The Economy

The Economy

THE PHILIPPINE ECONOMY EXPERIENCED considerable difficulty in the 1980s. Real gross national product (GNP) grew at an annual average of only 1.8 percent, less than the 2.5 percent rate of population increase. The US$668 GNP per capita income in 1990 was below the 1978 level, and approximately 50 percent of the population lived below the poverty line. The 1988 unemployment rate of 8.3 percent (12.3 percent in urban areas) peaked at 11.4 percent in early 1989, and the underemployment rate, particularly acute for poor, less-educated, and elderly people, was approximately twice that of unemployment. In 1988, about 470,000 Filipinos left the country to work abroad in contract jobs or as merchant seamen.

The economy had grown at a relatively high average annual rate of 6.4 percent during the 1970s, financed in large part by foreign-currency borrowing. External indebtedness grew from $2.3 billion in 1970 to $24.4 billion in 1983, much of which was owed to transnational commercial banks.

In the early 1980s, the economy began to run into difficulty because of the declining world market for Philippine exports, trouble in borrowing on the international capital market, and a domestic financial scandal. The problem was compounded by the excesses of President Ferdinand E. Marcos's regime and the bailing out by government-owned financial institutions of firms owned by those close to the president that encountered financial difficulties. In 1983 the country descended into a political and economic crisis in the aftermath of the assassination of Marcos's chief rival, former Senator Benigno Aquino, and circumstances had not improved when Marcos fled the country in February 1986.

Economic growth revived in 1986 under the new president, Corazon C. Aquino, reaching 6.7 percent in 1988. But in 1988 the economy once again began to encounter difficulties. The trade deficit and the government budget deficit were of particular concern. In 1990 the economy continued to experience difficulties, a situation exacerbated by several natural disasters, and growth declined to 3 percent.

The structure of the economy evolved slowly over time. The agricultural sector in 1990 accounted for 23 percent of GNP and slightly more than 45 percent of the work force. About 33 percent of output came from industry, which employed about 15 percent of the work force. The manufacturing subsector had developed rapidly during the 1950s, but then it leveled off and did not increase its share of either output or employment. In 1990, 24 percent of GNP and 12 percent of employment were derived from manufacturing. The services sector, a residual employer, increased its share of the work force from about 25 percent in 1960 to 40 percent in 1990. In 1990 services accounted for 44 percent of GNP.

The Philippines is rich in natural resources. Land planted in rice and corn accounted for about 50 percent of the 4.5 million hectares of field crops in 1990. Another 25 percent of the cultivated area was taken up by coconuts, a major export crop. Sugarcane, pineapples, and Cavendish bananas also were important earners of foreign exchange. Forest reserves have been extensively exploited to the point of serious depletion. Archipelagic Philippines is surrounded by a vast aquatic resource base. In 1990 fish and other seafood from the surrounding seas provided more than half the protein consumed by the average Filipino household. The Philippines also had vast mineral deposits. In 1988 the country was the world's tenth largest producer of copper, the sixth largest producer of chromium, and the ninth largest producer of gold. The country's only nickel mining company was expected to resume operation in 1991 and again produce large quantities of that metal. Petroleum exploration continued but discoveries were minimal, and the country was required to import most of its oil.

Prior to 1970, Philippine exports consisted mainly of agricultural or mineral products in raw or minimally processed form. In the 1970s, the country began to export manufactured commodities, especially garments and electronic components, and the prices of some traditional exports declined. By 1988 nontraditional exports comprised 75 percent of the total value of goods shipped abroad.


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