Since 2012, economic growth has been high, driven by private consumption which accounts for about 70% of the economy. Growth has also been sustained by rising demand for exports.
Political situation
Head of state/government: President Benigno Aquiono (since June 2010)
Government type: Presidential republic. The Philippines´ constitution is strongly inspired by the US constitution.
Increasing problems with China
Although the Philippines have traditionally been quite politically volatile, the situation has improved markedly under the current president, Benigno Aquino, whose Liberal Party-led coalition controls a majority in the lower house and is favoured by most of the population.
However, despite improvements in recent years, the security situation in the region of South Mindanao remains poor because of the activities of Moslem separatist rebels.
Relations with China have deteriorated since 2013, due to Beijing´s growing assertiveness in the South China Sea. China has repeatedly seized islands claimed by Manila and Chinese ships have blocked supplies to Philippine garrisons in the contested area. Manila has brought its claims to the UN´s permanent court of arbitration: something that China has so far refused to do.
Economic situation
Persistent high growth rates
Since 2012, economic growth has been persistently high, driven mainly by private consumption which accounts for about 70% of the economy. Growth has also been sustained by rising demand for Philippine exports such as electronics. In 2015, GDP is expected to grow again - above 6% - and robust consumer spending, the result of higher remittances from Filipinos working abroad and a growing middle class, increase the potential for robust growth rates in the coming years. However, economic expansion is still hampered by a difficult business environment, with corruption and poor infrastructure impeding more investments.
Inflation is under control, and decreasing oil prices may even lead to lower inflation than currently forecast. This would give a further boost to consumer spending. Public finances are healthy, supporting continued government spending.
Consolidation has helped the Philippine banking sector to remain healthy. Banks are largely financed by deposits, making them more resilient to tighter credit conditions in the wholesale credit market. Traditionally, banks have been reluctant to lend to the private sector, leading to structural underinvestment. The external macroeconomic situation is robust, with manageable foreign debt (18% of GDP; 65% of exports of goods and services in 2015) and ample liquidity. The current account is structurally positive due to the inflow of remittances from overseas workers. External financing requirements are small and international reserves amount to more than 15 months of import cover.
