Pre Colonial Era (900s–1565)
The economic history of the Philippine Islands had been traced back to the pre-colonial times. The country which was then composed of different kingdoms and thalassocracies oversaw the large number of merchants coming to the islands for trade. Indian, Arab, Chinese and Japanese merchants were welcomed by these kingdoms, which were mostly located by riverbanks, coastal ports and central plains. The merchants traded for goods such as gold, rice, pots and other products. The barter system was implemented at that time and the pre-colonial people enjoyed a life filled with imported goods which reflected their fashion and lifestyle.
From the 12th century, a huge industry centred around the manufacture and trade of burnay clay pots, used for the storage of tea and other perishables, was set up in the northern Philippines with Japanese and Okinawan traders. These pots were known as 'Ruson-tsukuri' (Luzon-made) in Japanese, and were considered among the best storage vessels used for the purpose of keeping tea leaves and rice wine fresh. Hence, Ruson-Tsukuri pots became sought after in Northeast Asia. Each Philippine kiln had its own branding symbol, marked on the bottom of the Ruson-tsukuri by a single baybayin letter.
The people also were great agriculturists and the islands especifically Luzon has great abundance of rice, fowls, wine as well as great numbers of carabaos, deer, wild boar and goats. In addition, there were also great quantities of cotton and colored clothes, wax, honey and date palms produced by the natives. The Wangdom of Pangasinan often exported deer-skins to Japan and Okinawa. The Nation of Ma-i produced beeswax, cotton, true pearls, tortoise shell, medicinal betel nuts and yuta cloth in their trade with East Asia. By the early sixteenth century, the two largest polities of the Pasig River delta, Maynila and Tondo, established a shared monopoly on the trade of Chinese goods throughout the rest of the Philippine archipelago.
The kingdoms of ancient Philippines were active in international trade, and they used the ocean as natural highways. Ancient peoples were engaged in long-range trading with their Asian neighbors as far as west as Maldives and as far as north as Japan.
Spanish Era
New Spain (1565–1815)
The natives already had a great economy and were considered one of the economic centers in Asia when the Spanish colonized and unified the islands. Their economy grew even further when the Spanish government inaugurated the Manila Galleon trade system. Trading ships, settlers and military reinforcements made voyages once or twice per year across the Pacific Ocean from the port of Acapulco in Mexico to Manila in the Philippines. Both cities were part of the then Province of New Spain.
This trade made the city of Manila one of the major global cities in the world, improving the growth of the Philippine economy in the succeeding years. Trade also introduced foodstuffs such as maize, tomatoes, potatoes, chili peppers, chocolate and pineapples from Mexico and Peru. Tobacco, first domesticated in Latin-America, and then introduced to the Philippines, became an important cash crop for Filipinos. The Philippines also became the distribution center of silver mined in the Americas, which was in high demand in Asia, during the period. In exchange for this silver, Manila gathered Indonesian spices, Chinese silks and Indian gems to be exported to Mexico.
The Manila Galleon system operated until 1815, when Mexico got its independence. Nevertheless, it didn't affect the economy of the islands.
On 10 March 1785, King Charles III of Spain confirmed the establishment of the Royal Philippine Company with a 25-year charter. The Basque-based company was granted a monopoly on the importation of Chinese and Indian goods into the Philippines, as well as the shipping of the goods directly to Spain via the Cape of Good Hope.
Spanish East Indies (1815–98)
After Spain lost Mexico as a territory, New Spain was dissolved making the Philippines and other Pacific islands to form the Spanish East Indies. This resulted in the Philippines being governed directly by the King of Spain and the Captaincy General of the Philippines while the Pacific islands of Northern Mariana Islands, Guam, Micronesia and Palau was governed by the Real Audiencia of Manila and was part of the Philippine territorial governance.
It made the economy of the Philippines grow further as people saw the rise of opportunities. Agriculture remained the largest contributor to economy, being the largest producer of coffee in Asia as well as a large produce of tobacco.
