inflow rose from a low base to nearly $3 billion in 2006 and 2007-- nearly double the 2005 level -- but still lags most regional neighbors. Net FDI will end 2008 weaker, with net inflows estimated at $716 million during the first eight months of 2008, down 59% year-on-year. The BOP surplus had contracted to $2 billion as of September 2008, partly reflecting higher import bills for rice and fuel and net outflows of jittery foreign portfolio capital. The United States remains the Philippines' largest trading partner with over $17 billion in two-way trade, and the largest investor with more than $6.5 billion in total FDI.

At $8.6 billion, the overall balance of payments ended 2007 with a record surplus resulting from higher overseas workers remittances, tourism receipts, BPO-related revenues, portfolio investments, and official development assistance funds. Growth in merchandise exports, relying heavily on electronics shipments for about two-thirds of export revenues, slowed to 6 percent (from 15 percent in 2006). January-August 2008 merchandise exports decelerated further to 4.4% growth year-on-year. Although there has been some improvement over the years, the local value added of electronics exports remains relatively low at about 30 percent. Net foreign direct investment (FDI) inflow rose from a low base to nearly $3 billion in 2006 and 2007-- nearly double the 2005 level -- but still lags most regional neighbors. Net FDI will end 2008 weaker, with net inflows estimated at $716 million during the first eight months of 2008, down 59% year-on-year. The BOP surplus had contracted to $2 billion as of September 2008, partly reflecting higher import bills for rice and fuel and net outflows of jittery foreign portfolio capital. The United States remains the Philippines' largest trading partner with over $17 billion in two-way trade, and the largest investor with more than $6.5 billion in total FDI.

The Philippine stock market index -- which closed 2007 among the top performers in East Asia – has since declined and, as of the third week of October 2008, had slipped to a near three-year low. As of the third week of October, the index had slipped by about 27% from August 2007 and by 46% from the end of 2007. The Philippine peso, which appreciated about 16 percent against the U.S. dollar over the course of 2007, has since weakened and closed the third week of October 2008 down 18% from the beginning of the year. Gross international reserves ended 2007 up nearly 47 percent year-on-year to a new record high of $33.7 billion, and had increased further to nearly $36.7 billion as of September 2008, adequate for nearly 6 months of goods and services imports and equivalent to 2.7 times foreign debts maturing over the next 12 months.

The Philippine stock market index -- which closed 2007 among the top performers in East Asia – has since declined and, as of the third week of October 2008, had slipped to a near three-year low. As of the third week of October, the index had slipped by about 27% from August 2007 and by 46% from the end of 2007. The Philippine peso, which appreciated about 16 percent against the U.S. dollar over the course of 2007, has since weakened and closed the third week of October 2008 down 18% from the beginning of the year. Gross international reserves ended 2007 up nearly 47 percent year-on-year to a new record high of $33.7 billion, and had increased further to nearly $36.7 billion as of September 2008, adequate for nearly 6 months of goods and services imports and equivalent to 2.7 times foreign debts maturing over the next 12 months.

Efforts in recent years to reduce the public sector deficit by raising new taxes have helped reduce high debt ratios, create additional fiscal space to increase spending on vital social services and infrastructure after years of tight budgets, and improve confidence. December 2004 legislation provided for biennial adjustments to the excise tax rates for tobacco and liquor products until 2011, while a law signed in January 2005 seeks to institute a performance-based rewards system in the government's revenue collection agencies.

Efforts in recent years to reduce the public sector deficit by raising new taxes have helped reduce high debt ratios, create additional fiscal space to increase spending on vital social services and infrastructure after years of tight budgets, and improve confidence. December 2004 legislation provided for biennial adjustments to the excise tax rates for tobacco and liquor products until 2011, while a law signed in January 2005 seeks to institute a performance-based rewards system in the government's revenue collection agencies.

The national government worked to reduce its fiscal deficits for five consecutive years to 0.1 percent of GDP in 2007 and had hoped to balance the budget in 2008, two years ahead of its original plan. The government has since reverted to the 2010 balanced-budget schedule in order to stimulate the economy and temper the adverse impact of global external shocks on the already high number of Filipinos struggling with poverty. The national government's deficit-reduction program helped yield modest primary surpluses during 2006 and 2007. While more reforms and greater transparency are needed, tighter financial controls over state-owned companies and initiatives to improve the longer-term viability of state-run pension funds also contributed to recent surpluses. Although still high, the debt of the consolidated public sector has declined to under 75 percent of GDP. Major credit rating agencies raised their rating outlook for Philippine sovereign debt from "negative" to "stable" in recognition of fiscal progress and declining debt ratios. Looking forward, further reforms are needed to ease fiscal pressures from large losses being sustained by a number of government-owned firms and to control and manage contingent liabilities. Despite recent improvements, challenges still remain to the long-term viability of state-run pension funds. The national government's tax-to-GDP ratio (14% in 2007) remains low relative to historical performance and vis-à-vis regional standards. The government has intermittently relied on heftier privatization receipts to make up for the shortfall in targeted tax collections but this is not a sustainable revenue source.

The national government worked to reduce its fiscal deficits for five consecutive years to 0.1 percent of GDP in 2007 and had hoped to balance the budget in 2008, two years ahead of its original plan. The government has since reverted to the 2010 balanced-budget schedule in order to stimulate the economy and temper the adverse impact of global external shocks on the already high number of Filipinos struggling with poverty. The national government's deficit-reduction program helped yield modest primary surpluses during 2006 and 2007. While more reforms and greater transparency are needed, tighter financial controls over state-owned companies and initiatives to improve the longer-term viability of state-run pension funds also contributed to recent surpluses. Although still high, the debt of the consolidated public sector has declined to under 75 percent of GDP. Major credit rating agencies raised their rating outlook for Philippine sovereign debt from "negative" to "stable" in recognition of fiscal progress and declining debt ratios. Looking forward, further reforms are needed to ease fiscal pressures from large losses being sustained by a number of government-owned firms and to control and manage contingent liabilities. Despite recent improvements, challenges still remain to the long-term viability of state-run pension funds. The national government's tax-to-GDP ratio (14% in 2007) remains low relative to historical performance and vis-à-vis regional standards. The government has intermittently relied on heftier privatization receipts to make up for the shortfall in targeted tax collections but this is not a sustainable revenue source.