2014 Index of Economic Freedom

The Philippines

overall score60.1
world rank89
Rule of Law

Property Rights30.0

Freedom From Corruption26.1

Limited Government

Government Spending92.3

Fiscal Freedom79.2

Regulatory Efficiency

Business Freedom59.9

Labor Freedom49.7

Monetary Freedom78.0

Open Markets

Trade Freedom75.5

Investment Freedom60.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 95.8 million
  • GDP (PPP):
    • $424.4 billion
    • 6.6% growth
    • 4.7% 5-year compound annual growth
    • $4,430 per capita
  • Unemployment:
    • 7.0%
  • Inflation (CPI):
    • 3.1%
  • FDI Inflow:
    • $2.8 billion
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The Philippines’ economic freedom score is 60.1, making its economy the 89th freest in the 2014 Index. Its score is 1.9 points higher than last year, reflecting notable improvements in investment freedom, business freedom, monetary freedom, and the control of government spending. The Philippines ranks 16th out of 42 countries in the Asia–Pacific region, and its overall score is slightly below the world average.

Over the 20-year history of the Index, the Philippines’ economic freedom score has advanced by 5.1 points. Improvements in seven of the 10 economic freedoms, including significant gains in trade freedom, investment freedom, and freedom from corruption, have been partially offset by a deterioration in property rights. With its third consecutive year of overall score improvement, the Philippines has risen back to “moderately free” in the 2014 Index.

Demonstrating a high degree of resilience, the Philippine economy has recorded average annual growth of around 5 percent over the past five years. The government has pursued a series of legislative reforms to enhance the investment environment and incentivize broader-based private-sector job growth. Despite progress, lingering institutional challenges will not be overcome without a deeper commitment to reform. Although the perceived level of corruption has declined, more effective anti-corruption measures need to be firmly institutionalized.

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Background

The Philippines has a diverse population that speaks more than 80 languages and dialects and 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. While agriculture is still significant, industrial production in areas like electronics, apparel, and shipbuilding has been growing rapidly. Remittances from overseas workers 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 26.1 Create a Graph using this measurement

Corruption and cronyism are rife in business and government, with a few dozen leading families holding an outsized share of wealth and political power. Judicial independence has traditionally been strong, but the rule of law is generally weak. A culture of impunity, stemming in part from a case backlog in the judicial system, hampers the fight against corruption. Delays and uncertainty negatively affect property rights.

Limited GovernmentView Methodology

The top individual 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 12.3 percent of gross domestic income. Government expenditures equate to 12.3 percent of GDP. Total public debt is equal to about 42 percent of the total size of the domestic economy.

Regulatory EfficiencyView Methodology

Launching a business takes 15 procedures and 35 days. The time needed to deal with licensing requirements has been notably reduced, and the cost of completing them has been cut to less than the level of average annual income. The labor market remains structurally rigid, although existing regulations are not particularly burdensome. The government subsidizes state-owned or controlled corporations in the power, food, health care, and agriculture sectors.

Open MarketsView Methodology

The average tariff rate is 4.8 percent. Tariffs provide over 20 percent of government revenue. Tariff-rate quotas restrict some agricultural imports. The legal and regulatory systems may be difficult for foreign investors to navigate. The relatively small financial sector, dominated by banking, has been expanding strongly with greater market competition in recent years. The percentage of non-performing loans has gradually declined.

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 Kong90.10.8
2Singapore89.41.4
3Australia82-0.6
4New Zealand81.2-0.2
5Taiwan73.91.2
6Japan72.40.6
7Macau71.3-0.4
8South Korea71.20.9
9Malaysia 69.63.5
10Kazakhstan63.70.7
11Thailand 63.3-0.8
12Azerbaijan61.31.6
13Samoa61.14.0
14Kyrgyz Republic 61.11.5
15The Philippines60.11.9
16Sri Lanka60-0.7
17Vanuatu59.52.9
18Mongolia58.9-2.8
19Fiji58.71.5
20Indonesia58.51.6
21Tonga58.22.2
22Cambodia57.4-1.1
23Bhutan56.71.7
24India55.70.5
25Pakistan 55.20.1
26Bangladesh 54.11.5
27Papua New Guinea53.90.3
28China52.50.6
29Tajikistan52-1.4
30Laos51.21.1
31Maldives512.0
32Vietnam50.8-0.2
33Nepal50.1-0.3
34Micronesia49.8-0.3
35Burma46.57.3
36Uzbekistan46.50.5
37Kiribati46.30.4
38Solomon Islands46.21.2
39Timor-Leste43.2-0.5
40Turkmenistan42.2-0.4
41North Korea1-0.5
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