Philippines Economic Update Braving The New Normal

Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
JUNE 2020 EDITION

NEW NORMAL
BRAVING THE
PHILIPPINES ECONOMIC UPDATE
ii PHILIPPINES ECONOMIC UPDATE JUNE 2020 EDITION
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iii
PREFACE
The Philippines Economic Update summarizes key economic and social developments, important policy changes, and
the evolution of external conditions over the past six months. It also presents findings from recent World Bank analysis,
situating them in the context of the country’s long-term development trends and assessing their implications for the
country’s medium-term economic outlook. The update covers issues ranging from macroeconomic management and
financial-market dynamics to the complex challenges of poverty reduction and social development. It is intended to serve
the needs of a wide audience, including policymakers, business leaders, private firms and investors, and analysts and
professionals engaged in the social and economic development of the Philippines.
The Philippines Economic Update is a biannual publication of the World Bank’s Macroeconomics, Trade, and Investment
Global Practice (MTI), prepared in partnership with the Finance, Competitiveness, & Innovation Global Practice, the Poverty
& Equity, Finance, Competitiveness & Innovation, and Social Protection & Labor Global Practices (GPs). Ndiame Diop
(Practice Manager for the MTI GP) and Souleymane Coulibaly (Lead Economist and Program Leader) guided the preparation
of this edition. The team consisted of Rong Qian (Senior Economist), Kevin Chua (Economist), Kevin Cruz (Research
Analyst), and Karen Lazaro (Consultant) from the MTI GP, Isaku Endo (Senior Financial Sector Specialist) from the Finance,
Competitiveness and Innovation GP, Gabriel Demombynes (Program Leader), and Sharon Faye Alariao Piza (Economist)
from the Poverty & Equity GP, and Yoonyoung Cho (Senior Economist), Ruth Rodriguez (Social Protection Specialist), and
Arianna Zapanta (Consultant) from the Social Protection GP, Natasha Beschorner (Senior Digital Development Specialist)
from the Digital Development Department prepared the Special Focus Note on the digital economy. The report was edited
by Oscar Parlback (Сonsultant), and the graphic designer was Christopher Carlos (Сonsultant). Peer reviewers were Shakira
Binti The Sharifuddin (Senior Economist) and Pedro Miguel Gaspar Martins (Senior Economist). Logistics and publication
support were provided by Elysse Dominguez Miranda (Team Assistant) and Kristiana Gizelle Torres Rosario (Team Assistant).
The Manila External Communications Team, consisting of Clarissa David (Senior Communications Officer) and David Llorito
(Communications Officer) prepared the media release and web-based multimedia presentation, Stephanie Margallo
provided team assistance. Moira Enerva (Consultant) prepared the dissemination plan for this edition of the PEU.
The team would like to thank Achim Fock (Acting Country Director for Brunei, Malaysia, Philippines and Thailand) for his
advice and support. The report benefited from the recommendations and feedback of various stakeholders in the World
Bank as well as from the government, the business community, labor associations, academic institutions, and civil society.
The team is very grateful for their contributions and perspectives. The findings, interpretations, and conclusions
expressed in the Philippines Economic Update are those of the World Bank and do not necessarily reflect the views of the
World Bank’s executive board or any national government.
If you wish to be included in the email distribution list for the Philippines Economic Update and related publications,
please contact Elysse Miranda (emiranda2@worldbank.org). For questions and comments regarding the content of this
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David Llorito (dllorito@worldbank.org).
For more information about the World Bank and its activities in the Philippines, please visit www.worldbank.org/ph.