In Europe, the Industrial Revolution spread from Great Britain during the period known as the Victorian Age. The industrialization of Europe created great demands for raw materials from the colonies, bringing with it investment and wealth, although this was very unevenly distributed. Governor-General Basco had opened the Philippines to this trade. Previously, the Philippines was seen as a trading post for international trade but in the nineteenth century it was developed both as a source of raw materials and as a market for manufactured goods. The economy of the Philippines rose rapidly and its local industries developed to satisfy the rising demands of an industrializing Europe. A small flow of European immigrants came with the opening of the Suez Canal, which cut the travel time between Europe and the Philippines by half. New ideas about government and society, which the friars and colonial authorities found dangerous, quickly found their way into the Philippines, notably through the Freemasons, who along with others, spread the ideals of the American, French and other revolutions, including Spanish liberalism.
In 1834 the Royal Company of the Philippines was abolished, and free trade was formally recognized. With its excellent harbor, Manila became an open port for Asian, European, and North American traders. European merchants alongside the Chinese immigrants opened stores selling goods from all parts of the world. The El Banco Español Filipino de Isabel II (now the Bank of the Philippine Islands) was the first bank opened in the Philippines in 1851.
In 1873 additional ports were opened to foreign commerce, and by the late nineteenth century three crops—tobacco, abaca, and sugar—dominated Philippine exports.
First Philippine Republic (1899–1901)
The economy of the Philippines during the insurgency of the First Philippine Republic remained the same throughout its early years but was halted due to the break out of the Philippine–American War. Nevertheless, during the era of the First Republic, the estimated GDP per capita for the Philippines in 1900 was of $1,033.00. That made it the second richest place in all of Asia, just a little behind Japan ($1,135.00), and far ahead of China ($652.00) or India ($625.00).
American Era (1901–35)
When the Americans defeated the first Philippine Republic and made the Philippines a showcase territory of the United States, the country saw a redevelopment under the American system. Economy as well was re-developed. The Philippines saw the growth of the economy once again after the war as the Americans built new public schools, transportation, reform system, boutiques, offices and civic buildings.
When the Great Depression happened in the United States, the Philippines on the other hand wasn't affected. Instead, the US relied on the Philippine economy throughout the depression era.
Commonwealth Era (1935–45)
When the United States granted the Philippines commonwealth status, the country enjoyed a rapid growth of prosperity. Tourism, industry, and agriculture were among the largest contributors to the economy. Products included abaca (a species of banana Janssen), coconuts and coconut oil, sugar, and timber. Numerous other crops and livestock were grown for local consumption by the Filipino people. Manila became one of the most visited cities in Asia alongside Hong Kong. Manila was considered to be the most beautiful city in Asia. This sentiment drew tourists from around the world, helping to boost the Philippine economy.
The performance of the economy was good despite challenges from various agrarian uprisings. Taxes collected from a robust coconut industry helped boost the economy by funding infrastructure and other development projects. The people enjoyed a first world economy until the time when the Philippines was dragged into World War II. That resulted to a recession in the economy.
World War II (1941–45)
Due to the Japanese invasion establishing the unofficial Second Philippine Republic, the economic growth receded and food shortages occurred. Prioritizing the shortages of food, Jose Laurel, the appointed President, organized an agency to distribute rice, even though most of the rice was confiscated by Japanese soldiers. Manila was one of the many places in the country that suffered from severe shortages, due mainly to a typhoon that struck the country in November 1943. The people were forced to cultivate private plots which produced root crops like kangkong. The Japanese, in order to raise rice production in the country, brought a quick-maturing horai rice, which was first used in Taiwan. Horai rice was expected to make the Philippines self-sufficient in rice by 1943, but rains during 1942 prevented this.
Also during World War II in the Philippines, the occupying Japanese government issued fiat currency in several denominations; this is known as the Japanese government-issued Philippine fiat peso.
The first issue in 1942 consisted of denominations of 1, 5, 10 and 50 centavos and 1, 5, and 10 Pesos. The next year brought "replacement notes" of the 1, 5 and 10 Pesos while 1944 ushered in a 100 Peso note and soon after an inflationary 500 Pesos note. In 1945, the Japanese issued a 1,000 Pesos note. This set of new money, which was printed even before the war, became known in the Philippines as Mickey Mouse money due to its very low value caused by severe inflation. Anti-Japanese newspapers portrayed stories of going to the market laden with suitcases or "bayong" (native bags made of woven coconut or buri leaf strips) overflowing with the Japanese-issued bills. In 1944, a box of matches cost more than 100 Mickey Mouse pesos. In 1945, a kilogram of camote cost around 1000 Mickey Mouse pesos. Inflation plagued the country with the devaluation of the Japanese money, evidenced by a 60% inflation experienced in January 1944.
