Philippine Macroeconomy

Introduction
The Philippines was a former colony of Spain and the United States and became a
self-governing commonwealth in 1935. The current president, Rodrigo Duterte was elected
in 2016 has consolidated power by marginalizing his opponents. To improve the economy of
the country, President Duterte has downplayed tensions with China. Industrial products such
as electronics apparel and shipbuilding have significantly increased or growing. Remittances
from the overseas Filipino workers is equal to 10.5% of the GDP.

Commodity Financial
Government Workforce
Markets Markets

The top individual income

tax rate is 35 percent, and
the top corporate tax rate is
30 percent. Other taxes
include value-added and
environmental taxes. The
overall tax burden equals
14.2 percent of total
domestic income.
Government spending has
amounted to 20.1 percent
of the country’s output
(GDP) over the past three
years, and budget deficits
have averaged 0.6 percent
of GDP. Public debt is
equivalent to 39.6 percent
of GDP. Protection of
minority investors and risk-
management practices in
the construction sector
have been improved, but
the overall competitiveness
of the business regulatory
environment has
deteriorated. Tax
registration costs have
increased. Labor costs are
low. Workers are highly
motivated. The government
budgeted more funds for
subsidies to state-owned
enterprises in 2019, but
actual payments to some
SOEs have declined.
Employment: Job
creation has always
been part of the
development objectives
of the Philippines. The
employment rate is
94.70% of the total
population (All sectors)
Unemployment: the
unemployment rate is
3.50% of the total
population.
Labor Force: the labor
force in the country is
61.70%
Headline inflation, which The total value of
captures the prices of all exports and imports of
goods and services goods and services
including commodities, equals 76.1 percent of
rose to 6.4 percent in GDP. The average
August (year on year) applied tariff rate is 1.7
from 3.4 percent in 2018. percent, and 285
Higher excise taxes, nontariff measures are in
rising global energy force. In a move to
prices, the weaker peso, attract longer-term
and challenges foreign investment,
in managing rice supply foreign ownership
are driving inflation. To ceilings in a number of
contain inflation and sectors have been
preserve market raised. The financial
confidence, the Bangko sector, which is
Sentral ng Pilipinas, the gradually modernizing,
country’s central remains relatively stable
bank, increased the and sound.
policy rate three times
this year and stands
ready to further tighten
monetary policy (by
raising interest rates) to
anchor inflation
expectations and temper
further second-round
effects.

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Corporations
The Philippines'
economy is based on
food processing;
production of cement,
iron, and steel; and
telecommunications,
among others. The
agricultural sector
employs 25% of the
labor force but
contributes only 9.3% of
GDP. The sector only
grew by 0.9% in 2018,
showing signs of
stagnation. . President
Duterte ordered
government lands to be
converted to agriculture
use (PhilStar). As for
mining, Philippines is
one of the richest
countries of the world in
terms of minerals with an
unexploited mineral
wealth estimated at
more than USD 840
billion (Inquirer). The
Philippines reserves of
copper, gold and zinc
are also among the
largest in the world.
Effects of Corona Virus Pandemic
On Global Economy
Government The pandemic has caused a lot of disturbances
in many aspects. Some are minimal while some
are getting out of hand.
Personal Savings in
Philippines increased to Monetary policymakers – who have already done
4965843.77 Million PHP in less than a month what took them three years
in February from to do after the GFC – must continue to throw the
4945889.93 Million PHP kitchen sink of unconventional measures at the
in January of 2020. crisis. That means zero or negative interest rates;
enhanced forward guidance; quantitative easing;
Household final
and credit easing (the purchase of private assets)
consumption
to backstop banks, non-banks, money market
expenditure, etc. (% of
GDP) in Philippines was funds, and even large corporations (commercial
reported at 73.56 % in paper and corporate bond facilities).
2016, according to the
World Bank collection of governments need to deploy massive fiscal
development indicators, stimulus, including through “helicopter drops” of
compiled from officially direct cash disbursements to households. Given
recognized sources. the size of the economic shock, fiscal deficits in
Philippines - Household advanced economies will need to increase. Only
final consumption central governments have balance sheets large
expenditure, etc. (% of
and strong enough to prevent the private sector’s
GDP) - actual values,
collapse.
historical data, forecasts
and projections were
sourced from the World Unless the pandemic is stopped, economies and
Bank on May of 2020. markets around the world will continue their free
fall. But even if the pandemic is more or less
contained, overall growth still might not return by
the end of 2020.
https://www.weforum.org/agenda/2020/04/depressi
on-global-economy-coronavirus/