iv PHILIPPINES ECONOMIC UPDATE JUNE 2020 EDITION
TABLE OF CONTENTS
PREFACE iii
ABBREVIATIONS AND ACRONYMS v
EXECUTIVE SUMMARY 1
1 RECENT DEVELOPMENTS 4
1.1. Economic Growth: COVID-19 hit the Philippine and Global Economy 5
1.2. Fiscal Policy: Accelerating Spending amid an Erosion of Fiscal Space 12
1.3 Monetary and Macro-prudential Policies: Geared Toward Mitigating

the Impact of the COVID-19 Pandemic 17
1.4. The Exchange Rate and the External Sector: Resilience Driven by Strong Initial Conditions 19
1.5. Poverty and Employment: Protecting Gains amid the COVID-19 Pandemic 22
2 OUTLOOK AND RISKS 26
2.1. Growth Outlook 27
2.2. Poverty and Shared Prosperity 32
2.3. Risks and Policy Challenges 33
SPECIAL FOCUS NOTE: ACHIEVING FASTER AND MORE AFFORDABLE

3 INTERNET SERVICES FOR ALL 38
3.1. Introduction 39
3.2. Market failures in the provision of digital infrastructure 41
3.3. Government Initiatives to Improve Internet Services 47
3.4. Legal and Regulatory Challenges 49
3.5. Conclusions and Recommendations 56
REFERENCES 59
v
ABBREVIATIONS AND ACRONYMS

4Ps Pantawid Pamilyang Pilipino Program DSWD Department of Social Welfare and Development
A4AI Alliance for Affordable Internet DTI Department of Trade and Industry
AFP Armed Forces of the Philippines ECQ Enhanced Community Quarantine
ASEAN Association of Southeast Asian Nations EIU Economist Intelligence Unit
BASS Bandwidth and Signal Statistics EMBI Emerging markets bond index
Bbl Barrel EMDEs Emerging market and developing economies
BCDA Bases Conversion and Development Authority EO Executive Order
BFAR Bureau of Fisheries and Aquatic Resources ERC Energy Regulatory Commission
BI Bank Indonesia FDI Foreign direct investment
BIR Bureau of Internal Revenue FPI Foreign portfolio investments
BOC Bureau of Customs FRAND Fair, reasonable and non-discriminatory
Bps basis points GAA General Appropriations Act
BSP Bangko Sentral ng Pilipinas GDP Gross domestic product
BTr Bureau of the Treasury Ghz Gigahertz
BWA Broadband Wireless Access GNI Gross national income
CA Commonwealth Act GOCC Government-Owned and Controlled Corporations
CAB Civil Aeronautics Board GRM Grievance Redressal Mechanism
CAMP COVID-19 Adjustment Measures Program GSIS Government Service Insurance System
CBOE Chicago Board Options Exchange HEAL Help via Emergency Loan Assistance to LGUs
CDN Content delivery network HLURB Housing and Land Use Regulatory Board
COVID-19 Coronavirus Disease 2019 HTS High through-put satellites
CPCN Certificate of public convenience and necessity IATF-EID Inter-Agency Task Force for the Management of
Emerging Infectious Diseases
DA Department of Agriculture
ICT Information and communication technologies
DAI Digital Adoption Index
IDN Indonesia
DBM Department of Budget and Management
IDR Indonesian Rupiah
DENR Department of Environment and
Natural Resources IMT International Mobile Telecommunications
DepEd Department of Education ISP Internet service providers
DICT Department of Information and IT-BPO Information technology-business
Communications Technology process outsourcing
DILG Department of the Interior and ITC Independent tower companies
Local Government
ITU International Telecommunication Union
DO Department Order
IXP Internet exchange point
DOH Department of Health
JMC Joint Memorandum Circular
DOLE Department of Labor and Employment
KYC Know-your-customer
DPWH Department of Public Works and Highways
LBP Land Bank of the Philippines
DROMIC Disaster Response Operations Monitoring and
Information Center
vi PHILIPPINES ECONOMIC UPDATE JUNE 2020 EDITION
ABBREVIATIONS AND ACRONYMS

LCU Local currency unit PHIVOLCS Philippine Institute of Volcanology
and Seismology
LFPR Labor force participation rate
Php Philippine peso
LFS Labor force survey
PLCN Pacific Light Cable Network
LGU Local Government Unit
PMI Purchasing Managers’ Index
LLDA Laguna Lake Development Authority
PNP Philippine National Police
Mbps Megabits per second
POEA Philippine Overseas Employment Administration
MC Memorandum Circular
PPE Personal protective equipment
Mhz Megahertz
PSA Philippine Statistics Authority
MO Memorandum Order
PSE Philippine Stock Exchange
MOOE Maintenance and other operating expenses
PTE Public telecommunications entity
MRT Metro Rail Transit
RA Republic Act
MSME Micro, small, and medium enterprise
RHS Right-hand side
MYS Malaysia
RRR Reserve requirement ratio
NBP National Broadband Plan
SAC Social Amelioration Card
NBQB Non-bank financial institutions with
quasi-banking function SAP Social Amelioration Program
NCIP National Commission on Indigenous Peoples SARS Severe acute respiratory syndrome
NCR National Capital Region SDG Sustainable Development Goals
NDRRMC National Disaster Risk and Reduction and SME Small and medium enterprise
Management Council
SOTI State of the Internet
NEA National Electrification Authority
SSS Social Security System
NEDA National Economic and Development Authority
SUF Spectrum User Fee
NGA National government agency
Tbps TeraBytes Per Second
NGCP National Grid Corporation of the Philippines
THA Thailand
NPL Non-performing loans
U.S. United States
NTC National Telecommunications Commission
UCT Unconditional cash transfer
OFW Overseas Filipino Worker
UP University of the Philippines
OPEC Organization of the Petroleum
USD United States Dollar
Exporting Countries
VND Vietnamese Dong
PA Provisional authority
VNM Vietnam
PAP Programs, activities, or projects
WB World Bank
PCC Philippine Competition Commission
WBG World Bank Group
PCSD Philippine Council for Sustainable Development
WHO World Health Organization
PFOCN Philippine Fiber Optic Cable Network Ltd Inc.