Third Philippine Republic (1946–65)
After the re-establishment of the Commonwealth in 1945, the country was left with a devastated city, food crisis and financial crisis. A year later in 1946, the Philippines got its independence in America, creating the Third Philippine Republic.
In an effort to solve the massive socio-economic problems of the period, newly elected President Manuel Roxas reorganized the government, and proposed a wide-sweeping legislative program. Among the undertakings of the Third Republic's initial year were: The establishment of the Rehabilitation Finance Corporation (which would be reorganized in 1958 as the Development Bank of the Philippines); the creation of the Department of Foreign Affairs and the organization of the foreign service through Executive Order No. 18; the GI Bill of Rights for Filipino veterans; and the revision of taxation laws to increase government revenues.
President Roxas moved to strengthen sovereignty by proposing a Central Bank for the Philippines to administer the Philippine banking system which was established by Republic Act No. 265.
In leading a "cash-starved government" that needed to attend a battered nation, President Roxas campaigned for the parity amendment to the 1935 Constitution. This amendment, demanded by the Philippine Trade Relations Act or the Bell Trade Act, would give American citizens and industries the right to utilize the country’s natural resources in return for rehabilitation support from the United States. The President, with the approval of Congress, proposed this move to the nation through a plebiscite.
The Roxas administration also pioneered the foreign policy of the Republic. Vice President Elpidio Quirino was appointed Secretary of Foreign Affairs. General Carlos P. Romulo, as permanent representative of the Philippines to the United Nations, helped shape the country’s international identity in the newly established stage for international diplomacy and relations. During the Roxas administration, the Philippines established diplomatic ties with foreign countries and gained membership to international entities, such as the United Nations General Assembly, the United Nations Educational, Scientific and Cultural Organization (UNESCO), the World Health Organization (WHO), the International Labor Organization (ILO), etc.
When President Carlos P. Garcia won the elections, his administration promoted the "Filipino First" policy, whose focal point was to regain economic independence; a national effort by Filipinos to "obtain major and dominant participation in their economy." The administration campaigned for the citizens' support in patronizing Filipino products and services, and implemented import and currency controls favorable for Filipino industries. In connection with the government's goal of self-sufficiency was the "Austerity Program," which President Garcia described in his first State of the NatIon Address as "more work, more thrift, more productive investment, and more efficiency" that aimed to mobilize national savings. The Anti Graft and Corrupt Practices Act, through Republic Act No. 301, aimed to prevent corruption, and promote honesty and public trust. Another achievement of the Garcia administration was the Bohlen–Serrano Agreement of 1959, which shortened the term of lease of the US military bases in the country from the previous 99 to 25 years.
President Diosdado Macapagal, during his inaugural address on 30 December 1961, emphasized the responsibilities and goals to be attained in the "new era" that was the Macapagal administration. He reiterated his resolve to eradicate corruption, and assured the public that honesty would prevail in his presidency. President Macapagal, too, aimed at self-sufficiency and the promotion of every citizen's welfare, through the partnership of the government and private sector, and to alleviate poverty by providing solutions for unemployment.
Among the laws passed during the Macapagal administration were: Republic Act No. 3844 or the Agricultural Land Reform Code (an act that established the Land Bank of the Philippines); Republic Act No. 3466, which established the Emergency Employment Administration; Republic Act No. 3518, which established the Philippine Veterans Bank; Republic Act No. 3470, which established the National Cottage Industries Development Authority (NACIDA) to organize, revive, and promote the establishment of local cottage industries; and Republic Act No. 4156, which established the Philippine National Railways (PNR) to operate the national railroad and tramways. The administration lifted foreign exchange controls as part of the decontrol program in an attempt to promote national economic stability and growth.
