Did You Know?
In January 2015, out of the 62.87 million Filipinos in the age group of 15 years and above, the labor force comprised 40.11 million. Out of these, 2.65 million were unemployed.
Located in Southeast Asia, the Republic of the Philippines comprises 7,107 islands. With more than 100 million people currently living in the Philippines, it is ranked as the 12th most populous country in the world. Philippines' economy largely depends on the remittances from the Filipinos residing overseas and investing in the homeland. More than 10 million Filipinos are currently living abroad.
Philippines has emerged as one of the fastest growing economies in Asia, with an annual GDP growth rate of 6.1% in 2014. According to the Asian Development Bank, the GDP growth, Inflation, and Current Account Balance (share of GDP) in 2015 is estimated to be 6.4%, 2.8%, and 4%, respectively. While these figures might paint a rosy picture, there are certain serious issues that need to be addressed.
Economics Problems of the Philippines
Like most other southeast Asian regions, Philippines too has a history of European colonization. It was a colony of Spain and the USA. The country is now home to multiple cultures and ethnic groups. It is also looked upon as a perfect example of a 'mixed economy'. Traditionally, the economy stabilized on the agrarian contributions and the manufacture of garments, pharmaceutical products, and semiconductors. In the last decade, electronic exports added to the exports, along with various products obtained by mining. Though Philippines too suffered in terms of exports, remittances from overseas Filipino workers, and foreign direct investments, during the 2008 global economic crisis, there has been steady economic growth in the recent years. However, there are certain economic problems that cannot be ignored. The following sections list out some of the economic problems of the Philippines.
In 2012, 10 million Filipinos were either unemployed (three million) or underemployed (seven million). In October 2013, unemployment rate was 6.5% in comparison to 6.8% in 2012. According to the Labor Force Survey, the unemployment rate was 6% and 6.6% in October 2014 and January 2015, respectively.
Only one-fourth of the Filipinos that enter the labor force are able to find good jobs in the country, and the rest of them find jobs overseas, leave the labor force, or end up becoming unemployed/underemployed. Thus, three-fourth of the workers are unemployed or informally employed, with lack of opportunities to find good jobs. Though jobs are being generated, there's a need to generate jobs at a much faster rate, to be able to bring down the unemployment rate. Many of the unemployed individuals are college graduates. Many wait for job opportunities abroad, and many families depend on remittances from family members who are staying abroad.
Even though Philippines is a fast-growing economy, there's been just a minor decline in the incidence of poverty. Poverty is very much linked to unemployment. Unfortunately, the growth is restricted to the BPO, retail, and real estate sector, and a large number of Filipinos remain without jobs. On top of that, natural calamities further push people below the poverty line. Thus, economic disparity is a common feature. In general, the gains from higher economic growth have not really trickled down to the poor.
Infrastructure is one of the biggest challenges. In the Global Competitiveness Report 2014-2015 of the World Economic Forum, Philippines didn't fare well in terms of the quality of the overall infrastructure. It ranked at number 91 among 144 countries. This can be attributed to underinvestment in infrastructure.
In order to host global companies, Philippines will have to pay more attention to enhancing the infrastructure. A well-developed transportation (roads, railroads, ports, and air transport) and communication system is extremely essential for economic activities. As per the World Bank's Ease of Doing Business 2015 report, Philippines ranked 95 out of 189 economies. It needs to improve its ranking in certain categories. It ranked 161 in the category of starting a business, 124 in dealing with construction permits, 108 in registering property, 104 in getting credit, 154 in protecting minority investors, 127 in paying taxes, and 124 in enforcing contracts. Thus, the policy makers should take steps to attract global companies or investors.
Heavy Dependence on Remittances
Philippines was the third-highest recipient of migrant remittances in 2013, after India and China. According to the Philippine Central Bank, remittances from overseas Filipino workers (OFWs) reached USD 25.1 billion in 2013. It was 7.6% higher than the remittances from the last year, and accounted for 8.4 % of Philippine gross domestic product (GDP) in 2013.
The source countries for the remittances included the United States, Saudi Arabia, the United Kingdom, the United Arab Emirates, Singapore, Canada, and Japan. The country heavily relies on these funds. Their economic growth can primarily be associated to the remittances from the overseas Filipino workers, as well as the growth in the Business Process Outsourcing (BPO) sector. Also, one cannot rule out that the growth is connected to the global economy. In the event of any crisis, economic growth is bound to suffer. Thus, greater attention has to be paid to addressing to the internal problems of the economy and enhancing domestic-oriented growth. A policy of removing structural impediments to growth has to be adopted, with lesser focus on foreign investors and exporters.
Besides the aforementioned issues, corruption is another aspect that needs to be taken care of. The current administration needs to prepare an industrialization program that encourages value-addition manufacturing or services and builds Filipino-owned industries. Being overly dependent on global economy or remittances from Filipinos living abroad will make the nation vulnerable to external shocks. Thus, the aim should be to encourage inclusive growth in the country by creating employment opportunities and reducing poverty.