WSJ Wall Street Journal
PGH Philippine General Hospital
PhilHealth Philippine Health Insurance Corporation
PHILRECA Philippine Rural Electric Cooperatives
Association, Inc.
vii
LIST OF FIGURES
Figure 1 GDP contracted for the first time in 22 years in the first quarter of 2020. 5
Figure 2 The economic impact of COVID-19 was broad, although services continued to fuel growth. 5
Figure 3 Since the start of the enhanced community quarantine, air travel has dropped by 95 percent… 8
Figure 4 …visits to retail locations have dropped by over 80 percent… 8
Figure 5 …Manila is experiencing 80 percent less traffic… 8
Figure 6 …and people’s interests and desires have changed. 8
Figure 7 As a result of the COVID-19 pandemic, economic activity has fallen sharply… 9
Figure 8 …while volatility has increased dramatically. 9
Figure 9 Real GDP Growth, 2016-19 10
Figure 10 Global Trade Growth, Jan 2016-Jan 2020 10
Figure 11 National Government Fiscal Balance (% of GDP) 15
Figure 12 National Government Expenditure by Component (% of GDP) 15
Figure 13 The government continues to finance its deficit mainly through domestic borrowing. 15
Figure 14 The overall debt-to-GDP ratio moderated slightly in 2019. 15
Figure 15 Inflation eased in 2019 and was within the BSP’s target range in the first four months of 2020… 18
Figure 16 …due to slower food and non-food inflation… 18
Figure 17 …as rice inflation remained negative, utilities prices rose only marginally, and transport prices
deflated between January and April 2020. 18
Figure 18 There was a sustained overall decline in rice prices in the beginning of 2020,
except in the early weeks of April. 18
Figure 19 Composition of the Overall Balance-of-Payments Position 20
Figure 20 Portfolio equity outflows from the Philippines have been the lowest among the region. 20
Figure 21 The Philippine peso appreciated at a time when many regional currencies depreciated 20
Figure 22 Unemployment and Underemployment Rates (%) 22
Figure 23 Quarterly Labor Force Participation Rates 22
Figure 24 Share of Job Creation by Subsector 23
Figure 25 Top 10 Subsectors with the Most New Jobs 23
Figure 26 The Philippine economy is projected to contract in 2020. 28
Figure 27 Business sentiment weakened during the first quarter of 2020. 28
Figure 28 Actual and projected $3.2-a-day poverty rates. 32
Figure 29 Strengthening social assistance delivery through digital payments. 37
Figure 30 Digital adoption index and sub-indices relative to world average 39
Figure 31 How the Philippines Connects to the Internet 42
Figure 32 The Philippines’ Fiber Optic Network and Submarine Cables 43
Figure 33 Market Shares in Fixed and Mobile Broadband 44
Figure 34 Number of Unique Cell Site IDs Detected as of February 2020 44
Figure 35 4G Network Coverage (% of Population) 44
Figure 36 Mobile and Fixed Internet Download Speeds (August 2019) 46
Figure 37 Price of mobile broadband (1GB, prepaid) as % of GNI per capita 46
Figure 38 Economist Intelligence Unit (EIU) Affordability Score, 2017-2019* 46
viii PHILIPPINES ECONOMIC UPDATE JUNE 2020 EDITION
LIST OF TABLES
Table 1 Balance of Payments, 2015 to 2019 21
Table 2 Real Growth Projections 30
Table 3 Economic Indicators for Baseline Projections 30
Table 4 Broadband Penetration and Speeds, Philippines vs. ASEAN 40
Table 5 Licensing of ISPs Across Select Countries in Asia Pacific 50
Table 6 Reasons for the 8-month Long Process to Construct a Cell Site in the Philippines 52
Table 7 DICT and NTC Policy and Regulatory Issuances Affecting Broadband Access,
Quality and Affordability (2016-present) 57
LIST OF BOXES
Box 1 Tracking the Impact of COVID-19 in Real Time 8
Box 2 Recent Global Developments 9
Box 3 The Bayanihan to Heal as One Act 13
Box 4 ASEAN-5 Policy Response to COVID-19 16
