Find Business Partners in The Philippines
Search by Category

The Philippines and the Economy
The Philippines: General Economy
and Export Industry
Economy overview


The Philippines is among the fastest-growing economies in Southeast Asia, with upgrades to sovereign investment ratings confirming improvements in the country’s macroeconomic fundamentals. The Government of the Philippines has defined its development objectives as driving rapid but inclusive economic growth, accelerating employment on a massive scale, and reducing poverty.

The country’s Gross Domestic Product (GDP) in the fourth quarter of 2015 grew by 6.3 percent, the highest quarterly growth for the year. The growth, however, is slower than the 6.6 percent posted in the same period of last year. The fourth quarter GDP was driven by the Services sector which accelerated to 7.4 percent from 5.6 percent while Industry decelerated to 6.8 percent from 9.1 percent. On the other hand, Agriculture contracted by 0.3 percent from a growth of 4.2 percent in the previous year.

The fourth quarter growth paved the way for the economy to grow by 5.8 percent for the whole year of 2015 from 6.1 percent in 2014. Services was the main driver of the economy at 6.7 percent growth from 5.9 percent the previous year. Industry and the entire Agriculture both decelerated with 6.0 percent and 0.2 percent from 7.9 percent and 1.6 percent, respectively.

Meanwhile, Net Primary Income (NPI) from the Rest of the World grew by 5.4 percent in the fourth quarter of 2015 from 1.4 percent the same period last year, driving the Gross National Income (GNI) to post a growth of 6.2 percent from the previous year’s 5.7 percent.

On an annual basis, GNI slowed down to 5.4 percent in 2015 from 5.8 percent the previous year with the deceleration of NPI to 3.6 percent in 2015 from 4.1 percent in 2014.

Value of Production Index (VoPI) for total manufacturing significantly rose to 26.5 percent in January 2016 compared with the negative 1.1 percent in January 2015, according to the preliminary results of the Monthly Integrated Survey of Selected Industries (MISSI). This was brought about by the three-digit growth experienced by chemical products (309.6%), particularly for drugs and medicine sub-sector. Other major sectors that pulled up the performance of VoPI were tobacco products (49.6%), food manufacturing (19.1%) and beverages (11.7).

Volume of Production Index (VoPI) likewise posted 34.3 percent increment in January 2016 compared with 2.6 percent during the same period last year. Chemical products contributed significantly to the growth with 312.4 percent, followed by major sectors that registered two-digit growth in VoPI, namely: tobacco products (49.4%), machinery except electrical (23.6%), food manufacturing (20.2%), electrical machinery (19.2%) and beverages (10.1%).



Inflation settled below the 2015 target range. Headline inflation edged higher in Q4 2015 to 1.0 percent from the quarter-ago average of 0.6 percent. This brought the full-year average inflation rate to 1.4 percent which is below the Government’s inflation range target of 3.0 percent ± 1.0 percentage point for 2015. Easing petroleum prices and ample food supply contributed largely to the low inflation readings during the year.

Nevertheless, inflation gained momentum in the fourth quarter of the year, traced mainly to seasonal demand for certain food items as well as the adverse impact of recent typhoons on food supply. Non-food inflation likewise inched higher owing in part to passenger fare increases for air and sea transport. Meanwhile, core inflation increased slightly to 1.8 percent from 1.6 percent in the previous quarter. In terms of the alternative measures of core inflation estimated by the BSP, only the weighted median showed a slight uptick while the other two measures remained steady. Meanwhile, the number of items with inflation rates greater than the upper end of the 2015 inflation target increased to 23 items in Q4 2015 from 22 items in the previous quarter, comprising a slightly higher share of the CPI basket.


Inflation expectations are generally lower. Results of the BSP’s survey of private sector economists for December 2015 yielded lower mean inflation forecasts for 2015-2017 relative to the results in September 2015. The analysts attributed their lower inflation expectations mainly to lower global oil prices as well as domestic utility rates which are seen to outweigh upside risks coming from adverse climate and weather conditions, election-related expenditures, holiday spending, peso depreciation and possible adjustments in utility rates.