On Philippine Economy
https://www.nordeatrade.com/fi/ex https://tradingeconomics.c The National Economic and Development
plore-new- om/philippines/household- Authority (NEDA) projected 2020 gross domestic
market/philippines/economical-
context final-consumption- product (GDP) growth to be as low as -0.6%, as
expenditure-etc-percent- tourism, trade, remittances, and consumption
of-gdp-wb-data.html drastically drop during the lockdown.
Philippine economy may lose between P276.3 billion and P2.5 trillion, depending on how the coronavirus
pandemic develops in the next few months according to government think-tanks. Metro Manila, which
accounts for 37.5% of GDP, is a major concern during the pandemic, while the entire Luzon region
accounts for about 73% of the country’s GDP. Sectors from retail, real estate, to manufacturing are
experiencing serious challenges due to the enhanced community quarantine. The Philippine Stock
Exchange Index has dropped by 32% year-to-date. Over 2 million employees were displaced during the
first five weeks of the Luzon-wide ECQ wherein about 70% of this were affected by temporary business
closures and 30% employees were subject to alternative work arrangements such as reduced working
days and hours; forced leave; and work-from-home. Metro Manila accounted for the most number of
displaced workers..
https://www.flandersinvestmentandtrade.com/export/nieuws/coronavirus-situation-philippines
No import/export restrictions are implemented
during the pandemic period.
On the other hand, the importation of health
equipment and supplies deemed critical or needed
to address the COVID-19 public health emergency
shall be exempt from duties, taxes, and fees
persuant to Republic Act No. 11469, otherwise
known as “Bayanihan to Heal as One Act”. Import
requirements, application and registration process
of needed medical supplies, equipment and
protective equipment as COVID-19-critical
commodities have been streamlined.
On an annual basis, the gross domestic product is
expected to shrink by 0.2% in 2020. But would
likely bounce back to 7% growth next year as the
government policy gains traction. Inflation would
also probably slow this year, Bangko Sentral ng
Pilipinas (BSP) Governor Benjamin Diokno
forecasts that inflation will average at the low end
of the target range at 2% in 2020, down from the
previous forecast of 2.2%. The major downside
risks to inflation are the decline in prices of global
crude and non-oil products and the impact of
COVID-19 on both global and domestic growth.
Critical to the recovery scenario is the
consumption and investment growth. Foreign
Direct Investments (FDI) is expected to be hit as
coronavirus worries cloud investor sentiment.
Remittances, which comprise 10% of the GDP, is
also expected to contract by about 0.2 to 0.8
percentage point this year as Filipinos living and
working abroad face massive layoffs due to the
coronavirus-led global economic slowdown. This
could also have a spillover effect on consumption.
Household consumption is expected to shrink as
consumer confidence dips. A 5.0 to 10.0 percent
decline in household consumption of non-essential
commodities (i.e. alcoholic beverages and
tobacco, clothing and footwear, furnishings,
household equipment and routine household
maintenance, recreation and culture, restaurants
and hotels, and miscellaneous goods and
services) could result in a loss equivalent to 0.2 to
0.5 percent of GDP. Private investments, as well
as imports and exports are all likewise expected to
dwindle this year.
https://www.flandersinvestmentandtrade.com/export/
nieuws/coronavirus-situation-philippines
https://www.rappler.com/business/255515-
economists-recommendations-philippine-government-
coronavirus-spending
Policy Recommendations
Financial relief
A moratorium on foreclosures and utility payments
during the quarantine period is needed, especially
for households earning below a certain income
threshold. These payments can be collected at a
later date at 0% interest, and over an extended
period. Individuals should be allowed to withdraw
contributions from the Social Security System,
Government Service Insurance System, and Pag-
IBIG up to P50,000 to be repaid over an extended
period at 0% interest.
Relaxing rules on medical equipment and
workers
Tariffs and non-tariff barriers that apply to personal
protective equipment and other medical equipment
to fight the pandemic should be suspended
immediately. Occupational licensing restrictions
should be relaxed to allow nursing and medical
students close to finishing their degree to assist in
the efforts to combat the disease.
Preparing for hotel takeover
The national and local governments must stand
ready to take over hotels, motels, and other
accommodation services to use their beds should
the health crisis require it
Securing supply chains
The necessary processes, including travel and
production, for food and essential non-food items
like water, electricity, medicine, packaging
materials, soap, and disinfectants must be
secured. For agriculture, the government must
provide support to farmers, either through input
subsidies or access to markets, so that they will
continue to produce during this critical time. When
shortfalls become inevitable, the government
should be ready to import more or incentivize the
private sector to do the same.
Compassionate containment
There must be strong coordination between the
Metro Manila Council and neighboring spillover
cities and municipalities for a coherent,
comprehensive, and compassionate containment
plan.This ensures supply chains will not be
disrupted, contract tracing will be more efficient,
transboundary movement of workers will not be
blocked, and information will be shared
seamlessly.