Overview

The Philippines is currently one of the most dynamic economies in the East Asia region, with sound economic fundamentals and a globally recognized competitive workforce. Growth has been robust in the past five years, registering an average 6.2 percent from 2010-2015, significantly higher than average 4.5 percent annual growth in 2000-2009.

A new administration entered office on June 30, at a time when the economy grew at the fastest pace among its East Asian peers. The Philippine economy grew at an annual rate of 6.9 percent in the first half of 2016, up from 5.5 percent during the same period in 2015, exceeding growth of China, Malaysia, Thailand and Vietnam. On the production side, the services and industry sectors remained the main engines of growth, while agriculture further weakened due to the lingering effects of El Niño. On the demand side, growth was driven by robust private consumption and capital formation. This was further supported by more than 10 percent expansion in public spending in the first half of 2016. Net exports, however, caused a drag on growth due to weak external demand.              

Growth in real household income, partly due to effective social protection programs, is gradually improving the welfare of the poor. Recent estimates suggest that extreme poverty in the Philippines, measured by the international poverty line of 1.9 dollars a day (2011 purchasing power parity), decreased from 10.6 percent in 2012 to 8.4 percent in 2015. Household income in real terms reported continuous growth. However, natural calamities including the highest number of typhoons ever witnessed during the period of 2013-2015 have muted some of welfare gains. The government’s social protection programs, in particular the Pantawid Pamilya conditional cash transfer program, successfully buffered some impacts of the shocks. The poorer segment of the population reported faster growth in household income than the average figure, showing that income inequality is easing downward.

The new administration has reassured businesses and investors by continuing existing macroeconomic policies while reforming the tax collection system. Now there is a need to institutionalize reforms and clearly assess what remains necessary to fulfil the economic reform agenda. The new administration’s 10-point socio-economic agenda emphasizes equitable tax reform, enhanced public spending, greater transparency and accountability, improved ease of doing business, and continued investment in education, skills, health and social assistance to the poor.

Last Updated: Apr 15, 2016

The World Bank Group’s  (WBG) partnership with the Philippines spans nearly 60 years, providing longstanding support for infrastructure as well as engagement on key sectors including governance, social protection, water resources and disaster risk management. The WBG also is an active partner in helping spur private sector growth, expanding engagement with civil society, and promoting peace and development in Mindanao.

The WBG’s Country Partnership Strategy for the Philippines from 2015-2018 revolves around the theme “Making Growth Work for the Poor,” which supports the country’s goal of inclusive growth that reduces poverty and creates more and better jobs that raise real wages. The strategy is currently grounded in five engagement areas:

•       Transparent and accountable governance: strengthening public financial management, improving fiscal transparency and financial accountability, and supporting greater citizen demand for government accountability. 

•       Empowerment of the poor and vulnerableimproving health and education outcomes, strengthening social protection and ensuring the availability of more timely and improved measurements of poverty.

•       Rapid, inclusive and sustained economic growth: promoting economic policy reform for inclusive growth, boosting private sector development by improving the investment climate for firms of all sizes, and increasing productivity and job creation – especially in rural areas. 

•       Climate change, environment and disaster risk management: increasing physical, financial and institutional resilience to natural disaster and climate change impacts, and improving natural resource management and sustainable development.

•       Peace, institution building, and social and economic opportunity: supporting governance, social and economic development and citizen security and justice in conflict-affected regions in Mindanao, including the territory of the proposed new Bangsamoro autonomous political entity.

The WBG supports transformational programs and projects that work across sectors to deliver tangible results with long-term impact. The International Bank for Reconstruction and Development (IBRD) and the WBG’s private sector arm, the International Finance Corporation (IFC), mobilize private sector investment and support job creation in sectors like agriculture and agribusiness, trade and logistics, infrastructure and public-private partnerships. 

The financial commitment from the IBRD averaged $800 million a year in the last five years, along with non-lending support in the form of analytical and advisory assistance. As of August 2016, the Philippine portfolio comprised 15 active projects with a total net commitment of close to $3 billion, including nine investment loan operations, one development policy operation and five projects funded by grants.

The IFC has a portfolio of $792 million in the Philippines, with 52 percent in the infrastructure sector, 43 percent in financial markets and five percent in manufacturing, agribusiness and services.

Last Updated: Sep 30, 2016

Since 1957 when the Philippines government received its first World Bank loan, the Bank has financed irrigation and other agriculture-related infrastructure and rural development needs that have produced significant results for its citizens. In the last three decades, the Bank’s assistance expanded to a wide range of projects and analytical work, policy advice and capacity development in support of the country’s development agenda.

The Bank has expanded support for the agriculture and rural sector over the years. The Mindanao Rural Development Program (MRDP) Phase II promoted rural growth in southern Philippines, increasing the average household income of beneficiaries by about 36 percent when the project closed in December, 2014. The project was scaled up through the Philippine Rural Development Project (PRDP) in 2015, which aims to increase rural incomes, enhance farm and fishery productivity, and improve market access throughout the country. The project uses technological tools such as geotagging and expanded vulnerability and suitability assessments to help guide public investments toward a modern, value-chain oriented and climate-resilient agriculture and fisheries sector. To date, around 120 rural infrastructure projects are under construction based on provincial commodity plans that have generated 3,000 short-term jobs. In addition, 45 kilometers of roads and potable water system have also been completed. Early impacts indicate about a 60 percent reduction in travel time and 50 percent increase in road usage.

