Philippines

Fiscal discipline will be crucial

B1

LOW RISK for entreprise

  • Economic risk

  • Business environment risk

  • Political risk

  • Commercial risk

  • Financing risk

GDP USD313.6bn (World ranking 38, World Bank 2017)
Population 104.2mn (World ranking 13, World Bank 2017)
Form of state Presidential Republic
Head of government Rodrigo Duterte
Next elections 2022, general election
  • Robust GDP growth since 2002 and resilience to external headwinds
  • Solid monetary and fiscal policies
  • Relatively low external debt
  • Ample foreign exchange reserves
  • Strong remittances inflows
  • Strong banking system
  • Increasing integration into the global value chain
  • History of political turmoil and ongoing security issues pose a risk to political stability
  • Strong income disparities
  • High dependency on electronic and electrical exports and tourism
  • Weak business environment

Outlook: Strong domestic demand as main driver of growth

After continuously stable growth rates above +6% since 2012, we expect the Philippines’ real GDP growth to remain solid in 2019 (+6% compared to +6.2% in 2018), with  strong domestic demand as the main driver. Public investment, especially President Duterte’s ambitious “build build build” infrastructure spending agenda, is expected to support growth over the next decade, serving as a strong fiscal stimulus. Moreover, due to the ongoing economic integration of the Philippines into the global value chain, ICT and services sectors have been particularly benefitting and are now the economy’s strongest export sectors. A historically low unemployment rate (5.2% in 2018) and lower inflation (from 5.2% in 2018) after a rate cut by the central bank will also result in  resilient private consumption.

However, risks to the outlook remain: (i) lower than expected growth in countries which are the main trading partners, particularly China; (ii) a further escalation of the US-China trade feud and thus overall slowing global trade and (iii) rising macroeconomic imbalances due to the deteriorating current account as well as fiscal balances.

Strong external position but increasing risk

The Philippines enjoys a solid external position with stable external debt levels, as well as a strong level of foreign exchange reserves that currently cover around eight months of imports, also thanks to continuously strong remittance inflows from overseas workers. This strong environment is underpinned by a stable and well-functioning banking system.

The substantial fiscal stimulus, as well as strong domestic investment and consumption, will put pressure on prices and the current account, which is expected to move further into deficit, though still remaining in sustainable territory. Overall, fundamentals remain solid, although external risks are on the rise, including slowing global growth and uncertainties around global trade. 

Trade structure by destination/origin

(% of total)

Exports Rank Imports
China 26%
1
31% China
United States 14%
2
10% Japan
Japan 13%
3
8% Taiwan
Hong Kong 5%
4
7% United States
South Korea 5%
5
7% South Korea

Trade structure by product

(% of total)

Exports Rank Imports
Electronic Components 28%
1
10% Electronic Components
Computer Equipment 13%
2
7% Refined Petroleum Products
Electrical Apparatus 9%
3
5% Cars And Cycles Electrical Apparatus
Electrical Equipment 4%
4
5% Electrical Apparatus
Non Ferrous Ores 4%
5
3% Yarns Fabrics

  • Low

  • Medium

  • Sensitive

  • High

  • Payments

  • Court proceedings

  • Insolvency proceedings