Major Economic Indicators

Latest Development

• According to IMF estimates, the Philippines is expected to record no growth in real GDP in the year 2009, compared to a growth rate of 4.6% in 2008.
• The Philippines’ export growth declined year-on-year (YoY) to -2.8% in 2008 from 6% in 2007, whereas import growth slowed down to 2.2% in 2008, down from 7.2% in 2007.
• During the first four months of 2009, Hong Kong’s exports to the Philippines declined by 32.4% YoY to US$595 million, whereas imports from the Philippines decreased by 42.6% YoY.
• In reducing the impact due to the financial tsunami, the Philippine government launched a stimulus package called the “Economic Resiliency Plan (ERP)” in the first quarter of 2009. The stimulus package cost the government Php330 billion (US$7.0 billion), spending mostly on creation of jobs in areas such as teachers, policemen, soldiers and doctors, providing cheaper fertilisers to local farmers, increasing lending to SMEs, and encouraging the upgrade of technology.

Current Economic Situation

Domestic Economy

According to the IMF, the Philippines grew by 4.6% in real GDP terms in 2008. The country recorded a 0.4% YoY increase in the first quarter of 2009. Major economic drivers were construction, agriculture, transportation, communication and storage, mining and quarrying, and private services industries. Private construction and investment from the Philippine government caused the construction sector to record a positive growth rate. The services sector registered no quarter-on-quarter growth in the first quarter 2009, which was partly attributed to the substantial weakening of the manufacturing sector.

In reducing the negative impact of the financial tsunami, the Philippine government launched a stimulus package called the “Economic Resiliency Plan (ERP)” in the first quarter of 2009, in the hope of helping firms and encouraging domestic spending. The stimulus package cost the government Php330 billion (US$7.0 billion), spending mostly on creation of jobs in areas such as teachers, policemen, soldiers and doctors, providing cheaper fertilisers to local farmers, increasing lending to SMEs, and encouraging the upgrade of technology. Moreover, under the ERP, personal income tax exemption will be increased, with a total increase of about Php20 billion (US$424.8 million) to the overall wealth of all individuals.

External Trade

The Philippines’ exports declined to US$49.1 billion in 2008 from US$50.5 billion in 2007, a YoY decline of 2.8%. Among the top ten categories of exports, electronic products topped the list, which contributed to 58.1% of the total exports, but electronic exports declined by 8.3% compared to 2007. Other major exports included articles of apparel and clothing accessories, cathodes and sections of cathodes of refined copper, petroleum products and woodcrafts and furniture. Major export markets were the US, Japan, the Chinese mainland, Hong Kong and Singapore.

Export Items

Export Destinations

The Philippines’ imports rose by 2.2% in 2008, but fell by 34.3% YoY in the first quarter of 2009. Top five imports 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 35.3% of the import total. Major import markets included the US, Japan, Singapore, Saudi Arabia and the Chinese mainland.

Import Items

Import Source

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 had been committed to lowering tariffs for ASEAN imports to a maximum of 5% on all products, a commitment that was met by the end of 2008.

Besides, 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

In 2008, the Philippines’ simple average tariff stood at 7.0 %, compared to 7.8% in 2007. In 2003, tariff rates applied to foreign raw material imports and finished goods were 3% and 10% respectively, whereas for the remaining imports, tariff rate was 5%.

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.

Foreign Direct Investment

According to the central bank of the Philippines, net foreign direct investment (FDI) declined to US$1,350 million in 2008 from US$1,949 million in 2007 due the financial tsunami. In the first quarter of 2009, the country recorded FDI of only US$47 million, plunging from US$228 million during the same period of the previous year. The US was the largest source of FDI in 2009 Q1, contributing US$31.7 million to Philippine’s FDI, and it was followed by Japan, South Korea and Singapore, with respective contributions of US$13.3 million, US$2.4 million and US$2.3 million.

Hong Kong’s Trade with the Philippines

In 2008, the Philippines was the 19th largest export market for Hong Kong. Total exports from Hong Kong to the Philippines went down to US$2.7 billion in 2008 from US$2.8 billion in 2007, representing a YoY drop of 3.6%. Major export items included parts and accessories of office machines/computers (17.8% share of total exports), telecommunications equipment and parts (17.5% share), semi-conductors, electronic valves and tubes (9.9% share), and electronic apparatus (5.4% share).

Total imports to Hong Kong from the Philippines increased by 1.3% YoY in 2008. Major import items were semi-conductors, electronic valves and tubes (58.3% share of the total imports), telecommunications equipment and parts (9.5% share), and computers (6.2% share).

During the first four months of 2009, total exports from Hong Kong decreased by 32.4% YoY to US$595 million. Telecommunications equipment and parts (24.6% share of the total exports) topped the list and generated the greatest revenue among all other export items. Other major exports were, parts and accessories of office machines/computers (12.2% share), semi-conductors, electronic valves and tubes (9.7% share), and electronic apparatus (4.7% share).

During the same period, Hong Kong’s imports from the Philippines declined by 42.6% YoY to US$1.2 billion. Major import items were semi-conductors, electronic valves and tubes (57.4% share of total imports), telecommunications equipment and parts (13.2% share), parts and accessories of office machines/ computers (5.1% share) and computers (4.7% share).

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, including accounting firms, airlines, banks, fast-food shops, forwarding companies, legal firms, and supermarkets, have set up their local offices in Hong Kong.

According to Hong Kong Tourism Board, the number of visitors coming from the Philippines grew by 2.8% YoY to reach 568,540 in 2008. Inbound tourists from the Philippines showed an increase of 0.8% YoY during the first quarter of 2009, while the number of visitors coming from other countries decreased in the same period due to economic recession.