The Participatory Irrigation Development Project (PIDP)  is supporting the improvement of 58 irrigation systems throughout the country. From the beginning of 2011 to date, the project has rehabilitated and modernized irrigation infrastructure that serves 93,200 hectares benefiting more than 160,000 farmers and their families. It also has provided organizational development and capacity building activities to more than 926 Irrigators Associations.

The Bank’s assistance through the Learning, Equity and Accountability Program Support (LEAPS) Project supports government efforts to improve early grade learning outcomes, particularly for disadvantaged children.  To date, the project supported the training for more than 22,000 teachers and school principals, who would in turn share their learning and skills with other teachers. The project also is helping develop staff and teacher performance monitoring systems, and strengthening school-level accountability through improved school reporting and financial management capability.

The first Social Welfare and Development Reform Project (SWDRP) helped bring almost universal enrollment (98 percent) of poor children from 6-11 years old in project areas, as well as increased use of health services for pregnant women and children up to five years old. The project supported the government’s conditional cash transfer program (CCT) or Pantawid Pamilyang Pilipino Program, which helps poor households invest in the education and health of children up to 14 years old. The program has made significant impact on reducing total poverty and food poverty among beneficiaries, and has grown to become one of the largest in the world, supporting more than 4.4 million households as of December 2015.

An important feature of the SWDRP, and also supported through a large non-lending technical assistance package, is the national household targeting system for poverty reduction in the Philippines, or Listahanan, that reaches three of  four households across the country. At this scale, the Philippines is second to Brazil in rolling out such a large coverage and successful household targeting system to reach the poor and vulnerable. The objective selection of 5.1 million poor households in 2015 helps ensure that government programs are better targeted for those who need it most. To help ensure the continuity of the project, the Bank provided new funding through a second project (SWDRP II) that will contribute to the government’s financing of health and education grants for CCT beneficiaries nationwide from 2016-2019.

The Philippines passed the landmark Sin Tax Law in 2012 with advisory and budgetary support from the Bank. The measure raised tobacco and alcohol taxes and allocated the revenues for universal health coverage. This more than doubled the budget of the Department of Health, expanding free health insurance to the poorest 40 percent of the population and contributing to a reduction in smoking prevalence from 29 percent in 2012 to 25 percent in 2015.

The Bank also brought groundbreaking interventions to help curb the spread of HIV in the country. Interventions among men-who-have-sex-with-men and people who inject drugs were at the frontier of global evidence on the best way to address and reverse the tide of the HIV epidemic among these key affected populations.

The poorest communities have benefited from projects that address their priority needs through a community-driven development approach. The Kapitbisig Laban Sa Kahirapan-Comprehensive and Integrated Delivery of Social Services (KALAHI-CIDSS) Project that closed in 2014 reached approximately 1.2 million households that experienced a 12 percent rise in incomes. The project was expanded from June 2014 across the country and now covers 847 poor and disaster-affected municipalities. The KALAHI-CIDSS National Community Driven Development Project now covers 4.4 million households and channels additional resources to support communities in post-Haiyan recovery. Currently, over 14,000 projects are being implemented including small infrastructure, flood and erosion control, as well as basic social services such as health clinics, schools, day care centers and water systems.

With its global expertise in post-disaster reconstruction, the Bank is working with development partners and the government in helping develop effective disaster recovery programs and building back better infrastructure and communities. The Bank is also providing a contingent line of credit to manage the risks posed by natural disasters. Combined with technical assistance to help strengthen investment planning and regulations to reduce disaster risk, this innovative financing will also help manage financial impacts and to ensure that resources are available for the government’s ongoing development programs. 

The Bank’s assistance also extends to conflict-affected areas in the country, helping to support better governance, access to services, job creation and enhanced citizen security and justice. The Mindanao Trust Fund-Reconstruction and Development Program is supported by a range of development partners and has provided access roads, farm equipment and post-harvest facilities, water supply systems and bridges, while at the same time promoting social cohesion for over 500,000 people in Mindanao since 2006. As of 2016, 225 villages across Mindanao have benefited from 379 community infrastructure and livelihood projects and support for community-enterprise development.

The Bank also actively supports the peace process between the government and the Moro Islamic Liberation Front through technical and advisory services to various bodies set up to implement the March 2014 Comprehensive Agreement on the Bangsamoro. Ongoing analytical work such as the Mindanao Jobs Report supports job creation, while advisory work supports land conflict management, financial inclusion (including Islamic finance) and conflict resolution.

The Bank is also helping the government achieve its goal of improving quality and access to basic water supply and sanitation services and institutionalizing integrated water resources management. In Metro Manila, the Bank’s interventions contributed to a dramatic increase in 24-hour water supply from 26 percent in 1997 to 99.6 percent in 2012 at the East Concession Area and 97.4 percent in 2015 at the West Concession Area.

Outside Metro Manila, the Bank has assisted water and sanitation service providers in improving efficiency and sustainability by strengthening local governments’ accountability and management systems on water supply and sanitation services for all, harnessing private sector participation. In rural areas, more than 1 million households have gained improved access to toilets while 135 municipalities in 60 provinces have participated in the Zero Open Defecation campaign as of September 2016.

 

Last Updated: Sep 30, 2016


LENDING

Philippines: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments