Philippines

Philippines Overview:

 

  • The United States gained control of the Philippines in 1898 after defeating Spain in the Spanish-American War.
  • The Philippines gained their independence in 1946, following a period of Japanese occupation in the Second World War.
  • Ferdinand Marcos ruled the island as a dictator between 1965 to 1986.koo
  • Islamic rebels continue to fight government forces in the south of the country, while a communist insurgency continues in other parts of the Philippines.
  • The Philippines’ economy has not realized the massive growth that many other countries in Southeast Asia have experienced over the past four decades.

 

Key Facts and Data:

 

  • Official Name – Republic of the Philippines
  • Capital – Manila
  • Government Type – Republic
  • Head of State and Government – President Rodrigo Duterte (since 2016) • Population – 104,256,000
  • Land Area – 298.170 sq. km
  • Total GDP (US$) – $305 billion
  • Per Capita GDP at PPP (US$) – $7,728
  • Currency – Philippine peso

 

Table of Contents

Current Events:

  • Recent Political Events
  • Recent Economic Events
  • Other Recent Events

 

Political Outlook :

  • Overview of the Current Government
  • Leadership Profile
  • Summary of the Most Recent Elections
  • Leading Political Parties
  • Forecast for the Next Elections
  • International Relations Outlook
  • Potential Conflicts
  • Military Capabilities
  • Key Political Issues
  • Political Risk Outlook

 

Economic Outlook :

  • Economic Overview
  • GDP Growth Forecasts
  • Key Sector Forecasts
  • Inflation Forecasts
  • Foreign Trade Forecasts
  • Foreign Investment Forecasts
  • Exchange Rate Forecasts
  • Outlook for Key Sector
  • Key Economic Issues
  • Economic Risk Outlook

 

Demographic and Environmental Outlook :

  • Population Overview
  • Population Characteristics
  • Development of Leading Urban Centers
  • Key Demographic Issue
  • Topography and Climate Overview
  • Environmental Threat Summary
  • Key Environmental Issues
  • Demographic and Environmental Risk Outlook

 

Key Political Events and Changes:

  • President Duterte suggested that he wanted to finish his term early as he was becoming too old and tired to do the job.
  • In May 2018, the country’s highest court forced its chief justice, Maria Lourdes Sereno, to step down. She had been one of the most vocal critics of President Duterte and his war on drugs.
  • President Duterte extended martial law by another year in the southern Philippines due to the threat of Islamist and Communist militants.
  • The United States and the Philippines carried out a large scale joint military exercise in May 2018.
  • In April 2018, Kuwait expelled the Philippines’ ambassador to that country over a dispute concerning the treatment of Philippine guest workers in that country.

 

 

 

 

 

Key Economic Events and Changes:

  • GDP growth in the Philippines accelerated to 6.8% on a year-on-year basis in the first quarter of 2018. Growth was boosted by highest levels of government spending and capital formation in the first quarter.
  • Exports from the Philippines declined by 8.2% year-on-year in March 2018, continuing a recent run of disappointing export results.
  • The country’s inflation rate rose to 4.5% year-on-year in April 2018.
  • The country’s central bank raised interest rates by 25 basis points to 3.25% in May 2018 in a bid to combat rising inflationary pressures.
  • The unemployment rate in the Philippines rose to 5.3% in the first quarter of 2018.

 

Other Key Events and Changes:

  • The government launched an investigation into a public dengue fever immunization program that may pose health risks to 730,000 children in the Philippines. This led to tens of thousands of parents refusing to allow their children to receive the vaccine in the first few months of 2018.
  • In April 2018, the government closed the popular tourist island of Boracay for six months in a bid to restore the environmental health of the island’s beaches and the waters off of the island.
  • The lower house of the Philippine parliament passed a bill that would legalize divorce in the country in April 2018. However, this bill faces major opposition, including from President Duterte.

 

Philippines Political Outlook

Philippines: Current Government

Overview :

  • President Rodrigo Duterte was sworn in as president of the Philippines in mid-2016.
  • Meanwhile, Leni Robredo became the new vice president at the same time.

