Overview

The Philippines is one of the most dynamic economies in the East Asia region, with sound economic fundamentals and a globally recognized competitive workforce. Growth in the Philippines has been on average above 5%in the past decade, significantly higher than in previous decades.

The Philippines remained a strong performer in the region, despite slow global growth.
Following high growth of above 6% in the past three years, growth slowed down to 5.3% in the first half of 2015 but bounced back in the second half, bringing full year growth to 5.8 percent in 2015. Among the major economies in the region, the Philippines trailed only behind China and Vietnam. On the supply side, the services sector remained the main engine of growth, while agriculture continued to underperform as El Nino intensified. On the demand side, robust growth of private consumption and the rebound in government spending in the second half of 2015 tempered weak external demand.

Sustained high non-agricultural growth and effective government programs are helping to improve the welfare of the poor. Recent estimates suggest that extreme poverty decreased gradually between 2012 and 2014. Extreme poverty is estimated to have decreased from 10.6 percent in 2012 to nine percent in 2014. After a decrease of only 0.3 percentage points between 2009 and 2012, poverty fell more rapidly between 2012 and 2014, according to revised purchasing power parity (PPP) estimates. However, high rates of structural poverty remain, especially among households depending on agriculture.

What is needed now is to consolidate the reforms made, embark on the next set of reforms and move ahead at full speed. In the short-term, deepening reforms in budget execution will allow the country to use its growing fiscal space to increase investments in both human and physical capital, with positive contributions to near-term growth and quality of jobs. Over the medium-term, accelerated structural reforms are needed to enhance competition in sectors with high impact on jobs (such as rice, shipping, and telecoms), securing property rights through more systematic and administrative adjudication of land rights, and simplifying business regulations to encourage the growth of firms of all sizes, while increasing tax effort and reforming the budget execution system in order to sustainably ramp up public investments in infrastructure and social services.

In all these, priority is needed in Mindanao, where decades of conflict and weak, Manila-centric policies have kept it from reaching its potential. To accelerate reforms in the future, the government, business, labor, and civil society need to work more closely together to support a package of reforms that will help the country move full speed ahead to create more and better jobs.

 

Last Updated: Apr 15, 2016

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

The World Bank Group’s Country Partnership Strategy for the Philippines from 2015 to 2018 revolves around the theme “Making Growth Work for the Poor” which supports the country’s goals of promoting and sustaining inclusive growth that reduces poverty and creates more and better jobs—jobs that raise real wages and bring people out of poverty.

Aligned with the World Bank Group’s twin goals of eradicating extreme poverty and promoting shared prosperity, the strategy continues to support the country’s development programs in five key engagement areas:

•       Transparent and accountable governance: strengthening public financial management, improving fiscal transparency and financial accountability, and supporting greater demand from citizens 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, including greater access to finance, 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 World Bank Group (WBG) supports transformational programs and projects that work across sectors to deliver tangible results with high and long-term impact. The International Bank for Reconstruction and Development (IBRD) and the WBG’s private sector arm, the International Finance Corporation (IFC) work closely to 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 5 years, along with non-lending support in the form of analytical and advisory assistance. As of March 2016, the Philippine portfolio comprises 15 active projects with a total net commitment of close to $3 billion. This includes nine investment loan operations, one development policy operation and five projects funded by grants.

As of February 2016, the IFC has a committed portfolio of $679 million in the Philippines. It includes both the infrastructure and financial institution sectors, with $270 million and $239 million current investments, respectively. Investments in power and utilities dominate the infrastructure portfolio while investments in financial institutions include investments in commercial and thrift banks, distressed asset platforms, and an investment fund.

Last Updated: Apr 15, 2016

Since 1957 when the 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% by end-project on December 31, 2014, exceeding the target of 20% increase. The project was scaled up through the Philippine Rural Development Project (PRDP) in 2014, which aims to increase rural incomes and enhance farm and fishery productivity and improvement of market access throughout the country. The project developed ICT-enabled tools such as geotagging and expanded vulnerability and suitability assessments in guiding public investments towards a modern, value-chain oriented, and climate resilient agriculture and fisheries sector.

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 85,000 hectares benefiting more than 160,000 farmers and their families, and has provided organizational development and capacity building activities to more than 900 Irrigators Associations.

In education, the Bank’s assistance through the Learning, Equity and Accountability Program Support (LEAPS) Project, approved in March 2014, is supporting government efforts to improve early grade learning outcomes particularly for disadvantaged children. The project is also supporting efforts to reinvigorate the professional development of teachers, and provide extensive training in early language, literacy and numeracy to all principals and at least one teacher in each target region. The project is also helping develop staff and teacher performance monitoring system as well as strengthening school level accountability through improved school reporting.

The Bank is helping to protect poor and vulnerable families while keeping children healthy and in school. The Social Welfare and Development Reform Project (SWDRP) helped to bring about almost universal enrolment (98%) for poor children from 6-11 years old in project areas. 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 aged 0-14 years. The program has made significant impact on reducing total poverty and food poverty among beneficiaries by up to 6.7 percentage points. It has grown to become one of the largest in the world. From 0.7 million households in 2009, it has supported more than 4.4 million households as of November 2015.

An important feature of the SWDRP is the national household targeting system for poverty reduction in the Philippines or Listahanan, reaching 4 out of 5 households across the country. At this scale, the Philippines is second to Brazil in rolling out a 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. Aside from the CCT, the database is also being used by 25 national programs including the Universal health program. To help ensure the continuity of the project, the Bank provided new funding that will contribute to the government’s financing of health and education grants for CCT beneficiaries nationwide from 2016-2019.

In health, 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 from 5.2 million (2012) to 15.3 million families (2015) and contributing to a reduction in smoking prevalence from 29% (2012) to 25% (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 has reached approximately 1.2 million households, whose incomes rose by 12% . The project has been expanded across the country including areas devastated by typhoon Haiyan (Yolanda) in 2014 under the new National Community Driven Development Project. Some 14,000 community projects that provide access to basic services, roads and bridges as well as livelihood are benefiting 5.2 million households in over 19,000 of the poorest and most disaster-affected villages.

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 classrooms, access roads, 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% in 1997 to 99.6% in 2012 at the East Concession Area and 97.4% in 2015 at the West Concession Area, as it expanded coverage of sewerage, sanitation and septage management.

The benefits from the 1997 privatization of Manila Water have been significant. Assuming four people per household, water coverage rose from 1.3 million to about 6 million and 24-hour access to water increased from 26% to 99% post-privatization. The cost of paying for water connection also went down, from around $3 per cubic meter of water to $1.3 per cubic meter or 57% lower than what they paid pre-privatization. The investment has also resulted in significant health benefits, with incidences of diarrhea in the area falling almost 75% over the same period. Manila Water also reduced its water losses from 63% in 1997 to just 11% today.

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, close to 90,000 households now have latrines while 40 municipalities in 18 provinces have participated in the Zero Open Defecation campaign as of September 2015.

Last Updated: Apr 15, 2016


LENDING

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

*Amounts include IBRD and IDA commitments