Box 5 Social Protection Measures to Support Poor and Vulnerable Households 24
Box 6 Global Economic Outlook 29
Box 7 Digital Delivery of Large Scale Cash Transfers for COVID-19 Pandemic Response 36
Box 8 Digital Infrastructure Components 41
EXECUTIVE SUMMARY
1
EXECUTIVE SUMMARY
A series of unforeseen events caused an abrupt halt to the affecting Philippine exports of agriculture, fisheries
Philippines’ strong growth momentum in early 2020. The products and manufacturing goods. Similarly, service
Philippine economy carried its strong growth momentum exports contracted by 4.3 percent year-on-year in the first
from the second half of 2019 into early 2020 thanks to quarter of 2020 reflecting travel restrictions imposed in
positive consumer confidence, robust macroeconomic the Philippines and globally that resulted in a 40 percent
fundamentals, and an improvement in the external sector. decline in international tourist arrivals. Meanwhile, imports
However, the eruption of Taal Volcano in early January, the also contracted given weaker growth in capital goods
spread of the Coronavirus Disease 2019 (COVID-19) outbreak imports due to weaker domestic investment activities,
in the region, and the rise of COVID-19 infection cases in and in raw and intermediate goods imports reflecting
the Philippines in March, forced the economy to a near disruptions in global value chains.
halt in the latter part of March due to severe disruptions
in manufacturing, agriculture, tourism and hospitality, While the government accelerated spending in March,
construction, and trade. The economy contracted by 0.2 partly in response to the COVID-19 pandemic, the overall
percent year-on-year in the first quarter of 2020, the first fiscal deficit narrowed in the first quarter of 2020. The
contraction in over two decades, and was a sharp reversal fiscal deficit shrunk to 1.7 percent of GDP in the first
from the 5.7 percent growth over the same period in 2019. quarter, 80 percent lower than target, owing to government
Leading indicators that track economic activity in real time underspending. This underspending partly reflects delays in
suggest that the contraction would be even more severe in the implementation of public infrastructure projects caused
the second quarter as most regions of the country entered by the Taal Volcano eruption, and the disruption of budget
an enhanced community quarantine (ECQ) in mid-March. execution at onset of the COVID-19 pandemic. Subsequently,
public spending accelerated in March with the passage
The impact of COVID-19 on private consumption growth of the “Bayanihan to Heal as One Act” to support the
has been steep and swift resulting in its lowest growth government’s COVID-19 response, including the provision of
rate since 1985 recession. In an effort to flatten the cash assistance to affected households. Non-tax revenues
infection curve, the Philippine government imposed increased more than three-fold in the first quarter thanks
the ECQ on March 16 mandating the closure of all non- to the early dividend remittances of the Bangko Sentral ng
essential businesses which caused millions of workers to Pilipinas (BSP) and Government Owned and/or Controlled
lose jobs and income. As a result of the lockdown and of a Corporations (GOCCs) to compensate for the tax revenue
likely decline in remittances inflows, private consumption shortfall, as tax collections contracted by around 10 percent
growth fell to 0.2 percent in the first quarter of 2020 from in nominal terms in March alone. Overall, government
6.2 percent last year. The slowdown in consumption underspending and higher non-tax revenue collections led
growth was broad-based across all major categories of to a smaller fiscal deficit in the first quarter of 2020.