 

Key Members Of The Government :

  • Head of State and Government – President Rodrigo Duterte
  • Vice-President – Leni Robredo
  • Minister of Foreign Affairs – Alan Peter Cayetano
  • Minister of Finance – Carlos Dominquez III
  • Minister of the Interior and Local Government – Eduardo Ano
  • Minister of Justice – Vitaliano Aguirre
  • Minister of Defense – Delfin Lorenzana
  • Minister of Trade and Industry – Ramon Lopez

 

Profile of President Rodrigo Duterte

Background:

Rodrigo Duterte was elected president of the Philippines in 2016, after winning a clear victory in that year’s presidential election.

  • Prior to becoming president, he was the mayor of the southern city of Davao City, where he made a name for himself nationally by taking a hard line on crime and corruption and reducing that city’s crime rates dramatically.
  • President Duterte is the first ethnic Mindinaoan to become the president of the Philippines.

 

Key Policies and Stances:

President Duterte has focused many of his efforts at reducing crime and corruption in the Philippines.

  • His methods (and his tone) have been criticized by human rights groups who accuse him of using unlawful methods to combat crime and corruption.

President Duterte’s economy policies have been focused on improving living standards for poorer Filipinos.

  • Otherwise, he has maintained many of the policies of his predecessors, including welcoming foreign investment and trade as a means of boosting economic growth and living standards in the Philippines.

 

Philippines: Most Recent Elections

Presidential Elections – May 2016

Summary of the Last Elections:

The controversial mayor of the southern city of Davao, Rodrigo “Digong” Duterte, won a resounding victory in May 2016’s presidential election.

  • Duterte had trailed in the polls just a few months before the election, but his anti-crime platform won him a great deal of support in the final months of the campaign.
  • In the end, Duterte won 36.5% of the popular vote, well ahead of President Aquino’s favored candidate, Mar Roxas (22.% of the vote) and the relative newcomer, Grace Poe (20.5% of the vote).

The campaign was dominated by the controversial statements made before and during the campaign by Mr. Duterte.

  • He vowed to kill thousands of criminals in the Philippines and to bend the laws of the country to eliminate crime within his first year in office.
  • Many foreign countries criticized Mr. Duterte in the run up to the election, but this did little to dent his popularity.

 

Philippines’ Leading Political Forces: Liberal Party (PLP)

History :

The Liberal Party re-emerged as a leading force in the country’s politics following Benigno Aquino’s victory in the 2010 presidential election.

  • The Liberal Party has been in existence since 1945 and is now one of the best-established parties in the country.

 

Key Policies and Stances :

  • The Liberals favor lower taxes for individuals and businesses in the Philippines.
  • The party has taken a strong stance against corruption in the country in recent years.
  • The Liberals were the leaders in the efforts to reduce the presence of the United States military in the Philippines.

 

Outlook :

The Liberals will be the leading force in the country’s politics over the near-term thanks to President Aquino’s position.

  • Nevertheless, the party will likely find it difficult to exercise too much power given the divided nature of the country’s political system.

 

Philippines: International Relations Outlook

Key International Disputes:

  • China’s claim to much of the South China Sea, including the Spratly Islands, has been contested by the Philippines and this has significantly raised tensions between the two countries in recent years.
  • Malaysia and the Philippines dispute the control of three islands in the South China Sea as well.

 

International Relations Outlook:

  • The Philippines main priority will be to maintain internal stability and this will heavily influence its international affairs for decades to come.
  • Relations with the US will remain paramount as the Philippines looks to control Muslim rebels in the south and to hold off the rising influence of China.

 

The Association of Southeast Asian Nations (ASEAN)

The Association of Southeast Asian Nations (ASEAN) has 10 member states: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.

  • ASEAN was established 1967 in Thailand by the organization’s five original members (Indonesia, Malaysia, the Philippines, Singapore and Thailand).
  • The five additional members of ASEAN all joined the organization between 1984 and 1999.

ASEAN seeks to promote economic growth, social progress, and cultural development in Southeast Asia, while also seeking to promote regional peace and stability.

  • One of the organisations primary objectives is to establish ASEAN as a single market and production base, thus allowing the organization to better compete with its larger neighbors.
  • ASEAN intends to achieve this goal by establishing a free flow of investment, capital and products between member countries.
  • Furthermore, ASEAN seeks to encourage peace in Southeast Asia and throughout the rest of Asia by ensuring democratic values are upheld in the region, although this aim has been severely tested in recent years.

