Economic Analysis


Population 107.3 million
GDP per capita 3,512 US$
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Major macro economic indicatorS

  2018 2019 2020 (e) 2021 (f)
GDP growth (%) 6.3 6.1 -9.6 4.6
Inflation (yearly average, %) 5.2 2.5 2.6 4.3
Budget balance (% GDP) -2.6 -3.4 -7.6 -9.6
Current account balance (% GDP) -2.6 -0.8 3.6 0.4
Public debt (% GDP) 39.9 39.6 54.6 60.5

(e): Estimate (f): Forecast


  • Large population that is young (50% is under 25), qualified and with good fluency in English
  • Diverse geographic and sectoral origins of expatriate workers’ remittances (10% of GDP)
  • Thriving Business Process Outsourcing (BPO) sector
  • Poverty reduction (Pantawid Pamilyang Pilipino Program)


  • Inadequate infrastructure levels, low fiscal revenues (14% of GDP)
  • Governance shortcomings and high corruption perception
  • High levels of income inequality, underemployment leading to expatriation
  • Terrorism in the South of the country
  • Strict bank secrecy and casinos that facilitate money laundering
  • Exposed to natural disasters (typhoons)


A fragile recovery with persistent downside risks

The Filipino economy continued to recover in the first half of 2021, but the pace of recovery has yet to reach full momentum due to persistent downside pressures. In the first six months, private domestic consumption was up merely 0.9% and fixed investment grew 6.1% in annual terms, far from reversing their -7.7% and -20.2% respective contractions recorded in the first half of 2020. COVID-19 resurgence and its associated containment measures impeded on the recovery during Q1 and Q2 of 2021. Tighter measures, including a two-week lockdown in Manilla during August, further constrained economic activity in the third quarter, especially household consumption. Vaccination remains slow, with the country among the slowest in the region, indicating that economic reopening will be challenging, thus adding to the uncertainty over the recovery. As of 16 August 2021, just over 11% had received all vaccines doses. The outlook for household consumption (74% of GDP) recovery is likely to remain soft in the second half of 2021 (Q1 2021 recovery: 7.2%, Q1 2020: -15.3%) as labour market prospects are still subdued. Despite falling from a record 17.6% in Q2 2020, the unemployment rate (8.7% in Q2) remains well above pre-pandemic levels, with the job market also suffering from structural weaknesses due to loss of job skills. The labour market problems are being addressed with fiscal responses, but reforms targeting education and investment would be required to address the structural issues. In 2021, the government maintains its supportive policy with the continued Bayanihan II package and the Corporate Income Tax and Incentives Reform Act (CREATE). Exports increased in 2021: as of July 2021, the YoY change reached 12.7%, with strongest increase in the sales of coconut oil, which were up by over 200%. The tourism sector struggled in 2020 (5.4% of GDP, 2019: 12.8%) and will not recover in 2021 because of the persistent delta variant.

Inflationary pressures have intensified, owing to higher commodity prices and global supply factors. While the full-year inflation rate is expected to exceed the Central Bank’s 4% upper limit this year, the policy rate of 2% should stay unchanged for the rest of the year in order to continue provide support to the recovery. As business confidence and FDI inflows should probably remain low, public infrastructure, through President Duterte’s “Build Build Build” programme, should drive investments. A recovery in FDI is expected only from 2022 onwards.


Budget deficit to widen and current account deficit to reappear 

The budget deficit is set to widen further in 2021 as the government maintains fiscal support in order to restart the economy and domestic consumption amid lingering downside risks. The government expects the budget deficit to widen from 7.5% in 2020 to 9.4% in 2021. Infrastructure is at the core of government expenses and grew by 17%, which sets it at around 5.4% of GDP in 2021. An important part of the budget is dedicated to social services (around one third) supporting health system, social welfare and employment programmes. Most of the deficit financing (around 80%) is sourced from the domestic market.

Before the pandemic, the current account had experienced a slight deficit due to a trade in goods deficit (14% of GDP), mostly offset by secondary income (workers remittances), and, to a lesser extent, by tourism receipts (13% of GDP prior to the pandemic). However, the trade in goods deficit improved due to a fall in imports, as the pandemic-induced shock hit domestic demand, while secondary income remained almost intact, which led to a surplus in the current account. This trend reverted in 2021 as imports recovered through domestic consumption, faster than exports, which experienced a gradual recovery (led by electronics exports), albeit subdued as the global economy recovered slowly from the effects of COVID-19. Because of the current account surplus in 2020, the peso appreciated in real terms and foreign exchange reserves grew rapidly. In 2021, as the current account normalises, the value of the peso should depreciate and regain some competitiveness. The amount of accumulated foreign exchange reserves should decrease due to the economic recovery, as import growth picked up.


Duterte’s agenda under pressure

Rodrigo Duterte was elected in 2016 for a six-year term. The mid-term elections in 2019 gave him the control of the senate and the capacity to push his agenda. His agenda comprises the fight against drug trafficking through re-imposing the death penalty, health and education, and infrastructure. However, the pandemic slowed his agenda, notably in infrastructure – many projects have yet to be completed and the programme should go on beyond Duterte’s presidency. The Chinese government intended to finance some of the infrastructure projects, with an overall equivalent to USD 24 billion in form of soft loans and direct investments. However, most of the projects have yet to be approved. Moreover, growing tensions between the two nations in the South China Sea led to strengthening of ties between the U.S. and the Philippines with the Visiting Forces Agreement restored. The next elections will take place in May 2022, and Duterte will run for the vice-president position. Given his popularity, Duterte’s party is likely to remain in power. 


Last updated: October 2021

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