consumption except health products. As expected, the
consumption of non-essential goods and services such as The benign inflation environment has provided the
from the hotel and restaurant industry was impacted the monetary authority ample space to act quickly and
most, contracting double digits, while consumption of food thoroughly to mitigate the impact of the COVID-19 outbreak
grew by 4.7 percent in the first quarter of 2020. on the financial sector. Headline inflation averaged 2.6
percent in the first four months of 2020 due to easing
Export activities weakened substantially due to the price pressure from food, rice in particular, and energy
disruptions in tourism and global value chains. Philippine consuming categories such as transport and utilities, as
export growth started to weaken in 2019 due to trade global commodity prices plunged. The stable inflation
tensions and slower global growth. The COVID-19 outbreak environment created room for the BSP to step up its
further weakened merchandises exports amid disruptions accommodative monetary policies to help cushion the
in global value chains and as global trade slowed down adverse impact of the COVID-19 outbreak and the ECQ.
2 PHILIPPINES ECONOMIC UPDATE JUNE 2020 EDITION
The BSP reduced its key policy rates by a total of 125 basis Labor market conditions remained favorable in early 2020
points (bps) between February and April bringing the but has worsened rapidly with the COVID-19 outbreak and
benchmark rate to 2.75 percent. In addition, the reserve imposition of the ECQ. Unemployment remained at 5.3
requirement ratio was reduced by 200 basis points in April percent in January 2020 while the underemployment rate
to further support domestic liquidity. Furthermore, the reached its lowest level in a decade at 14.8 percent. These
BSP has also adopted numerous regulatory measures to were a result of job creation in the agriculture and services
facilitate digitalization of its operations, encourage banks to sectors while employment in industry contracted in January
lend to micro, small, and medium enterprises (MSMEs), and 2020, consistent with the slower growth in construction and
facilitate delivery of social assistance programs, manufacturing. The imposition of the ECQ in Luzon, which
among others. accounts for seventy percent of the country’s economic
activity, has led to loss of income and livelihood for millions
Despite capital outflows caused by heightened global of Filipinos. This is particularly the case for the 7.4 million
uncertainty, lower export growth, and likely lower daily wage workers who were employed in construction,
remittances inflows, the Philippine peso has appreciated in manufacturing, retail, and hospitality sectors.
the first quarter of 2020. Amid increased global uncertainty,
net foreign direct investment (FDI) inflow is expected to be The expected broad-based economic contraction in 2020 is
negative for developing countries including the Philippines. likely to cause an increase in poverty despite government
Similarly, portfolio inflows were volatile in the first quarter effort to mitigate the impact of COVID-19 outbreak.
of 2020, with outflows peaking in March when community Containment measures have cut off income streams from
transmission of COVID-19 was confirmed in the country. seasonal wage earners and entrepreneurial activities in
Remittance inflows are expected to decline as many non-agricultural and low-end service jobs, which were the
overseas Filipino workers (OFWs) returned to the country driver of poverty reduction and shared prosperity in recent
and are unable to go back to their hosting countries. Yet, years. To mitigate the negative economic impact of COVID-19
given the relatively small size of the Philippines’ reliance and the ECQ, the government has launched a social
on FDI and portfolio inflows, the import contraction has protection program for 18 million informal and vulnerable
resulted in peso appreciating 3.0 percent, year-on-year in families and 3.4 million formal workers of small businesses
the first three months of 2020, leading to foreign reserve affected by ECQ. While the emergency subsidy program is
reaching US$87.6 billion in February (7.7 months of imports expected to partially offset income losses, implementation
and payment of services). challenges and delays to reach to vulnerable households
in a timely manner could result in failure to prevent
The Philippines faces a looming contraction in 2020 driven more households to fall into poverty. Based on simulated
by the severity of COVID-19 pandemic and associated estimates, the poverty incidence could increase by at least
containment measures imposed globally. The Philippine 3.3 percentage points assuming a loss of two months’ worth
economy is expected to contract by 1.9 percent in 2020, the of income if there are no mitigation measures in place.