The latest BSP baseline forecasts show that inflation could approach the midpoint of the target range in 2016 – 2017. The inflation projection for 2016 is lower compared to the previous quarter’s forecast due mainly to lower global crude oil prices. Meanwhile, the slightly higher inflation forecast for 2017 reflected a weaker peso. Over the next two years, inflation is expected to generally hover around the midpoint of the target range of 3.0 percent ± 1.0 ppt.

Energy Prices

The average price of Dubai crude oil dropped further in Q4 2015, declining by 18.2 percent quarter-on-quarter (q-o-q) as concerns of an oversupplied crude market intensified due largely to developments in the US and the Organization of Petroleum Exporting Countries (OPEC).


Overall electricity rates went down in Q4 2015 due to lower generation costs. For Q4 2015, the average generation charge decreased by P0.40 per kilowatt hour (kWh) to P4.07per kWh from P4.47 per kWh in Q3 2015. The decline in the average electricity rates during the quarter was driven generally by the lower generation cost from the Wholesale Electricity Spot Market (WESM) in October 2015, which offset the slight increases recorded in November and December 2015. The increases in the latter part of 2015 were attributed to increased outages of power plants, lower generation from hydro plants, and higher fuel costs due the weakening of the peso.


Effective 1 October 2015, the foreign currency differential adjustment (FCDA) for Q4 2015 charged by Manila Water Company, Inc. (MWCI) and Maynilad Water Services, Inc. (MWSI) increased by P0.03 per cubic meter and P0.11 per cubic meter, respectively. As a result, the all-in-water rates of MWCI and MWSI rose by P0.04/cu.m. (from P33.96/cu.m to P34.00/cu.m.) and P0.15/cu.m. (from P45.72/cu.m. to P45.87/cu.m.), respectively.

Labor Market Conditions

Based on the Labor Force Survey (LFS) as of October 2015, the Philippine labor market showed notable performance as it posted the lowest unemployment rate since 2005 while most of the employment indicators improved relative to the same period in 2014. The country’s unemployment rate went below 6.0 percent for the first time at 5.7 percent,24 which is equivalent to a decline in unemployment level by 137,000 to 2.3 million. This lower unemployment rate relative to 6.0 percent in October 2014 was due to the 0.4-percent growth in employment which outpaced the 0.1-percent growth in labor force. The growth in employment in October 2015 resulted from the 2.1 percent and 2.8 percent growth in employment in services and industry sectors, respectively, which offset the 3.7 percent decline in agriculture sector.

Exchange Rate

The peso depreciated against the US dollar in the Q4 2015. On a q-o-q basis, the peso weakened by 1.7 percent to average P46.87/US$1 from the previous quarter’s average of P46.05/US$1. On a y-o-y basis, the peso depreciated by 4.4 percent relative to the P44.81/US$1 average in Q4 2014.50 The weakness of the peso was due to the uncertainty in the external environment arising mainly from the market’s anticipation of a US Fed funds rate lift-off towards the end of 2015.


Export Performance

Philippine exports have been falling since April 2015 and continued to contract in January 2016 by 3.9 percent decrease from $4.357 billion recorded value in January 2015. The negative growth was mainly brought about by the decreases in five major commodities out of the top ten commodities for the month. These include articles of apparel and clothing accessories (-46.2%), chemicals (-34.6%), machinery and transport equipment (-22.6%), metal components (-14.2%), and other manufactures (-5.5%).


Electronic Products remained as the country’s top export with total receipts of $2.142 billion, accounting for 51.1 percent of the total exports revenue in January 2016. It increased by 5.0 percent from $2.040 billion registered in January 2015.

Components/Devices (Semiconductors), had the biggest share of 35.3 percent among electronic products, increased by 5.1 percent to $1.476 billion in January 2016 from $1.404 billion in January 2015.

Machinery and Transport Equipment was the second top export earner in January 2016 with export revenue of $275.56 million. However, export sales for this commodity group went down by 22.6 percent from $356.04 million in January 2015.

