23 Jan 2017
Major Economic Indicators
- The Philippine economy is estimated to have expanded by 6% in 2016 on the back of a robust service sector, up marginally from 5.8% in 2015. The IMF expects the Philippines to be the fastest-expanding major ASEAN economy in 2016.
- Consume price inflation rose to 2% in 2016 from 1.4% in 2015, with the uptrend expected to continue in 2017. The Philippine central bank kept the policy rate unchanged at 3% in December 2016.
- The new government formed by President Duterte since June 2016 has brought changes to the Philippines’ external relations with major countries such as the US and China.
- Philippine exports dropped by 7.5% year-on-year (YOY) to US$ 26.8 billion in the first half of 2016, whereas imports increased by 17.7% YOY to US$38.7 billion during the same period.
- The Philippines first obtained its investment grade sovereign credit ratings in 2014, which were reaffirmed by major credit agencies in 2016 on the back of continued improvement in economic and fiscal positions.
- Hong Kong’s total exports to the Philippines fell by 2.5% YOY to US$3 billion in the first 11 months of 2016, while imports from the country increased by 3.9% YOY to US$6.9 billion.
Current Economic Situation
In 2016, the Philippine economy is estimated to have grown by 6%, up marginally from 5.8% in 2015. The IMF expects the Philippines to maintain similar GDP growth in 2017 on the back of continued domestic demand and modest fiscal stimulus, which will spur it to be the fastest growing economy among the five largest ASEAN economies in 2016.
The Philippine services and industry sector grew, respectively, at 6.7% and 6% (inflation-adjusted) in 2015. Consumer price inflation rose to 2% in 2016 from 1.4% in 2015. In December 2016, Bangko Sentral ng Pilipinas (BSP), the country’s central bank, left its benchmark interest rate unchanged for the 6th consecutive month at 3%.
Strong GDP growth along with macroeconomic stability have allowed credit-rating agencies including Fitch, Standard & Poor’s (S&P) and Moody’s to accord investment grade to the Philippines’ sovereign borrowings since 2014. Despite affirming the country’s credit ratings in 2016, S&P noted of the rising uncertainties surrounding the stability, predictability, and accountability of the new Philippine government led by President Duterte, who won the elections in May 2016.
To improve the infrastructure in the Philippines, public-private partnership (PPP) projects are increasingly adopted - with 15 PPP projects awarded as of December 2016.
In the first half of 2016, Philippine exports decreased by 7.5% YOY, with coconut oil and chemicals showing larger declines of by 29.8% and 32.3% respectively. Meanwhile, woodcraft and furniture grew by 19.6% in the same period.
Japan was the Philippines’ top export market in the first half of 2016, accounting for 21.4% of the country’s total export. The US ranked second with a share of 15.9%. Hong Kong was the third largest export market for the Philippines with a share of 11.2% in the same period.
Philippine imports increased by 17.7% YOY in the first half of 2016 fueled by strong demand for imported goods such as cars and motorcycles.
In the first half of 2016, China was the top import source of the Philippines and accounted for 18.4% of the country’s total imports. Japan and the U.S. came second and third, accounting for 11.6% and 8.7% respectively.
The new government led by President Duterte, after his election victory in May 2016, has steered an expected change in the Philippines’ external relations with major countries including both the US and China. In a bid to diffuse concerns about the Philippines reneging on treaties and agreements with the US, President Duterte said in October 2016 that he was advocating a "separation of foreign policy" rather than "a severance of ties." This was followed by comments from the trade minister saying the Philippines was maintaining trade and investment ties with the US.
As a member of the Association of South-East Asian Nations (ASEAN) and the ASEAN Free-Trade Area (AFTA), the Philippines is committed to tariffs reduction for ASEAN imports to a 5% cap on all products. With the implementation of the ASEAN Trade in Goods Agreement (ATIGA), basically all tariff lines have been brought down to zero. The Philippines has assumed the one-year rotational chairmanship for ASEAN in 2017.
Goods imported into the Philippines are subject to import tariffs, excise duties, VAT, and various customs fees and related charges. All tariffs are ad valorem on the c.i.f. value of imports. The Philippines have reduced its simple average applied MFN rate from 7.4% in 2004 to 6.3% in 2015, with average rates of 9.9% on agriculture and 5.7% on non-agricultural products.
As a member of the WTO, the Philippines has been complying with the Information-Technology Agreement (ITA) since 2000 by imposing zero-tariff on most information-technology equipment and inputs.
As a member of ASEAN, the Philippines is committed to undertaking the needed reforms and liberalisation measures related to the formation of ASEAN Economic Community (AEC) at the end of 2015, while trying to cushion the effect of AEC on the local economy.
To deepen economic integration in the region, the Philippines have ratified a number of regional free trade agreements, including the ASEAN-China Free Trade Agreement (ACFTA), the ASEAN-Korea Free Trade Agreement (AKFTA), the ASEAN-Australia-New Zealand FTA (AANZFTA), the ASEAN-Japan Comprehensive Economic Partnership Agreement (AJCEPA) and the ASEAN-India Free Trade Agreement (AIFTA). Besides, the Philippines ratified the Philippines-Japan Economic Partnership Agreement (PJEPA) in 2008 to further expand Philippine exports of goods and services to Japan.
Hong Kong’s Trade with the Philippines
The Philippines was the 20th largest export market for Hong Kong in both the first 11 months of 2016 and 2015, Hong Kong’s total exports to the Philippines contracted 2.5% YOY to US$3 billion, following an increase of 7.9% in 2015.
In the first 11 months of 2016, major export items included telecom equipment and parts (21.2% share), parts and accessories of office machines/computers (16.8%), office machines (8%) electronic apparatus for electrical circuits (7.4%), and semi-conductors, electronic valves and tubes, etc. (6.8%).
Over the same period, Hong Kong imports from the Philippines increased by 3.9% YOY to US$6.9 billion. Major import items were semi-conductors, electronic valves and tubes (67.9% share), computers (6.8%) and telecom equipment and parts (5.5%).
The Philippines’ Involvement in Hong Kong Economy
As of October 2016, there were 180,780 Filipinos residing in Hong Kong, most of them working as domestic helpers in the city. According to the Hong Kong Census and Statistics Department, 33 Philippine companies had set up their local offices in Hong Kong as of June 2016.
According to the Hong Kong Tourism Board, the number of visitors coming from the Philippines amounted to 701,296 in the first 11 months of 2016, increasing by 12.5% YOY.
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Related information: Philippines infographics