Philippines

Politics:

• Analysis

  Philippines politics: Quick View - Historic day for reproductive health

  Event

  On December 17th Congress approved a proposed law requiring public hospitals and clinics to make contraceptives available to poor couples. The bill also calls on schools to provide sex education to teenage students.

  Analysis

  The lower and upper houses of Congress approved slightly different versions of the bill, which will be reconciled by a bicameral committee, and then ratified by both chambers. The bill will then go to the president, Benigno Aquino, to be signed into law. However, it is likely to face a legal challenge before the Supreme Court.

  Proponents of the bill expect it to help more than one-fifth of married Filipina women who say they want to limit or space out births but are unable to do so owing to insufficient money to purchase contraceptives. Unwanted pregnancies lead to high levels of maternal deaths in the Philippines, where the rate is 160 deaths per 100,000 live births-almost twice the average in other large South-east Asian countries, according to the World Bank.

  It is estimated that if the reproductive health bill helps to cover even nine-tenths of currently unmet contraceptive requirements, it could accelerate the reduction in the country's average fertility rate from 3.1 births per woman to the replacement ratio of 2.1 within a decade. Without the law, the fertility rate is forecast to fall to 2.1 only after two decades. Reaching the replacement ratio is thought to trigger a "demographic transition" that could lead to faster economic growth in a country, as the proportion of working-age people in the total population sharply rises. The demographic transition is thought to have accounted for one-third of the economic growth spurt experienced by East Asia's economic "tigers" in 1965-95.

  Successive Philippine governments have attempted to pass some version of the bill, for which there is relatively widespread popular support. However, the powerful Roman Catholic church has long resisted the changes, and has threatened civil disobedience if the president signs the law. Passage of the legislation represents a significant victory for Mr Aquino, although local media reports suggest that he threatened to withhold legislators' "pork barrel" (centrally distributed money for local projects and social service) if they voted against the bill.

  December 17, 2012

• Background

  Philippines: Political forces at a glance

  Political outlook: Political forces at a glance

  Present government: Benigno Aquino was elected president in May 2010 with 42% of the votes cast, succeeding the previous holder of the post, Gloria Macapagal Arroyo. Mr Aquino's six-year period in office (under the constitution, he is permitted only a single term) began in July 2010 and will end in 2016.

  In the congressional election, which was also held in May 2010, the coalition that supported Ms Macapagal Arroyo, Lakas-Kabalikat ng Malayang Pilipino-Christian Muslim Democrat (Lakas-Kampi-CMD), initially emerged as the largest party in the House of Representatives (the lower house of Congress). But Lakas-Kampi-CMD subsequently suffered a large number of defections, with the result that Mr Aquino's Liberal Party (LP) became the largest force in the lower house. Taking into account the backing of smaller parties, Mr Aquino has in practice been able to count on the support of at least two-thirds of the lower house. By contrast, the Senate (the upper house), where the LP holds only four out of 24 seats, is more independent than the House of Representatives and represents a bigger stumbling block for the government as it attempts to press ahead with its legislative agenda.

  Next elections: The next presidential election will take place in 2016. Mid-term congressional elections for one-half of the seats in the Senate and all those in the House of Representatives will be held in May 2013.

  June 19, 2012

• Structure

  Philippines: Political structure

  Official name

  Republic of the Philippines

  Form of state

  Under the 1987 constitution, the government is based on a separation of powers between the executive presidency, a bicameral legislature and an independent judiciary

  The executive

  The president is chief executive, head of state and commander-in-chief, serves no more than one six-year term and may approve bills passed by Congress (the legislature) or exercise a veto, which can be overridden by a two-thirds majority of Congress. Cabinet appointments are subject to approval by the Congressional Commission on Appointments

  Legislature

  The Congress of the Philippines consists of the Senate (the upper house, with 23 members at present) and the House of Representatives (the lower house, which has 278 members, of whom 80% are directly elected and 20% are selected from party lists). Senators are elected for six-year terms and representatives for three-year terms. (The Senate normally has 24 members, but Benigno Aquino, who had been a senator, was elected president in 2010, meaning that his seat in the upper house is vacant. It should be filled at the mid-term elections in 2013, restoring the number of senators to 24.)

