The Philippines in the 1950s and Economic Overview

Economic Standing in the 1950s

• The Philippines had the second highest GDP per capita in Asia, after Japan.
• Experienced a modern manufacturing sector.
• Subsequently surpassed by South Korea, Singapore, and Taiwan, which became the first Asian Tiger economies.

Economic Decline

• Fall from the Asian economic tiger race.
• Economic growth averaged over 4.5% from 2000 to 2009, accelerating to 6.5% until 2019.
• In 2020, recorded the worst economic performance among major Southeast Asian economies.

Historical Causes of Economic Challenges

1. Political Instability

• High levels of political crises, including:
  • Poorly executed reforms
  • Presidential assassination
  • Social unrest
• Resulted in decreased foreign direct investment.

2. Protectionism

• History of import substitution since World War II.
• Balance of payments crisis due to:
  • Excess imports over exports.
  • Reduction in U.S. post-war aid.
  • Collapse of coconut prices, key export.
• Import substitution led to poor economic results.
• Attempts to open sectors in the 1960s and 70s led to adverse effects, impacting domestic industries.

3. Increased Borrowing

• Borrowing to raise growth led to capital flight and debt default in the early 80s.
• Managed to reverse debt situation, but missed early Asian Tiger status.

Unique Economic Development Path

• Transition from agriculture to services occurred rapidly, with services becoming the largest sector by the 1980s.
• Industrial sector struggled to provide enough jobs due to:
  • Historical protectionism.
  • Inability to cope with rural-urban migration.

Geographic Challenges

• Composed of over 7,000 islands, complicating transportation and utility provision.
• High energy prices deter manufacturing due to thin margins.
• Urban density in Manila contributes to low-skilled service provision.

Outsourcing and Remittances

Business Process Outsourcing (BPO)

• Major growth area, worth over $25 billion annually.
• Large employment sector with over a million people.
• Cultural affinity with the U.S. aids service delivery.
• Rapid growth from less than 10 call centers in 2003 to the world's largest by early 2010s.

Remittances

• Approximately 10% of the population work abroad, accounting for 9% of GDP.
• Education system prepares students for overseas employment in various fields.

Tourism Potential

• Accounts for ~12% of GDP.
• Underperformance in comparison to other regional economies due to:
  • Poor transport infrastructure.
  • Ideal location for attracting tourists from Asia's growing middle class.

Key Economic Challenges

• Ease of doing business ranking 95th globally.
• Issues with bureaucracy and regulations, despite some improvements.
• Foreign investors face constitutional restrictions and high corporate tax rates.
• Significant income inequality with high Gini coefficient of nearly 43.

Current Economic Situation

• Suffered the largest estimated fall in economic activity in 2020.
• Longest lockdown affected service-based economy.
• Weak consumer infrastructure with limited online retail transactions.

Conclusion

• The Philippines faces challenges but has made progress since reopening its economy.
• Focus on services, particularly outsourcing, as a core driver.
• Demographic advantages may provide opportunities for recovery and growth.
• Future outlook remains uncertain; the nation’s economic trajectory will be closely monitored.