Marcos Era (1965–86)
President Ferdinand E. Marcos declared martial law in the midst of rising student movements and an increasing number communist and socialist groups lobbying for reforms in their respective sectors. Leftists held rallies to express their frustrations to the government, this restiveness culminating in the First Quarter Storm, where activists stormed Malacañang Palace only to be turned back by the Philippine Constabulary.[when?] This event in particular left four people dead and many injured after heavy exchanges of gunfire. There was further unrest, and in the middle of the disorder on 21 September 1972, Marcos issued Proclamation No. 1081, effectively installing martial law in the Philippines, a declaration that suspended civil rights and imposed military rule in the country.
The GDP of the Philippines rose during the martial law, rising from P55 million to P193 million in about 8 years. This growth was spurred by massive lending from commercial banks, accounting for about 62% percent of external debt. As a developing country, the Philippines during the martial law was one of the heaviest borrowers. These aggressive moves were seen by critics as a means of legitimizing martial law by purportedly enhancing the chances of the country in the global market. Much of the money was spent on pump-priming to improve infrastructure and promote tourism. However, despite the aggressive borrowing and spending policies, the Philippines lagged behind its Southeast Asia counterparts in GDP growth rate per capita. The country, in 1970–1980, only registered an average 5.73 percent growth, while its counterparts like Thailand, Malaysia, Singapore, and Indonesia garnered a mean growth of 7.97 percent. This lag, which became very apparent at the end of the Marcos Regime, can be attributed to the failures of economic management that was brought upon by State-run monopolies, mismanaged exchange rates, imprudent monetary policy and debt management, all underpinned by rampant corruption and cronyism. As said by Emannuel de Dios “main characteristics distinguishing the Marcos years from other periods of our history has been the trend towards the concentration of power in the hands of the government, and the use of governmental functions to dispense economic privileges to some small factions in the private sector.”
There are few more palpable and glaring examples of the economic mismanagement of the time than the Bataan Nuclear Power Plant (BNPP) located in Morong, Bataan. Started in the 1970s, the BNPP was supposed to boost the country’s competitiveness by providing affordable electricity to fuel industrialization and job creation in the country. Far from this, the US$2.3 billion nuclear plant suffered from cost over-runs and engineering and structural issues which eventually led to its mothballing—without generating a single watt of electricity.
Income inequality grew during the era of martial law, as the poorest 60 percent of the nation were able to contribute only 22.5 percent of the income at 1980, down from 25.0 percent in 1970. The richest 10 percent, meanwhile, took a larger share of the income at 41.7 percent at 1980, up from 37.1 percent at 1970. These trends coincided with accusations of cronyism in the Marcos administration, as the administration faced questions of favoring certain companies that were close to the ruling family.
According to the FIES (Family Income and Expenditure Survey) conducted from 1965 to 1985, poverty incidence in the Philippines rose from 41 percent in 1965 to 58.9 percent in 1985. This can be attributed to lower real agricultural wages and lesser real wages for unskilled and skilled laborers. Real agricultural wages fell about 25 percent from their 1962 level, while real wages for unskilled and skilled laborers decreased by about one-third of their 1962 level. It was observed that higher labor force participation and higher incomes of the rich helped cushion the blow of the mentioned problems.
Aquino Administration (1986–92)
The Aquino administration took over an economy that had gone through socio-political disasters during the People Power revolution, where there was financial and commodity collapse caused by an overall consumer cynicism, a result of the propaganda against cronies, social economic unrest resulting from numerous global shortages, massive protests, lack of government transparency, the opposition's speculations, and various assassination attempts and failed coups. At that point in time, the country's incurred debt from the Marcos Era's debt-driven development began crippling the country, which slowly made the Philippines the "Latin-American in East Asia" as it started to experience the worst recession since the post-war era.
Most of the immediate efforts of the Aquino administration was directed in reforming the image of the country and paying off all debts, including those that some governments were ready to write-off, as possible. This resulted in budget cuts and further aggravated the plight of the lower class because the jobs offered to them by the government was now gone. Infrastructure projects, including repairs, were halted in secluded provinces turning concrete roads into asphalt. Privatization of many government corporations, most catering utilities, was the priority of the Aquino administration which led to massive lay-offs and inflation. The Aquino administration was persistent in its belief that the problems that arose from the removal of the previous administration can be solved by the decentralization of power.