  Legal system

  Based on US common law; the 1987 constitution contains a Bill of Rights and provides for a judiciary with the Supreme Court at its apex

  National elections

  Elections took place in May 2010 for the president and vice-president, the House of Representatives and one-half of the Senate. The next legislative election (for the House of Representatives and one-half of the Senate) is due in May 2013; the next presidential election is due in 2016

  National government

  Mr Aquino became president for a six-year term in June 2010. However, his Liberal Party does not command a majority in either house of Congress

  Main political organisations

  Liberal Party; Lakas-Kabalikat ng Malayang Pilipino-Christian Muslim Democrat (Lakas-Kampi-CMD); Nacionalista Party; Nationalist People's Coalition (NPC); Pwersa ng Masang Pilipino (PMP); Partido Demokratiko Pilipino-Lakas ng Bayan (PDP-Laban); Communist Party of the Philippines (CPP); Moro National Liberation Front (MNLF); Moro Islamic Liberation Front (MILF)

  President: Benigno Aquino

  Vice-president: Jejomar Binay

  Key ministers

  Agriculture: Proceso Alcala

  Budget & management: Florencio Abad

  Defence: Voltaire Gazmin

  Education: Armin Luistro

  Energy: Jose Rene Almendras

  Environment: Ramon Paje

  Finance: Cesar Purisima

  Foreign affairs: Albert del Rosario

  Justice: Leila de Lima

  Trade & industry: Gregory Domingo

  Central bank governor

  Amando Tetangco

  December 11, 2012

• Outlook

  Philippines: Key developments

  Outlook for 2013-17

  • Benigno Aquino, who was elected president in 2010, continues to enjoy wide popular support, ensuring that the Philippines will enjoy a period of political stability until he stands down in 2016.
  • The president has made only limited progress on some aspects of his reform agenda, but the mid-term election in May 2013 should provide him with an opportunity to strengthen his mandate.
  • Relations with China will remain under strain as a result of the two countries' conflicting territorial claims in the South China Sea.
  • After expanding by an estimated 5.5% in 2012, real GDP will grow by 6.1% in 2013, driven primarily by private consumption. The economy will then expand at an average annual rate of 6% in 2014-17.
  • Consumer price inflation will average 3.9% in 2013, up from an estimated 3% in 2012. Although global food and oil prices will decline next year, faster economic expansion will put upward pressure on local consumer prices.
  • As a result of substantial inflows of remittances from overseas workers, the current account will remain in surplus in the forecast period, to the tune of 3.3% of GDP on average.

  Review

  • At an Association of South-East Asian Nations (ASEAN) summit in November, a statement on the South China Sea released on behalf of the bloc was disputed by the Philippines, demonstrating the progress that still has to be made.
  • Real GDP growth in the third quarter was much stronger than many had expected, at 7.1% year on year, driven by investment and private consumption. This follows upwardly revised growth of 6% in the second quarter.
  • Consumer price inflation stood at 2.8% year on year in November, down from 3.1% in the previous month. This took inflation below the target range of 3-5% of the Bangko Sentral ng Pilipinas (the central bank).
  • Merchandise exports expanded by a rapid 22.8% year on year in September, following a contraction in August. In the first nine months of the year export revenue held up well amid a weak global economic environment.

  December 11, 2012

Economy:

• Background

  Philippines: Country fact sheet

  Fact sheet

  Annual data	2011a	Historical averages (%)	2007-11
  Population (m)	101.8	Population growth	2.0
  GDP (US$ bn; market exchange rate)	224.8b	Real GDP growth	4.7
  GDP (US$ bn; purchasing power parity)	391.1	Real domestic demand growth	5.2
  GDP per head (US$; market exchange rate)	2,207.2	Inflation	4.8
  GDP per head (US$; purchasing power parity)	3,840.8	Current-account balance (% of GDP)	4.0
  Exchange rate (av) P:US$	43.3b	FDI inflows (% of GDP)	1.0
  a Economist Intelligence Unit estimates. b Actual.

  Download the numbers in Excel

  Background: The Philippine islands were ruled by Spain from 1565 to 1898, when the US took control. The islands became independent in 1946. The 21-year rule of Ferdinand Marcos (1965-86) was characterised by economic mismanagement and martial law. A democratic system was re-established under Corazon Aquino (1986-92) and was maintained under Fidel Ramos (1992-98) and Joseph Estrada (1998-2001). In 2001 Mr Estrada was removed in a military-backed civilian coup and replaced by his vice-president, Gloria Macapagal Arroyo, who won the presidential election in 2004. Mrs Aquino's son, Benigno Aquino, won the May 2010 presidential poll.