ASEAN is facing a number of challenges that could jeopardize the prospects for unity and prosperity in Southeast Asia.  First, political unrest in number of key member states could destabilize the region.  Second, the economic challenge presented by China and India is threatening the region’s ability to maintain strong economic growth.

Potential Conflict: China

Main Disputes:

  • The two countries are the key players in the dispute over control of the potentially oil-rich Spratly Islands.
  • Mischief Reef, which is far closer to the Philippines than China, is currently occupied by Chinese forces.
  • China has asserted its “right” to control the entire South China Sea, including areas near the Philippines.
  • The Philippines regularly apprehends Chinese fishermen in Philippine waters.

Best- and Worst-Case Scenarios:

  • Best Case Scenario – China accepts an international settlement to the Spratly Islands dispute that allows the Philippines a share of the territory.
  • Worst-Case Scenario – China asserts its claim to most of the South China Sea, bringing it into conflict with the Philippines.

Military Spending

Strengths and Weaknesses

The Philippines has little capacity to project military power outside of its borders.

  • In fact, the country’s armed forces struggle to maintain control over its vast array of islands and territories.

The military’s main task has been to maintain control of Mindanao and nearby islands.

  • With assistance from the US, it has registered some recent successes against Muslim separatist forces in recent years.

China’s ambitions in the South China Sea are a major concern for the military.

  • This has led to the Philippines building up its naval capabilities in the region.

Outlook :

The Philippines has little capacity to upgrade its military capabilities in the near future. 

  • This will result in a widening of military capabilities between the Philippines and China, as well as other countries in the region.

Philippines: Political Risk Outlook

  • The Philippines face some of the highest levels of political risk in all of East Asia and these levels are likely to remain high for the foreseeable future.
  • At present, the government has regional rebel movements fairly well under control, but an increase in infighting among the government and the military could lead to a broad destabilization of the country.
  • The country’s piecemeal political system also leads to higher levels of political risk as the system is based more on individuals than on land-standing political parties or movements.

Philippines Economic Outlook

Economic Summary:

The Philippines’ traditionally agriculture-based economy is becoming increasingly diversified as the service and manufacturing sectors have expanded in recent decades.

  • Lost-cost manufacturing has been one of the fastest growing areas of the economy.
  • Agriculture is split between food crops for domestic consumption and cash crops such as sugar cane and tobacco.

The Philippines is home to some of Asia’s largest wealth disparities.

  • For example, Manila and its suburbs are nearly ten times wealthier than southern Mindanao.

Manufacturing will continue to play a more important role in the Philippine economy, but will not reach the levels of China or many other Southeast Asian countries. 

  • As a result, agriculture will continue to play an important role, with export potential growing in the coming decades.
  • The service sector also has the potential to record major growth in the coming years.

 

Key Wealth-Related Issues and Trends

The Philippines remains one of the poorest countries in Southeast Asia.

Moreover, purchasing power has failed to grow as quickly as in many other countries in the region.

Poverty is widespread, with major wealth discrepancies existing between different regions.

Without a major increase in foreign investment and in manufactured exports, wealth levels in the Philippines will continue to fall further behind other countries in the region, such as China.  This, in turn, will result in slower economic growth rates in the future as foreign investment goes elsewhere.

Philippines: GDP Growth Outlook

Current Outlook:

  • GDP growth has been very high since 2010, in part as a result of a major increase in domestic demand levels.
  • In 2016, the Philippines recorded the highest rate of economic growth in East Asia, surpassing China, before a slight slowdown in 2017.

 

Future Outlook :

  • GDP growth will slowly trend upwards over the course of the near-term as domestic and export demand levels continue to trend upwards.

 

Philippines: Industrial Production Growth Outlook

Current Outlook

  • Foreign investment in the manufacturing sector has remained relatively small, preventing industrial production growth rates from reaching the levels of many other countries in the region.

 

Future Outlook :

  • Without a major increase in foreign investment, industrial production growth will remain below the regional average.

 

Manufacturing Location Rankings by in Developing Asia

Current Situation:

  • China remains Asia’s most attractive manufacturing location and the world’s dominant manufacturing center, but rising costs are jeopardizing its position.
  • Other East Asian emerging markets such as Vietnam and the Philippines are attracting more low-cost manufacturing investment.

 

Future Situation:

  • Chinese manufacturing will continue to move upmarket as costs rise.
  • Other Asian emerging markets will see their manufacturing sectors grow rapidly in the coming years as the region remains the center of global manufacturing.