Growth gradually began in the next few years of the administration. Somehow, there was still a short-lived, patchy, and erratic recovery from 1987 to 1991 as the political situation stabilized a bit. With this, the peso became more competitive, confidence of investors was gradually regained, positive movements in terms of trade were realized, and regional growth gradually strengthened.
Ramos Administration (1992–98)
The Ramos administration basically served its role as the carrier of the momentum of reform and as an important vehicle in "hastening the pace of liberalization and openness in the country". The administration was a proponent of capital account liberalization, which made the country more open to foreign trade, investments, and relations. It was during this administration when the Bangko Sentral ng Pilipinas was established, and this administration was also when the Philippines joined the World Trade Organization and other free trade associations such as the APEC. During the administration, debt reduction was also put into consideration and as such, the issuance of certain government bonds called Brady Bonds also came to fruition in 1992. Key negotiations with conflicting forces in Mindanao actually became more successful during the administration, which also highlighted the great role and contributions of Jose Almonte as the key adviser of this liberal administration.
By the time Ramos succeeded Corazon Aquino in 1992, the Philippine economy was already burdened with a heavy budget deficit. This was largely the result of austerity measures imposed by a standard credit arrangement with the International Monetary Fund and the destruction caused by natural disasters such as the eruption of Mt. Pinatubo. Hence, according to Canlas, pump priming through government spending was immediately ruled out due to the deficit. Ramos therefore resorted to institutional changes through structural policy reforms, of which included privatization and deregulation. He sanctioned the formation of the Legislative-Executive Development Advisory Council (LEDAC), which served as a forum for consensus building, on the part of the Executive and the Legislative branches, on important bills on economic policy reform measures .
The daily brownouts that plagued the economy were also addressed through the enactment of policies that placed guaranteed rates. The economy during the first year of Ramos administration suffered from severe power shortage, with frequent brownouts, each lasting from 8 to 12 hours. To resolve this problem, the Electric Power Crisis Act was made into law together with the Build-Operate-Transfer Law. Twenty power plants were built because of these, and in effect, the administration was able to eliminate the power shortage problems in December 1993 and sustained economic growth for some time.
The economy seemed to be all set for long-run growth, as shown by sustainable and promising growth rates from 1994 to 1997. However, the Asian Crisis contagion which started from Thailand and Korea started affecting the Philippines. This prompted the Philippine economy to plunge into continuous devaluation and very risky ventures, resulting in property busts and a negative growth rate. The remarkable feat of the administration, however, was that it was able to withstand the contagion effect of the Asian Crisis better than anybody else in the neighboring countries. Most important in the administration was that it made clear the important tenets of reform, which included economic liberalization, stronger institutional foundations for development, redistribution, and political reform.
Perhaps some of the most important policies and breakthroughs of the administration are the Capital Account Liberalization and the subsequent commitments to free trade associations such as APEC, AFTA, GATT, and WTO. The liberalization and opening of the capital opening culminated in full-peso convertibility in 1992. And then another breakthrough is again, the establishment of the Bangko Sentral ng Pilipinas, which also involved the reduction of debts in that the debts of the old central bank were taken off its books.
Estrada Administration (1998–2001)
Although Estrada's administration had to endure the continued shocks of the Asian Crisis contagion, the administration was also characterized by the administration's economic mismanagement and "midnight cabinets." As if the pro-poor rhetoric, promises and drama were not really appalling enough, the administration also had "midnight cabinets composed of 'drinking buddies' influencing the decisions of the "daytime cabinet'". Cronyism and other big issues caused the country's image of economic stability to change towards the worse. And instead of adjustments happening, people saw further deterioration and hopelessness that better things can happen. Targeted revenues were not reached, implementation of policies became very slow, and fiscal adjustments were not efficiently conceptualized and implemented. All those disasters caused by numerous mistakes were made worse by the sudden entrance of the Jueteng controversy, which gave rise to the succeeding EDSA Revolutions.