  Political structure: The Philippines has a presidential system of government, the president being limited to a single six-year term. Congress (the legislature) is modelled on the US system and comprises two directly elected bodies, the Senate (the upper house), normally with 24 members, and the House of Representatives (the lower house), with 278.

  Policy issues: The main policy challenge facing the government is the need to ensure stability in the public finances while boosting spending in crucial areas of the economy, such as infrastructure, education and healthcare. Poor tax administration, a limited tax base and the losses incurred by public-sector companies have been at the root of persistent deficits. The budget deficit widened to the equivalent of 3.7% of GDP in 2009, from 0.9% in 2008, owing to slower economic growth and tax cuts that were aimed at stimulating the economy. It remained around that level in 2010, but then narrowed to 2% of GDP in 2011 before widening again in 2012, to an estimated 2.5%.

  Taxation: The corporate income tax rate was raised from 32% to 35% in 2005, but it was lowered again in 2009, to 30%, and remains at that level. Personal income tax rates are structured into seven bands, ranging from 5% to 32% of annual income. Tax exemption levels start at P50,000 (around US$1,200) for individuals.

  Foreign trade: The merchandise trade deficit (on a balance-of-payments basis) stood at US$15.5bn in 2011. Exports totalled US$47.2bn in that year, while imports stood at US$62.7bn. The current account recorded a surplus of US$7.1bn in 2011, equivalent to 3.1% of GDP.

  Major exports 2011	% of total	Major imports 2011	% of total
  Electronic products	58.0	Capital goods	29.0
  Garments	3.2	Mineral fuels	16.5
  Coconut oil	3.2	Chemicals	9.0
  Petroleum products	1.2	Manufactured goods	7.1
  Leading markets 2011	% of total	Leading suppliers 2011	% of total
  China	26.4	China	19.0
  Japan	17.5	Japan	16.0
  US	17.2	US	12.3
  Singapore	11.0	South Korea	11.0

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  December 11, 2012

• Structure

  Philippines: Economic structure

  Data and charts: Annual trends charts

  
  

  

  December 11, 2012

• Outlook

  Philippines: Country outlook

  Philippines: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  POLITICAL STABILITY: The Philippines is on course for a period of relative political stability in the forecast period. Benigno Aquino achieved a decisive victory in the May 2010 presidential election, beating the second-placed candidate, a former president, Joseph Estrada, by a record margin of more than 5m votes. Popular fondness for Mr Aquino's late mother, Corazon Aquino, the president from 1986 to 1992, is still providing a boost to his popularity. In addition, progress on some aspects of Mr Aquino's anti-poverty and anti-corruption reform agenda will have gone some way towards helping him to achieve a 77% satisfaction rating in the latest survey by a local pollster, Social Weather Stations. Mr Aquino's expansion of the conditional cash transfers programme is particularly popular.

  ELECTION WATCH: The next presidential election is scheduled for 2016. Under the constitution, Mr Aquino cannot stand for re-election. In May 2013 the Philippines will hold elections for one-half of the seats in the Senate (the upper house of Congress) and the entire House of Representatives (the lower house). Mid-term polls usually give the president an opportunity to strengthen his mandate in Congress. In the run-up to the Senate election, the two main alliances of parties have both affirmed their support for Mr Aquino's reform agenda. However, there are signs that the ruling coalition, led by the Liberal Party (of which Mr Aquino is chairman), is coming under strain. One grouping of legislators has coalesced around Manuel Roxas, also of the Liberal Party, who was Mr Aquino's running-mate in 2010 and is his preferred successor as president. Another has gathered around the vice-president, Jejomar Binay, who narrowly defeated Mr Roxas in the presidential election. Mr Binay, of the Partido Demokratiko Pilipino-Lakas ng Bayan (PDP-Laban), has made no secret of his intention to stand for president when Mr Aquino's term ends, thereby putting him in competition with Mr Roxas.

