ECONOMIC DIPLOMACY NEWSLETTER (ITA VERSION)
PHILIPPINES: MACROECONOMIC FRAMEWORK.
Robust expected growth rates (6%), ongoing population growth (115 million), make the Philippines a leading emerging market in the Asia-Pacific region with remarkable potential in manufacturing, retail trade, infrastructure development, including those in the energy sector.
In 2023, the Philippines emerged as the fastest growing economy in Southeast Asia, with GDP growth of 5.6%. The outcome was largely influenced by the post-Covid business rebound, more public infrastructure spending, and service sector expansion.
Despite a context of a general slowdown in 2023 due to rising inflation and the global economic recession, the Philippines’ GDP growth was also higher than that of major Asian economies such as China (+5.2%), Vietnam (+5%) and Malaysia (+3.8%).
In 2024-2025, the Philippine economy, is expected to follow a decisively upward trend.
According to projections by the IMF (World Economic Outlook 2024) and the ADB, in the next two years the Philippines will be the fastest growing ASEAN economy (+6 percent) and the second in Asia after India.
Fiscal stimulus through planned spending, together with private consumption, are expected to support Philippine growth momentum. The expansion is predominantly driven by increased consumption, supported by a growing labor market, substantial remittance flows (weighing 10-12 percent of national GDP), lower personal income taxes, and significant public and private investment mainly focused in infrastructure.
Some downside risks weigh heavily, which include continued inflationary pressures, a possible decline in domestic demand, and a highly uncertain global economic and geopolitical environment.
TRADE.
In 2023, the trade between Italy and the Philippines recorded an increase in the trade surplus for Italy from €404 million in 2022 to €476 million in 2023. This increase is mainly due to a reduction in Philippine exports to Italy.
Italian exports to the Philippines in 2023 totaled €804 million, a change of -1.5% from the previous year. Imports from the Philippines to Italy amounted to €328 million, a change of -20.2% from the previous year.
The main products traded between the two countries include computers, electronic and optical equipment, machinery, food, beverages and tobacco.
A slowdown in trade volumes was observed in 2023, a phenomenon also present in other Southeast Asian countries. According to the Philippine Statistics Authority, the Philippines’ total foreign trade contracted by 8% to about €199.5 billion. Philippine imports decreased by 8.2% (total of €122 billion), while exports dropped by 7.6% (total of €67 billion).
The latest available data for the January-June 2024 period show results increasing but substantially in line with those for the same period in 2023, with Italian exports at €461 million and imports from the Philippines at €243 million.
OPPORTUNITIES FOR ITALY.
The Philippines constitutes a partner for Italy whose potential has not yet been fully developed. In addition to market access, opportunities for the national economic system can also be seen for possible manufacturing establishments, particularly in the manufacturing sector.
Soaring wages and operating costs in China can make the Philippines an alternative manufacturing base in Southeast Asia to relocate or diversify production.
Relative advantages and opportunities in the Philippines lie in the skilled, English-speaking workforce and managerial effectiveness.
Impressive development projects supported by the Asian Development Bank offer opportunities for Italian companies in the construction and transportation sectors.