Despite all these controversies, the administration still had some meaningful and profound policies to applaud. The administration presents a reprise of the population policy, which involved the assisting of married couples to achieve their fertility goals, reduce unwanted fertility and match their unmet need for contraception. The administration also pushed for budget appropriations for family planning and contraceptives, an effort that was eventually stopped due to the fact that the church condemned it. The administration was also able to implement a piece of its overall Poverty Alleviation Plan, which involved the delivery of social services, basic needs, and assistance to the poor families. The Estrada administration also had limited contributions to Agrarian Reform, perhaps spurred by the acknowledgement that indeed, Agrarian Reform can also address poverty and inequitable control over resources. In that regard, the administration establishes the program "Sustainable Agrarian Reform Communities-Technical Support to Agrarian and Rural Development". As for regional development, however, the administration had no notable contributions or breakthroughs.
Macapagal-Arroyo's Administration (2001–10)
The Arroyo administration, economically speaking, was a period of good growth rates simultaneous with the USA, due perhaps to the emergence of the Overseas Filipino workers (OFW) and the Business Process Outsourcing (BPO). The emergence of the OFW and the BPO improved the contributions of OFW remittances and investments to growth. In 2004, however, fiscal deficits grew and grew as tax collections fell, perhaps due to rampant and wide scale tax avoidance and tax evasion incidences. Fearing that a doomsday prophecy featuring the [Argentina default] in 2002 might come to fruition, perhaps due to the same sort of fiscal crisis, the administration pushed for the enactment of the 12% VAT and the E-VAT to increase tax revenue and address the large fiscal deficits. This boosted fiscal policy confidence and brought the economy back on track once again.
Soon afterwards, political instability afflicted the country and the economy anew with Abu Sayyaf terrors intensifying. The administration's Legitimacy Crisis also became a hot issue and threat to the authority of the Arroyo administration. Moreover, the Arroyo administration went through many raps and charges because of some controversial deals such as the NBN-ZTE Broadband Deal. Due however to the support of local leaders and the majority of the House of Representatives, political stability was restored and threats to the administration were quelled and subdued. Towards the end of the administration, high inflation rates for rice and oil in 2008 started to plague the country anew, and this led to another fiscal crisis, which actually came along with the major recession that the United States and the rest of the world were actually experiencing.
The important policies of the Arroyo administration highlighted the importance of regional development, tourism, and foreign investments into the country. Therefore, apart from the enactment and establishment of the E-VAT policy to address the worsening fiscal deficits, the administration also pushed for regional development studies in order to address certain regional issues such as disparities in regional per capita income and the effects of commercial communities on rural growth. The administration also advocated for investments to improve tourism, especially in other unexplored regions that actually need development touches as well. To further improve tourism, the administration launched the policy touching on Holiday Economics, which involves the changing of days in which we would celebrate certain holidays. Indeed, through the Holiday Economics approach, investments and tourism really improved. As for investment, the Arroyo administration would normally go through lots of trips to other countries in order to encourage foreign investments for the betterment of the Philippine economy and its development.
Benigno Aquino III's Administration (2010–16)
The Philippines consistently coined as one of the Newly Industrialized Countries has had a fair gain during the latter years under the Arroyo Presidency to the current administration. The government managed foreign debts falling from 58% in 2008 to 47% of total government borrowings. According to the 2012 World Wealth Report, the Philippines was the fastest growing economy in the world in 2010 with a GDP growth of 7.3% driven by the growing business process outsourcing and overseas remittances.
The country markedly slipped to 3.6% in 2011 after the government placed less emphasis on exports, as well as spending less on infrastructure. In addition, the disruption of the flow of imports for raw materials as a result from floods in Thailand and the tsunami in Japan have affected the manufacturing sector in the same year. "The Philippines contributed more than $125 million as of end-2011 to the pool of money disbursed by the International Monetary Fund to help address the financial crisis confronting economies in Europe.This was according to the Bangko Sentral ng Pilipinas, which reported Tuesday that the Philippines, which enjoys growing foreign exchange reserves, has made available about $251.5 million to the IMF to finance the assistance program—the Financial Transactions Plan (FTP)—for crisis-stricken countries."
Remarkably the economy grew by 6.68% in 2012. The Philippine Stock Exchange index ended in the year with 5,812.73 points a 32.95% growth from the 4,371.96-finish in 2011.
BBB- investment grade by Fitch Ratings on the first quarter of 2013 for the country was made because of a resilient economy by remittances, growth despite the global economic crisis in the last five years reforms by the VAT reform law of 2005, BSP inflation management, good governance reforms under the Aquino administration.
Source from Wikipedia
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