2019 Index of Economic Freedom

Philippines

overall score63.8
world rank70
Rule of Law

Property Rights48.7

Government Integrity30.9

Judicial Effectiveness36.4

Government Size

Government Spending88.7

Tax Burden76.9

Fiscal Health97.1

Regulatory Efficiency

Business Freedom61.3

Labor Freedom57.9

Monetary Freedom69.6

Open Markets

Trade Freedom78.2

Investment Freedom60.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 105.3 million
  • GDP (PPP):
    • $875.6 billion
    • 6.7% growth
    • 6.6% 5-year compound annual growth
    • $8,315 per capita
  • Unemployment:
    • 2.4%
  • Inflation (CPI):
    • 3.2%
  • FDI Inflow:
    • $9.5 billion

The Philippines’ economic freedom score is 63.8, making its economy the 70th freest in the 2019 Index. Its overall score has decreased by 1.2 points, with drops in scores for monetary freedom, government integrity, and the tax burden outweighing a higher score for property rights. The Philippines is ranked 15th among 43 countries in the Asia–Pacific region, and its overall score is above the regional and world averages.

Continued strong economic growth, driven in part by ambitious state-funded infrastructure projects, has allowed the government to prioritize domestic law-and-order issues over economic policy concerns. Investors remain concerned about President Duterte’s heavy-handed rule, although Duterte has consolidated support from Congress. The absence of entrepreneurial dynamism thwarts development. Despite the adoption of some fiscal reforms, deeper institutional reforms are needed in interrelated areas: business freedom, investment freedom, and the rule of law. The judicial system remains weak and vulnerable to political influence.

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Background

A former colony of Spain and then of the United States, the Philippines became a self-governing commonwealth in 1935. Its diverse population speaks more than 80 languages and dialects and is spread over 7,000 islands in the Western Pacific. Longtime Davao City Mayor Rodrigo Duterte succeeded President Benigno Aquino III in 2016. Duterte has consolidated power by marginalizing his opponents, and his brutal crackdown on illegal drugs reflects authoritarian tendencies. To improve economic relations, Duterte has downplayed tensions with China. Agriculture is still a significant part of the economy, but industrial production in such areas as electronics, apparel, and shipbuilding has been growing rapidly. Remittances from overseas workers are equivalent to nearly 10 percent of GDP.

Rule of LawView Methodology

Property Rights 48.7 Create a Graph using this measurement

Government Integrity 30.9 Create a Graph using this measurement

Judicial Effectiveness 36.4 Create a Graph using this measurement

Laws protecting property rights are weakly implemented. Judicial independence is strong, but the rule of law is generally ineffective. Courts are inefficient, biased, corrupt, slow, and hampered by low pay, intimidation, and complex procedures. Corruption and cronyism are pervasive. A few dozen leading families hold a disproportionate share of land, corporate wealth, and political power. Anticorruption measures are not enforced.

Government SizeView Methodology

The top individual income tax rate has increased to 35 percent, and the top corporate tax rate is 30 percent. Other taxes include value-added and environmental taxes. The overall tax burden equals 13.7 percent of total domestic income. Over the past three years, government spending has amounted to 19.4 percent of the country’s output (GDP), with budgets effectively in balance. Public debt is equivalent to 37.8 percent of GDP.

Regulatory EfficiencyView Methodology

A series of reforms has been pursued to enhance the entrepreneurial environment. Gradual improvement of the regulatory environment includes reduction of the time and cost involved in fulfilling licensing requirements. The labor market remains structurally rigid, but existing regulations are not particularly burdensome. The government budgeted a record $3.03 billion in subsidies to state-owned enterprises in 2018 but decided to scrap agricultural subsidies.

Open MarketsView Methodology

The combined value of exports and imports is equal to 70.7 percent of GDP. The average applied tariff rate is 3.4 percent. As of June 30, 2018, according to the WTO, the Philippines had 286 nontariff measures in force. Many agricultural imports face additional barriers. Investment in several economic sectors is restricted. About 39 percent of adult Filipinos have access to an account with a formal banking institution.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Hong Kong90.20.0
2Singapore89.40.6
3New Zealand84.40.2
4Australia80.90.0
5Taiwan77.30.7
6Malaysia 74-0.5
7South Korea72.3-1.5
8Japan72.1-0.2
9Macau710.1
10Thailand 68.31.2
11Indonesia65.81.6
12Kazakhstan65.4-3.7
13Azerbaijan65.41.1
14Brunei Darussalam65.10.9
15Philippines63.8-1.2
16Bhutan62.91.1
17Kyrgyz Republic 62.3-0.5
18Fiji62.20.2
19Samoa62.20.7
20China58.40.6
21Papua New Guinea58.42.7
22Cambodia57.8-0.9
23Tonga57.7-5.4
24Laos57.43.8
25Sri Lanka56.4-1.4
26Vanuatu56.4-13.1
27Bangladesh 55.60.5
28Tajikistan55.6-2.7
29Mongolia55.4-0.3
30Vietnam55.32.2
31India55.20.7
32Pakistan 550.6
33Solomon Islands54.6-2.9
34Nepal53.8-0.3
35Burma53.6-0.3
36Uzbekistan53.31.8
37Maldives53.22.1
38Micronesia51.9-0.4
39Afghanistan51.50.2
40Turkmenistan48.41.3
41Kiribati47.3-3.5
42Timor-Leste44.2-3.9
43North Korea5.90.1
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