first contraction since the Asian Financial Crisis, as COVID-19
continues to disrupt global and domestic economic The full extent and duration of the COVID-19 outbreak
activities. This projection assumes that the containment is still uncertain and the adverse socioeconomic
measures will be gradually relaxed in the second half of the repercussions of a deeper and prolonged COVID-19
year, and economic activities return in some sectors of the outbreak constitutes a significant downside risk to the
economy. Given income loss and heightened uncertainty, outlook. With most of the countries in the world yet to
household consumption and private investment are succeed in flattening the infection curve, and the risks of a
expected to remain weak in 2020. However, economic second wave of infections for those that appeared to have
growth prospects are expected to improve in succeeding momentarily flattened it remain present, the likelihood of a
years driven by a rebound in consumption, a stronger push deeper global recession in 2020 has escalated. Furthermore,
in public investment, and the recovery of global growth. The travel restrictions and depressed global demand implies
Philippine growth is projected to return to above 6 percent that demand for Philippine goods and services are likely
in 2021 and above 7 percent in 2022, aided by the increased to further contract. Domestically, while the government
economic activity surrounding national elections. continues to take decisive actions to contain the spread
EXECUTIVE SUMMARY
3
of the virus, the risks of continued transmission that force The COVID-19 context has underscored the importance
return to strict lockdown in at least parts of the country of digitalization to support resilience. Indeed, firms and
could push the economy to a deeper contraction in 2020 households with good digital connectivity have been able
with echo effects into 2021. For instance, a protracted ECQ to maintain some activities online during the outbreak.
could transform firms’ temporary liquidity problems into Going forward, innovative solutions could support the re-
solvency issues. Clearly, the overall economic damage of opening of the economy while minimizing resurgence of the
COVID-19 is still uncertain and will largely be dependent on virus. Virtual meetings and remote working are expected
how the pandemic will be contained locally and globally. to continue under the new normal for some sectors of the
economy, therefore widely reliable and affordable access
In the short term, the government effort needs to focus to internet will be critical to ensure business continuity.
on strengthening the capacity of the healthcare system Furthermore, the shift to e-commerce, digital financial
while protecting vulnerable households. Despite effort to services, digital public service and social protection delivery
ramp up testing capacity in the country, more resources started during ECQ is likely to continue even after the
and effort need to be placed in expanding health system lockdown. Finally, digital solutions will remain useful for
capacity to rapidly flatten the infection curve and to prevent contact tracing, to effectively contain new cases spreading
a second wave. Meanwhile, effective social protection rapidly in the communities.
measures are crucial to help households during periods
of lockdown and social distancing, especially the most To successfully embrace the new normal, Philippine digital
economically vulnerable households to provide for their infrastructure needs to be urgently and substantially
basic needs. Similarly, financial support to affected firms to improved to ensure resilient and affordable internet
prevent massive job destruction and bankruptcy are critical service. Due to insufficient competition and an outdated
to ensure temporary shocks do not turn into permanent legal, policy and regulatory framework, the Philippines
damage in country’s productive capacity and human capital. suffers from under-investment in broadband internet
network. As a result, the country’s broadband (high-speed)
In the medium term, supportive policies under the internet penetration is below the level of countries with
new normal will be crucial to accelerate the return to comparable per capita income. Limited infrastructure and
the strong growth momentum. As economic activities weak competition led to poor quality and high cost. For
gradually resume, the lack of an effective vaccine implies instance, the country’s internet speeds are among the
that the economy will operate under a new normal with slowest in the region and its price is higher than the ASEAN
continuous social distancing, strengthened through rules; average. While the private sector should continue to lead
some sectors allowed to operate partially and demand investment efforts in the Philippines’ digital infrastructure,
for some good and services remain suppressed. In this the government plays an important role in creating an
context, fiscal and monetary policies will be critical to re- enabling policy environment. This can be achieved through
start the economy, build confidence, and help the country (i) lowering barrier to market entry; (ii) streamlining permit
return to its high growth path pre-COVID. Given the rapidly requirements; (iii) enabling a fair and level playfield
changing environment and expected revenue shortfall for operators; (iv) fast-tracking and lowering the cost of
in the short term, the economic policy mix needs to be deploying broadband infrastructure; (v) encouraging more
strong but measured, adaptable and based on evidence private sector infrastructure sharing; and (vi) making
to ensure policy effectiveness, and to attain the highest spectrum more available for internet connectivity. Moreover,
socioeconomic impact. Moreover, given the Philippines’ high digitalization of government itself lags behind and strong
risk to natural disasters, fiscal stimulus, public investments investments into the digitalization of public administration
in particular, need to support resilience to natural disasters and public service functions can lead to significant efficient
and climate change to ensure the country’s sustainable gains and boost the digitalization of the country.
long term growth.
