How competitive is the Philippine economy today?
It is still unclear what industries the Duterte administration is championing.
In overall competitiveness, the Philippines is only better than Cambodia, Laos, and Myanmar today. We have been overtaken by Vietnam and Indonesia in most competitive indicators in the last two years. This is not to say that the Philippines did not improve. We did, especially between the years 2010 to 2015. In the last two years, however, the rest of the region accelerated their reforms while the Philippines remained static given the disruption of the national elections and the period of adjustment of the new administration.
Having said that, let us now compare the state of the economy today versus how it was three years ago, before President Duterte took over.
Looking through the data, my immediate assessment is that the economy remains fundamentally strong, albeit showing cracks that could bite us in the back, if left unaddressed.
Gross Domestic Product (GDP), per se, has been growing vigorously. It expanded by 6.9% in 2016, 6.7% in 2017, and 6.8% in the first quarter of 2018. It is worth noting that this is the first time since our post-liberation era that the Philippines has grown beyond 6.5% for ten consecutive quarters.
On the demand side, the drivers of the economy have been government consumption, capital formation, and consumer spending. The latter, however, has slowed down this year due to the rising prices of commodities.
On the supply side, the service sector expanded by 6.8% in 2017 and further to 7% in the first quarter of 2018. Industry grew by 7.3% in 2017 against 7.9% in 2018. These numbers are relevant as it shows the extent by which our industrial sector continues to grow faster than the service sector. It proves that the country’s manufacturing base is expanding and that industrialization is well on track.