 

Retail and Consumer Market Overview

Despite the Country’s recent run of economic growth retail sales growth levels have remained quite low during this period.  Moreover, purchasing power levels in the Philippines remain well behind those of China and most other Asian emerging markets.

 

Philippines: Inflation Outlook

Current Outlook:

  • Falling oil prices helped to push down inflation rates in 2015 and 2016.
  • However, inflationary pressures returned over the course of 2017 and the first part of 2018.

 

Future Outlook :

  • Inflation rates will trend slightly upwards in the coming years.
  • Moreover, a number of pressures and shocks could lead to further spikes in inflation later in the forecast period.

Foreign Trade Overview

The Philippines current account surplus has all but disappeared in recent years due to weaker export demand and rising demand for imported goods.  Looking ahead,high import levels will result in a current account deficit , despite improving export prospects over the long term.

Foreign Investment Climate:

The United States and Japan accounted for a large portion of the FDI inflows to the Philippines in recent years.

  • The manufacturing sector has been the leading recipient of this FDI as investors are targeting the Philippines for low-cost, labor intensive manufacturing operations.
  • The banking, mining and food processing sectors are also receiving significant amounts of foreign investment.

Foreign investment inflows in the Philippines have increased significantly in recent years.

  • This is due in large part to the growing attractiveness of the Philippines’ domestic market.

 

Outlook For Future Foreign Investment:

The Philippines will continue to trail many of its East Asian competitors in the race to attract foreign investment, but the gap will continue to close. 

  • Political factors will remain a key factor in the Philippines’ ability to attract foreign investment.

 

Working Patterns and the Labor Force in Philippines

Unemployment and underemployment remains a problem in the Philippines, but economic growth has allowed for these rates to trend downwards in recent years. 

  • As population growth continues, unemployment will grow, unless new job creation schemes are successful.
  • Meanwhile, the amount of skilled labor in the Philippines is growing, but remain behind that of many of the region’s more developed countries.

One advantage that the Philippines has is that a large percentage of its skilled workforce has strong English language abilities, making outsourcing a potential source of growth in the future.

  • Wages in the Philippines remain among the lowest in the Asia-Pacific region.
  • This is particularly true away from the capital city Manila, where foreign investment remains very small.

Philippines: Exchange Rates

The Philippine peso weakened recently against most major currencies due in part to uncertainty over the political situation in the Philippines.  In the coming years, a larger depreciation for the peso remains a possibility if investor confidence in the Philippines wanes or if political instability becomes a larger threat.

Fiscal Policy Overview

Current Outlook :

  • The Philippines actually recorded a fiscal surplus in 2014, before falling back into a deficit in 2015 and 2016 and 2017 as government spending levels increased.

Future Outlook:

  • The budget deficit is forecast to remain in place over the near-term, as an increase in government spending offsets higher tax revenues.

Largest Companies in Philippines

Leading Companies:

Compared with the larger countries of the region, the Philippines does not have any truly large domestic companies.

  • This is the result of the poverty in the country which makes it a smaller market than other countries in the region.
  • Few of the largest companies in the country are domestically-owned.

 

Outlook For Domestic Companies :

Without significant growth on the domestic market, it will be difficult for large companies to be created in the Philippines.

  • Moreover, foreign companies, with huge amounts of capital, will be able to take a more dominant position in the Philippines in the coming years.

 

Forecast Assumptions and Risk

 

Assumptions:

Near-Term Global Growth to Remain Stable The near-term forecast for the global economy calls for overall economic growth rates to remain near current levels, with developed economies continuing to grow faster than in previous years.

Mid-Term Economic Risk Levels to Rise A number of risks (share price corrections, Chinese debt, political gridlock) will rise to more dangerous levels by 2019, jeopardizing the recent run of steady growth for many large economies.

Asia Drives Global Growth Asian emerging markets, led by China, India and Southeast Asia, will generate nearly half of the world’s economic growth over the near- and mid-term.

Strong Domestic Demand Domestic demand levels in the Philippines will continue to rise in the years ahead, enabling the country’s economy to continue to grow at a strong pace.

 

Risks:

A Global Power Vacuum Whether by design or due to internal political unrest, the United States’ ”America First” policies are resulting in power vacuums forming in many of the world’s most volatile regions.

