Overseas Market Profiles

Major Economic Indicators

Source: International Monetary Fund (IMF), Philippine National Statistics Office
^ estimated by the International Monetary Fund
*January-March 2011

Latest Development

• The Philippines’ economic growth slowed down to 4.9% year-on-year (YoY) in the first quarter of 2011 after a strong recovery in 2010. The IMF expects the Philippine economy to grow by 5% in 2011.
• Robust private consumption continues to drive the Philippine economy, while putting pressure on inflation, which rose to 4.5% in May 2011.
• Philippine imports increased by 22.2% in the first quarter of 2011, while exports only increased by 7.8% over the same period. Faster import growth was due mainly to higher cost of oil imports.
• Hong Kong’s exports to the Philippines increased by 17.6% to US$831 million in the first four months of 2011, while imports from the country increased by 13.9% to US$1,776 million.

Current Economic Situation

In the first quarter of 2011, the Philippines’ GDP growth slowed down to 4.9% YoY after growing 7.3% in 2010 on the back of the global economic revival. In the first quarter of 2010, the Philippines recorded a GDP growth of 8.4%. After the exceptionally strong growth in 2010, the Philippines is seen as returning to  a normal growth pattern.

Robust private consumption continues to be the key growth driver of the economy, while stoking up inflationary pressures. The inflation rate has increased from 3.1% in December 2010 to 4.5% in May 2011.

Philippine exports jumped 33.7% to US$51.4 billion in 2010 from US$38.4 billion in 2009, back to the pre-crisis level. However, export growth slowed down to 7.8% in the first quarter of 2011.

Among the top ten categories of exports in 2010, electronic products topped the list, contributing 60.5% of total exports. The share of electronic exports increased 2.4% from 58.1% in 2008. Other major exports included apparel articles and accessories, coconut oil, woodcrafts and furniture.

Export Items (2010)

Source: National Statistics Office, Republic of the Philippines

Surpassing the US, Japan became the top export destination of the Philippines in 2010, accounting 15.2% of the country’s total exports. The US and Singapore accounted for 14.7% and 14.3% respectively. The Chinese mainland is gaining important as a trade partner of the Philippines. Exports to the Chinese mainland accounted for 11.1% of the Philippine exports in 2010, increasing from 7.6% in 2009.

Export Destinations (2010)

Source: National Statistics Office, Republic of the Philippines

Philippine imports increased by 22.2% in the first quarter of 2011, following a growth of 26.9% to US$54.7 billion in 2010. Import growth remained strong in the first quarter of 2011, as exports increased only by 7.8% over the same period. Faster import growth was due mainly to higher cost of oil imports.

Top five imports in 2010 were electronic products, mineral fuels, lubricants and related materials, transport equipment, cereals and cereal preparations, and industrial machinery and equipment. Electronic products topped the list of imports, and comprised 33.9% of the import total.

Import Items (2010)

Source: National Statistics Office, Republic of the Philippines

In 2010, Japan was the top import source of the Philippines, accounting for 12.3% of the country’s total imports. The US, Singapore and the Chinese mainland came second, third and fourth, accounting for 11.2%, 9.9% and 8.7% respectively.

Import Source (2010)

Source: National Statistics Office, Republic of the Philippines

Trade Policy

Tariff and import taxes

As a member of the Association of South-East Asian Nations (ASEAN) and the ASEAN Free-Trade Area (AFTA), the Philippines was committed to tariff reduction for ASEAN imports to a 5% cap on all products. Almost all tariff lines for ASEAN imports into the Philippines are reduced to zero under the Common Effective Preferential Tariff (CEPT) scheme.

Under the two-tier tariff policy in the Philippines, however, some sensitive agricultural products, such as grains, livestock, pork and poultry meat, sugar, potatoes, onions, garlic and coffee, are subject to a tariff-rate quota (TRQ). In other words, import items which exceed the minimum access volume (MAV) will be taxed at a higher out-of-quota rate.

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.

Import Restrictions

The Philippines’ most favoured nations (MFN) applied tariff rates stood at 6.3% on average in 2009. Over half of the goods had MFN tariff rates of 0.3% by the end of 2008.

Imports including all packaged food, drugs and cosmetic products must be registered with the Bureau of Food and Drugs. All unregistered imported food and pharmaceuticals offered for sale may risk being confiscated by the bureau.

Private grain dealers are required to obtain an Import Clearance issued by the National Food Authority (NFA) before they are allowed to import premium or fancy rice to the country.

Hong Kong’s Trade with the Philippines

The Philippines is the 22nd largest export market for Hong Kong. In the first four months of 2011, Hong Kong’s total exports to the Philippines increased by 17.6% to US$831 million, faster than the 9.3% growth in exports to the country in 2010.

In 2010, major export items included telecommunications equipment and parts (16.8% of the share), semi-conductors, electronic valves and tubes (15.6% share), parts and accessories of office machines/computers (14.9% share of total exports), and electronic apparatus (7.4% share).

Over the same period, total imports into Hong Kong from the Philippines increased by 21.8%. Major import items were semi-conductors, electronic valves and tubes (58.6% share of the total imports), telecommunications equipment and parts (6.6% share) and computers (5.5% share).

On the other hand, Hong Kong’s total imports from the Philippines increased by 13.9% to US$1,776 million.

Source: Hong Kong Census and Statistics Department

The Philippines’ Involvement in Hong Kong Economy

There are 138,372 Filipinos in Hong Kong, and most of them work as domestic helpers in the city. 25 Philippine companies have set up their local offices in Hong Kong.

According to the Hong Kong Tourism Board, the number of visitors coming from the Philippines grew by 7% to reach 603,030 in  2010. Inbound tourists from the Philippines showed an increase of 2.1% YoY during the first four months of 2011.