2013 Index of Economic Freedom

The Philippines

overall score58.2
world rank97
Rule of Law

Property Rights30.0

Freedom From Corruption26.0

Limited Government

Government Spending90.2

Fiscal Freedom79.3

Regulatory Efficiency

Business Freedom53.1

Labor Freedom51.0

Monetary Freedom76.6

Open Markets

Trade Freedom75.5

Investment Freedom50.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 95.9 million
  • GDP (PPP):
    • $390.4 billion
    • 3.7% growth
    • 4.6% 5-year compound annual growth
    • $4,073 per capita
  • Unemployment:
    • 7.0%
  • Inflation (CPI):
    • 4.8%
  • FDI Inflow:
    • $1.3 billion
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The Philippines’ economic freedom score is 58.2, making its economy the 97th freest in the 2013 Index. Its score is 1.1 points higher than last year, with notable improvements in investment freedom and freedom from corruption outweighing a decline in business freedom. The Philippines ranks 17th out of 41 countries in the Asia–Pacific region, and its overall score is slightly below the world average.

Weathering the ongoing global economic slowdown with a high degree of resilience, the Philippine economy has been on a steady path of economic expansion, growing at an average annual rate above 4.5 percent over the past five years. The government has pursued a series of legislative reforms to enhance the entrepreneurial environment and develop a stronger private sector to generate broader-based job growth.

Nevertheless, institutional challenges require deeper commitment to reform. Although the perceived level of corruption has declined in recent years, more effective anti-corruption measures need to be institutionalized. The inefficient judiciary remains susceptible to political interference and does not provide strong and transparent enforcement of the law, undermining prospects for long-term economic development.

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Background

The Philippines’ diverse population, which speaks more than 80 languages and dialects, is spread over 7,000 islands in the Western Pacific. The country returned to democracy in 1986 after two decades of autocratic rule. President Benigno Aquino III took office in 2010 with a mandate to address pervasive corruption and has launched investigations into abuses of power by prior administrations. The previous government’s failure to do anything substantial to liberalize the economy set back efforts to attract much-needed foreign investment in basic industries and infrastructure, and the Philippines continued its long slide from one of Asia’s richest economies to one of its poorest. Emigrants’ remittances are equivalent to more than 10 percent of GDP.

Rule of LawView Methodology

Property Rights 30.0 Create a Graph using this measurement

Freedom From Corruption 26.0 Create a Graph using this measurement

The rule of law remains uneven, and the legal framework is deficient in independence and efficiency. The cumbersome court system and loose regard for contracts continue to cause concern. The judiciary is susceptible to political interference. The Chief Justice was removed from office in 2012 after being convicted of corruption. Corruption is a pervasive and long-standing problem in the Philippines.

Limited GovernmentView Methodology

The top income tax rate is 32 percent, and the top corporate tax rate is 30 percent. Other taxes include a value-added tax (VAT) and an environmental tax. The overall tax burden equals 12.1 percent of total domestic income. Government spending is equivalent to 18.1 percent of GDP. Public debt has hovered around 40 percent of GDP. Efforts to narrow the budget gap have brought credit upgrades from some agencies.

Regulatory EfficiencyView Methodology

The business start-up process remains time-consuming. Launching a business takes 16 procedures and 36 days. The time involved in completing licensing requirements has been notably reduced, and the cost of completing them is slightly more than the level of average annual income. The labor market remains structurally rigid, although existing regulations are not particularly burdensome. Inflationary pressures have been building.

Open MarketsView Methodology

The trade-weighted average tariff rate is 4.8 percent, and layers of non-tariff barriers further interfere with trade. Despite a strong desire to attract longer-term foreign investment, systemic inefficiency exacerbated by heavy bureaucracy discourages dynamic growth in investment. The financial sector, which is gradually modernizing, remains relatively stable and sound.

Country's Score Over Time

Bar Graph of The Philippines Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing The Philippines to other economic country groups

Regional Ranking

rank country overall change
1Hong Kong89.3-0.6
2Singapore880.5
3Australia82.6-0.5
4New Zealand81.4-0.7
5Taiwan72.70.8
6Japan71.80.2
7Macau71.7-0.1
8South Korea70.30.4
9Malaysia 66.1-0.3
10Thailand 64.1-0.8
11Kazakhstan63-0.6
12Mongolia61.70.2
13Sri Lanka60.72.4
14Azerbaijan59.70.8
15Kyrgyz Republic 59.6-0.6
16Cambodia58.50.9
17The Philippines58.21.1
18Fiji57.2-0.1
19Samoa57.1-3.4
20Indonesia56.90.5
21Vanuatu56.60.0
22Tonga56-1.0
23India55.20.6
24Pakistan 55.10.4
25Bhutan55-1.6
26Papua New Guinea53.6-0.2
27Tajikistan53.40.0
28Bangladesh 52.6-0.6
29China51.90.7
30Vietnam51-0.3
31Nepal50.40.2
32Micronesia50.1-0.6
33Laos50.10.1
34Maldives49-0.2
35Uzbekistan460.2
36Kiribati45.9-1.0
37Solomon Islands45-1.2
38Timor-Leste43.70.4
39Turkmenistan42.6-1.2
40Burma39.20.5
41North Korea1.50.5
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