Other Manufactures ranked third, with 6.5 percent share to the total export receipts, posting at $270.96 million. It recorded a decrease of 5.5 percent from January 2015 value of $286.70 million.

Woodcrafts and Furniture ranked fourth, with a contribution of 5.6 percent share to the total export receipts, recording sales of $236.51 million in January 2016. It registered a 42.0 percent increase from the previous year level of $166.51 million.

Ignition Wiring Set and Other Wiring Sets Used in Vehicles, Aircrafts and Ships was recorded as the country’s fifth top export earner with value at $174.30 million or 4.2 percent share to total exports. It went up by 14.5 percent from $152.25 million in same period of 2015.

On export markets, total export receipts from the country’s top ten market destinations for the month of January 2016 was valued at $3.547 billion or 84.7 percent share of the total export receipts (Table 3). See Figure 4.

Japan including Okinawa remained as the country’s top export destination with revenue amounting to $950.52 million, comprising 22.7 percent share to total exports for January 2016. It increased by 7.7 percent from $882.61 million recorded in the same month a year ago.

United States of America (USA) including Alaska and Hawaii ranked second, accounting 16.7 percent to total exports, with export receipts valued at $698.85 million in January 2016. It recorded an increase of 0.7 percent from $693.87 million in same month last year.

Hong Kong ranked third with $438.79 million or 10.5 percent share of the total exports. It grew by 2.6 percent from $427.47 million in the same month year ago.

People’s Republic of China with 9.7 percent share to total exports, ranked fourth with shipments valued at $405.65 million. It went down by 8.6 percent from $443.96 million in same month a year ago.

Singapore placed fifth, representing a 6.6 percent share to total exports, with export earnings worth $278.70 million. It declined by 8.6 percent from $304.89 million posted in January 2015.

Other top ten market destinations for January 2016 were: Germany, $179.45 million; Thailand, $170.49 million; Republic of Korea, $148.27 million; Netherlands, $139.47 million; and Taiwan, $136.56 million.

Growth Constraints

Several factors account for the weaker performance of Philippine exports. One factor is the concentration of revenues in few goods and services, which exposes the sector to shocks in demand and supply of these products. More than two-thirds of goods exports are accounted for by the top 10 products which include semiconductor, electronic data processing, machinery and transport equipment, woodcrafts and furniture and chemicals. Yet this is already an improvement from 2006 when the top 10 represented 77% of revenues. There is even more lack of diversification in services exports. The share of IT-BPM has been steadily increasing from 51% in 2006 to 70% in 2014 as revenues from this industry more than tripled from US$5.7 to US$17 billion in the same period.

The sector is also dependent on a few markets. The top five destinations of Philippine exports, namely Japan, U.S., China, Hong Kong and Singapore delivered nearly half of the export revenues in 2014. Trading with other ASEAN economies, except Thailand and Malaysia, is still limited despite growing regional integration. Apart from limited diversification in products and markets, the growth of exports is also hampered by competitiveness issues.

A trade competitiveness mapping of 2014 exports reveals that the global demand for two-thirds of Philippine goods has either grown slower than overall world trade or contracted. The products for which the country has comparative advantage are among those with slow growing or declining demand in the global market. In the few products where global market demand is growing fast, Philippine producers have not kept pace with other producers and as result, lost some of their market share. The problems of weak demand and loss of competitiveness afflict almost half of total Philippine exports.

The loss of competitiveness can be traced to a host of domestic problems, including unnecessary and trade-impeding domestic regulations and government policies; high costs and deficient infrastructure; limited export financing especially for small and medium-scaled exporters; unstable supply of raw materials; shortage of domestic skills that match industry requirements; weak system of innovation in products and processes; and fragmented and poorly funded domestic institutions that regulate product quality and industry standards. These problems stifle the ability of local producers to link up with the global value chain.