  INTERNATIONAL RELATIONS: Relations with the US are crucial for the Philippines and are likely to remain warm in 2013-17. Aside from historical colonial connections, ties are strong for several reasons, including commercial relations (the US is one of the Philippines' main trading partners) and close military associations (the US army provides support for the Philippine government's campaign against Muslim separatists on Mindanao). There are signs at present that bilateral ties are strengthening further, with plans for increased defence co-operation, including maritime security, as part of the current "pivot" in US foreign policy towards Asia. China's value to the Philippines as a trading partner and a source of investment will grow in 2013-17. But Sino-Philippine relations will continue to be strained by conflicting territorial claims in the South China Sea.

  POLICY TRENDS: The main policy challenge for Mr Aquino's administration in the early part of the forecast period will be to demonstrate its commitment to strengthening the public finances. The government has abandoned the goal of balancing its budget, arguing that a fiscal deficit is unavoidable if public services are to be improved. The administration is targeting a budget deficit equivalent to 2.6% of GDP in 2012 and 2% in 2013. Mr Aquino aims to keep the deficit at that level until the end of his presidency. In order to upgrade the country's inadequate infrastructure, the president plans to establish around 80 PPPs by 2016 with aggregate investment capital of about P740bn (US$17.4bn). At least ten such projects had been expected to be put out to tender in 2011, but in the event the government awarded only one contract. Progress has slowed further in 2012, and mention of the scheme was noticeably absent from Mr Aquino's State of the Nation address in July.

  ECONOMIC GROWTH: The Economist Intelligence Unit estimates that the Philippine economy will expand by 5.5% in 2012; this has been revised up from our previous forecast of 5.2% in order to reflect the strong performance of the economy in the third quarter of the year. Real GDP growth will accelerate to 6.1% in 2013. Private consumption, which accounts for over 70% of GDP, will expand by 5.3% in 2013 and will contribute 3.8 percentage points to the rate of GDP growth. Consumption will be supported by a very slight pick-up in the global economy next year (which will boost growth in remittances from Filipinos working overseas), and by continued government transfers. Fixed investment growth will slow to 5.7% in 2013, from an estimated 9.1% in 2012, driven primarily by private-sector growth. Investment may receive a boost next year if the Philippines receives an investment-grade rating from leading international credit-rating agencies, as appears fairly likely. Exports of goods and services will expand by 4.5% in 2013.

  INFLATION: The average rate of consumer price inflation will accelerate to 3.9% in 2013, from an estimated 3% in 2012. In 2013 demand will outstrip supply as the economy expands more rapidly, putting upward pressure on prices. Proposals announced in 2011 to inflation-index excise duties on alcohol and tobacco, which are still under discussion, will add to upward price pressures if approved by Congress. However, the rate of inflation will be kept from accelerating too quickly as a result of lower global oil prices compared with 2012 (although they will remain high by historical standards). Global food prices will continue to decline in 2013, if more slowly than in 2012. In addition, inflows of foreign currency, including in the form of remittances, will continue to support the peso. We expect the local currency to appreciate against the US dollar in 2013, thereby helping to limit imported inflation. In 2014-17 the annual rate of inflation will average 4.7%. The Philippines' labour surplus will deter excessive wage demands, and real wages will thus rise only modestly during the forecast period.

  EXCHANGE RATES: We expect the peso to appreciate marginally in 2013, to around P42.3:US$1, from an estimated P42.5:US$1 in 2012. The local currency has strengthened in recent years, appreciating by over 10% between 2009 and 2012. Capital inflows have supported the peso. Amid strong inward flows, in July 2012 the central bank announced rules tightening restrictions on flows of foreign capital into special deposit accounts and said that further measures might be forthcoming. After appreciating further in 2013, the peso will weaken slightly in 2014-15 as central banks in the developed world begin to tighten monetary policy and so make Philippine yields less attractive. The currency will stabilise at around P43:US$1 in 2016-17, with strong GDP growth and the Philippines' continued current-account surplus supporting the peso. However, our forecast for 2013 is subject to downside risk, as the peso would be vulnerable were global risk aversion to increase more sharply than we expect.

  EXTERNAL SECTOR: Despite the continuing merchandise trade deficit, a large surplus on the transfers account, as well as smaller surpluses on the services and income accounts, will ensure that the current account remains in the black in 2013-17. The current account will post surpluses equivalent to 3.3% of GDP on average in the next five years, following an estimated surplus of 3.6% in 2012. After increasing by an estimated 10.3% in 2012, merchandise exports will expand by 6.5% in 2013 and by an average of 9.6% a year in 2014-17, reflecting a recovery in demand in overseas markets. The Philippines has recorded services surpluses since 2006 and will continue to do so throughout the forecast period. Services exports have been boosted by the country's growing importance as a base for business-process outsourcing, and the outsourcing sector will expand further in the next five years. The income account will remain in surplus over the forecast period. Significant debt interest payments and outflows on foreign investments in the Philippines will be offset by compensation for employees and income from Filipino investments abroad.

