Current Economic Situation of Philippines
The Philippines is a country situated in Southeast Asia, on the Western side of the Pacific Ocean. It is a former colony of Spain and as of today combines together some 7641 islands to form the nation. The country’s location makes it vulnerable to typhoons and earthquakes as it is situated on what is known as the Ring of Fire on the Pacific Ocean. However the country also reaps the rewards from a large stock of natural resources. Philippines was once colonized by Spain and gained independence in 1935. Rodrigo Duerte, upon gaining the role of president in 2016 brought in quite a number of sweeping reforms including attacks on drug cartels in the region. He also has played a vital role in establishing secure relationships with China for trade benefits. The most important sector of economy for Philippines has always been agriculture and it remains so to this day. However electronics, shipbuilding and the clothing industry has seen significant growth in recent years as well. Constituting 10 % of total GDP, remittance from countries abroad has also helped fund the growth of the economy.
From being one of the fastest growing economies in Asia as of 2017, it started to struggle from 2018 onwards. The economy grew 6.2 percent in 2018, compared to 2017’s 6.7 percent and an even bigger fall from 2016, which stood at 6.9 percent. The 2018 rise in prices of consumer goods and overall inflation held back the economy. Coupled with storms at regular intervals resulting in lower agricultural output along with the stagnant infrastructure has had a negative pull on the economy. Capital investment being withheld is one of the direst attributes contributed by the bottlenecked infrastructure. However the current regime in power has pledged to build infrastructure worth $171 billion by 2020. The government is also looking to undertake reforms which will cut the poverty and unemployment rates by a significant margin. Primary exports include semiconductors and electronic products, transport equipment, garments, copper products, petroleum products, coconut oil, and fruits. Electronic equipment, oil, vehicles, iron, steel, aircraft constitutes the main imports of the country.
In the last 5 years or so we can observe that the current account balance of the economy has been grossly negative. This is due to a stagnant FDI in the country as well as lack of international quality exports, i.e where international demand for the country’s goods haven’t been significant. Philippines is a consumption based country whose people put emphasis on value gained compared to quality assured. Thus the produce of the country has been deemed below par for a while now, leading to importation of household, business as well as resources key to driving the economy as a whole. All these factors have led to a fall in the current account balance of the country over the years. Similarly, the trade to GDP percentage in recent years has also been negative. The currency situation of the Philippines has been a thing of quite a surprise in the last two years. As reported by Bloomberg, Philippine Peso was predicted to be one of the worst performers within the region. The appreciation of the USD against the Peso maintained a steady growth during this period. However, as of 2019 it emerged as one of the top currencies in the region. This was in fact due to positive speculation of a future booming economy where the infrastructure is modernized, higher levels of education leading to better workforce and an increase in overall remittance. Overall the currency was buoyed by a rise in confidence in the overall economy. This is an exception even though current account deficits are expected for a few more terms to come.
In conclusion it can be said that although the Philippine economy has shown sparks of promise in the past, it did not do particularly well in terms of living up to expectations mainly due to natural disasters, low consumer confidence, higher reliance on foreign products as well as infrastructural and bureaucratic barriers. However it has shown some remarkable signs of revitalization, spurred on by the Central Bank reforms, as well as infrastructure developments, more incentives to investors, better utilization of natural resources and broadening of business scopes i.e. more emphasis on tourism.
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