The Philippines of recent years has witnessed a spectacular turnaround. Over the past decade, the country has averaged 5% GDP growth each year. Sound economic fundamentals - such as declining debt and low inflation - and a workforce that is young, diverse, educated and English-speaking has made the Philippines a rising star poised to seize the opportunities of the global economy.
The new administration, elected in May, has professed its commitment to the further liberalization of trade through free trade agreements. Its eagerness to join the mega-regional TPP is palpable. "The new government is one that will keep the policy of maximizing foreign trade agreements participation,” Trade Secretary Ramon Lopez said in August.
When the ASEAN Economic Community was established last year, the Philippines also joined nine other nations to form an enormous market of $2.6 trillion and 622 million people. Together, they are the third largest economy in Asia and the seventh largest in the world.
The United States is the Philippines’ third largest trading partner, and gives the Philippines preferential duty-free access to U.S. markets under the Generalized System of Preferences. $16.5 billion worth of goods was exchanged between the two countries in 2015. Looking forward, we can expect the United States and the Philippines to continue its tradition of robust trade.
Filipino exports are driven by the manufacturing sector. A labor force that is hardworking and highly educated gives the country a competitive edge in manufacturing. If you take a look at the top 10 exports from the Philippines in 2015 - which accounted for 83.5% of exports - eight are manufactured goods.
From wood products to transport equipment, manufactured goods of all shapes and sizes come out of the Philippines. By far, the hottest manufacturing export is electronics - and that subsector is dominated by semiconductors. Electronics was easily the biggest export in all five of the largest destination markets for Filipino goods: Japan, U.S., China, Hong Kong, and Singapore. We should also mention that the Philippines is one of the top seafood exporting countries in the world, particularly tuna. Even so, the Philippines is far from producing seafood at its highest capacity given its long coastline and inland bodies of water, which means that there is plenty of untapped potential for this export in the future.
The growth of imports into the Philippines since the beginning of 2016 is fueled by increases in consumer demand, capital goods, and new construction. In spite of the downturn in the global economy, consumer confidence is high in the Philippines. Consumer goods, which comprise 17.9% of imports, increased 47.2% year-over-year in May. Consumer spending in the Philippines has buoyed the economy, rising from 63% of GDP a decade ago to three-quarters today. This phenomenon is underpinned in part by remittances from 2.3 million strong Filipinos who work abroad and further propelled by the explosion of foreign tourists – many from China - spending money while traveling in the Philippines. The country’s young population will be a driving force for domestic demand in future years as well.
Favorable demographics will continue to help the Philippines become a destination for manufacturing. As exports grow and the spending power of Filipinos rise, imports will continue on an upward trajectory – both because of consumer demand and the need to bring in raw materials for processing. The Philippines was once called “the sick man of Asia” because of poor economic policies that kept the country from taking off. Today, it’s well on its way to resuming its coveted position as a hotspot in global trade.
To meet the growing demand for international and domestic freight forwarding in the Philippines, AGWorld has opened a Manila office. We will focus on air and ocean freight (import and export), customs, and domestic trucking services. Our Manila outpost will also offer value added services that many local forwarders lack, including tracking capabilities that give our customers visibility into shipments at all times. AGWorld staff in the Philippines boast 50+ years of experience in the logistics industry. If you need help with shipments to, from, or within the Philippines, get in touch with us!