Major Power Conflicts The risk of conflicts between large- and mid-sized powers is rising in the Middle East, Asia and East Europe, and any of these could have the scale needed to severely disrupt the global economy.

Return to Violence in the Southern Philippines While the security situation in the southern Philippines has improved in recent years, the potential for a return to widespread unrest remains firmly in place.

Economic Meltdown. Despite the recent run of impressive economic growth, the Philippines remains at risk from internal and external shocks that could lead to much lower rates of economic growth.

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Philippines: Economic Risk Outlook

  • Economic risk levels in the Philippine have fallen significantly in recent years.
  • One of the main reasons for this decline in economic risk levels in the Philippines has been the development of the country’s domestic market in recent years.

Ethnic Groups : Most Filipinos are of Malay descent.

  • Many have some degree of Chinese or European ancestry as well. A number of small minority groups live in more remote areas of the Philippines.
  • Many of these ethnic minorities live in the southern islands

Languages : Both Filipino and English are official languages of the Philippines.

  • Filipino is derived from Tagalog, which is the language of Luzon Island.
  • However, other ethnic groups and regions have been reluctant to adapt this language.

 

Religions: The Philippines is the only country in Asia with a Christian majority.

  • Most Christians in the Philippines are Roman Catholic. The Muslim minority lives mostly in the South.
  • Muslim secessionists have been fighting the government for nearly 30 years.

Philippines: Leading Urban Centers

  • Manila is the dominant urban center in the Philippines and has grown to become one of the largest cities in Asia.
  • As urbanization continues, the population of the Manila metropolitan area will likely pass 20 million within the next two decades.
  • The other major cities in the country often serve as the commercial center for smaller islands.

 

Key Demographic Issue in Philippines

The Muslim Minority

Two groups of Muslims live on the southern island of Mindanao, the Moro and the Samal.

  • They adapted Islam in the 13th century as they had contacts with traders from the Middle East.

The Moro National Liberation Front began waging a guerrilla war in the early 1970s.

  • Fighting has been particularly heavy since 1995.
  • Some factions of the MNLF signed a peace treaty with the government in 1996 that granted some autonomy to Muslim areas.

Abu Sayyaf and the Moro Islamic Liberation Front, MNLF splinter groups, have carried on the fighting in recent years.

  • They have carried out a number of kidnapping raids and terrorists acts in the southern Philippines over the past decade.

The US is providing troops, advisors and supplies to the Philippine government in an attempt to eliminate the remaining Islamic rebel factions still in operation.  Difficult terrain and rebel support among the local population will make the elimination of the rebel groups a difficult task, but by putting them on the defensive, the government hopes to curtail the rebels’ ability to launch fresh terrorist attacks.

 

Philippines: Topography and Climate

  • The Philippines is a series of volcanic islands (more the 7,100) running from north to south.
  • The largest two islands are Luzon in the north and Mindanao in the south.
  • The larger islands have river valleys and bays where most Filipinos live.
  • Earthquakes and volcanic eruptions are common occurrences.
  • The Philippines have a tropical climate with warm temperatures all year.
  • The rainy monsoon season lasts from May to November when the islands can be hit by severe typhoons.
  • The dry season in the Philippines lasts from November to April.

 

Key Environmental Issues:

Rapid population growth has resulted in the Philippines having one of the highest rates of deforestation in the world.

  • Filipinos are increasingly moving to more forested areas of the country.
  • Illegal logging is proving difficult to control for the government.Manila’s air quality is notoriously bad and is growing worse.
  • As urban populations continue to grow, pressure on urban environments will grow. • The urban population of the Philippines will double in the next 50 years.

The Philippines are susceptible to a variety of natural disasters.

  • Some of the largest volcanic eruptions in recent times have occurred here
  • Earthquakes are also a danger.
  • Major typhoons hit the islands on a regular basis, causing extensive damage.

 

Philippines: Demographic and Environmental Risk Outlook

  • As the population of the Philippines continues to increase, demographic-related risk will likewise grow, adding to the potential for domestic instability.

Environmental Risk Outlook:

  •  Few countries are more at risk from natural disasters than the Philippines.

 

 

 

 

By | 2019-01-02T17:29:21+00:00 January 2nd, 2019|Uncategorized|0 Comments

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