  December 10, 2012

• Forecast

  Philippines: Country forecast summary

  Country forecast overview: Highlights

  • The resounding victory won by Benigno Aquino in the May 2010 presidential election suggests that the Philippines is on course for a period of relative political stability. Mr Aquino is popular with the public and can still count on the backing of a large majority in the House of Representatives (the lower house of Congress), although the Senate (the upper house), in which he lacks a majority, is likely to be more unruly. Mr Aquino's attempts to prosecute his predecessor, Gloria Macapagal Arroyo, for corruption could prove politically destabilising.
  • Internal security threats will persist, although the framework agreement for peace reached in October between the government and the main Muslim rebel group on Mindanao, the Moro Islamic Liberation Front, bodes well for an improvement in the security environment. An agreement with the New People's Army, the military wing of the Communist Party of the Philippines, is on Mr Aquino's agenda but is unlikely to be achieved.
  • Mr Aquino's administration has abandoned the aim of balancing the budget in the medium term. The president has argued that deficits are unavoidable if public services are to be improved, and the Economist Intelligence Unit forecasts that the fiscal deficit will be equivalent to 2.4% of GDP on average in 2013-17. However, Mr Aquino's aim of improving public infrastructure through public-private partnership agreements has made only limited progress.
  • The Bangko Sentral ng  Pilipinas (BSP, the central bank) cut its main policy interest rates for the fourth time this year in October. The rate reduction is likely to be the last in the current loosening phase, and we expect the BSP to start raising rates in 2013. Strong inflows of foreign capital have helped to keep long-term interest rates low.
  • We expect real GDP growth to accelerate to 6.1% in 2013, from an estimated 5.5% in 2012, owing largely to an expansion in private consumption. Economic growth will then average 6% a year in 2014-17.
  • Remittances from overseas Filipinos will make a major contribution to the current-account surplus. Remittances will continue to rise in 2013-17 and will keep the current account in the black, despite large trade deficits.
  • GDP per head (at market exchange rates) remains low in the Philippines, at an estimated US$2,415 in 2012. It is expected to rise to US$3,717 by 2017. This will bring about a modest improvement in market opportunities, but it will leave average income levels lower than in many neighbouring countries.

  

  December 11, 2012

View detailed map

Country Briefing

Land area

300,179 sq km

Population

94.9m (2011 UN estimate)

Main towns

Population in '000 (August 2007 census)

Metro Manila (National Capital Region): 11,553

Taguig City: 613

Quezon City: 2,679

Valenzuela: 569

Manila (capital): 1,661

Cagayan de Oro: 554

Kalookan: 1,379

Paranaque: 553

Davao: 1,363

Las Pinas: 532

Cebu: 799

General Santos City: 530

Zamboanga: 774

Bacolod: 499

Pasig: 617

Iloilo: 419

Climate

Tropical

Weather in Manila (altitude 14 metres)

Hottest month, May, 24-34°C; coldest month, January, 21-30°C (average daily minimum and maximum); driest month, February, 13 mm average rainfall; wettest month, July, 432 mm average rainfall

Languages

Filipino (Tagalog), English and Spanish; many local dialects

Weights and measures

Metric system; also some local units

Currency

Peso (P); P1 = 100 centavos. Average exchange rate in 2011: P43.3:US$1

Time

8 hours ahead of GMT

Fiscal year

January-December

Public holidays

January 1st (New Year's Day); January 23rd-24th (Chinese New Year); February 25th (EDSA Revolution Day); April 5th (Maundy Thursday); April 6th (Good Friday); April 9th (Valour Day); May 1st (Labour Day); June 12th (Independence Day); August 21st (Ninoy Aquino Day); August 27th (National Heroes' Day); November 1st (All Saints' Day); November 30th (Bonifacio Day); December 25th (Christmas Day); December 30th (Rizal Day); December 31st (New Year's Eve)

March 05, 2012