Towards an Inclusive Export Growth Successful implementation of the strategies laid out in this plan would help exports shrug off its uneven performance in past years, move towards a stable growth path, and attain the elusive US$100-billion target by the end of the cycle. These could be achieved if exports would grow between 6.6 and 8.8 percent in 2016, and between 7.7 and 10.6 percent in 2017, to offset the projected contraction of about 1.2 percent in 2015. The growth targets translate to additional export revenues of US$5.2 to US$8.8 billion in 2016 and US$8.5 to US$15.5 billion in 2017.

A robust and sustained increase in exports would spur economic growth, create employment, and draw majority of the population into the social and economic mainstream. Ultimately, export-driven growth has the potential to help reduce poverty. Concretely, the export sector may be able to deliver between 800,000 and 1.4 million job opportunities in 2016, and between 1.2 and 2.3 million in 2017, to compensate for job losses in 2015 as a result of projected export decline. In all, the projected additional employment opportunities over the life of the plan, is between 500,000 and 2.8 million. This should help the country catch up with its neighbors and the rest of the world in trade and economic development.

Strategies for Growth and Development

To address the current woes of the export sector, a development plan should direct the sector towards: (i) diversifying into new markets and products; (ii) identifying and developing export capabilities in products where global market demand is fast growing; (iii) addressing bottlenecks that undermine the competitiveness of exports; and (iv) harnessing the potential of goods and services where the Philippines can be competitive but have yet to attain comparative advantage.

The long-term vision of this plan is to fully integrate the Philippine economy into the global production network. It is recognized that the essential role of the government with regard to this goal is the provision of a domestic business environment that facilitates trade, promotes competition, delivers on social infrastructures, opens up access to public goods, and promotes innovation. With a supportive market environment in the background, domestic producers could thrive, find their niche, and take advantage of scale and scope economies in the global value chain. Small and medium enterprises (SMEs) may need special attention, not only because they require more support, but also because their progress directly contributes to the attainment of inclusive growth.

To achieve export competitiveness, intervention has to be at two fronts – sectoral and macro. The first provides comprehensive support to selected sectors, while the latter works on lowering the common hurdles and costs faced by all producers.

Growth prospects in 2016

The Philippines will see strong growth continue in 2016 and 2017, driven by robust domestic consumption and investment, according to the Asian Development Bank report 2016, ADB is forecasting gross domestic product growth of 6% in 2016 and 6.1% in 2017 for the Philippines.

Meanwhile on exports, the Department of Trade and Industry (DTI) said the country’s exports are expected to get back on the growth path in 2016 after a slight recovery in December. Under the PEDP, merchandise exports are projected to grow between 5.4 percent and 8 percent this year and between 6.7 percent and 10 percent in 2017. Services exports are estimated to increase between 9 percent and 10.3 percent this year and between 9.9m percent and 12 percent in 2017. Total exports are seen to expand between 6.6 percent and 8.8 percent this year and between 7.7 percent and 10.6 percent in 2017.

The DTI even expressed further optimism for exports to go beyond forecasted figures and has boldly declared adopting a stretch target growth range of 8% to 9 % for total exports in 2016.

On the supply side, the lingering effects of the El NiƱo weather phenomenon also weighed down on the production and exports of agricultural and fishery products.

The slower than expected growth in world trade – currently estimated at 2.8 percent instead of the earlier forecast of 3.3 percent can be attributed to: declining imports of China, Brazil, and other emerging economies; continuous fall in prices for oil and other primary commodities; and significant exchange-rate fluctuations globally. The impact of these factors has been reflected in volatile financial markets, a situation further exacerbated by the uncertainty in the monetary policy of the US. The slack in world demand has been mainly attributed to the slowdown in the growth of China’s economy even as its officials have been advocating a shift from its export-based strategy to a more domestic consumption-based strategy.

Source: Philippine Export Development Plan 2015-2017


2014 State of the Nation Address (SONA)

2014 State of the Nation Address (SONA) -Technical Report

2015 State of the Nation Address (SONA)

2015 State of the Nation Address (SONA) -Technical Report


Upcoming Events
Import Documentation Seminar
A seminar on Import and Export Procedures on Customs Common Bonded Warehouse (CCBW).