PART 1 RECENT DEVELOPMENTS

A series of unforeseen events caused an abrupt impact of these events on the economy has been
halt to the Philippines’ strong growth momentum broad-based, steep, and deep, halting investment
in early 2020. As a result, the Philippine economy activity, and leading to the lowest consumption
contracted by 0.2 percent year-on-year in the first growth in three decades. In response, the Philippine
quarter of 2020, a sharp reversal from the 5.7 percent government implemented a set of fiscal and
growth over the same period a year ago. The growth monetary measures to contain the health, economic,
contraction – the first in over two decades – was and social impact of COVID-19. On the monetary side,
driven by a series of unexpected events, beginning the low and stable inflation rate provided room for
with the Taal volcano eruption in early January which the BSP to step up its accommodative monetary
caused severe disruptions in tourism, agriculture, policies and provide ample liquidity to the banking
construction, and manufacturing activities, the initial sector. On the fiscal side, modest debt levels coupled
outbreak of COVID-19 in China and in the region with recent tax policy and tax administration reforms
which impacted the Philippine’s tourism and trade; have provided the Philippines the fiscal space to
and the deepening of the outbreak into a global implement a wide range of policy measures to help
pandemic and local community transmission which strengthen the country’s health system and support
led to the implementation of stringent containment affected households and firms. The outbreak clearly
measures globally and in the Philippines. These poses the risk of unraveling some of Philippines’
events have sharply reduced economic activity and gains in poverty reduction in recent years.
induced losses of jobs and income. The cumulative
PART 1 RECENT DEVELOPMENTS 5
1.1 ECONOMIC GROWTH: COVID-19 HIT THE

PHILIPPINE AND GLOBAL ECONOMY
Prior to the outbreak of the COVID-19 pandemic, leading indicators for early 2020 suggested a
strong rebound for the Philippine economy as a result of positive consumer confidence, robust
macroeconomic fundamentals, and an improvement in the external sector. However, the COVID-19
shock has put an abrupt stop to the Philippines’ growth momentum, causing growth to contract for
the first time in twenty-two years.
Prior to the outbreak of the COVID-19 pandemic, Philippine investment activity in the first half of the year; and (ii)
economic growth accelerated in the latter half of 2019. weakening private investment amid heightened policy
After a relatively sluggish start to 2019, economic growth uncertainty in the external environment and the uncertainty
rebounded strongly in the second half of the year, surrounding the corporate income tax and fiscal incentive
increasing by 6.5 percent, year-on-year, up from 5.6 percent reform program. In addition, increased trade tensions and
in the first half of 2019, driven by increased public spending protection and slower growth in advanced economies
and robust consumption growth. Full year growth reached resulted in sluggish external demand, contributing to
6.0 percent, the lower end of the government’s growth tepid export growth in 2019. Overall, private consumption
target in 2019, slightly down from 6.3 percent in 2018 (Figure remained the main growth driver in 2019, benefitting from
1). This represented an eight-year low for the Philippine low inflation, a high level of remittances, a recovery in
economy, driven by (i) a significant deceleration in public consumer confidence, and an improving labor market.
Figure 1. GDP growth slowed to an eight-year low in 2019, as investment Figure 2. …while services continued to fuel growth on the
growth weakened… production side.
12 10
10
8
8
6 6
PERCENTAGE POINT
PERCENTAGE POINT
4
4
2
0 2
-2
0
-4
-6 -2
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2017 2018 2019 2020 2017 2018 2019 2020
Investments GDP Growth Services GDP Growth

Government Consumption Other industries
Household Final Consumption Expenditure Manufacturing
Net Exports Agriculture
Source: Philippine Statistics Authority (PSA). Note: Other industries are mining and quarrying, construction, electricity, gas, and water.
Source: PSA.
However, a series of unexpected events in early 2020 fell from 6.2 percent, year-on-year, in the first quarter of
caused an abrupt stop to economic activity, resulting 2019 to 0.2 percent in the same period in 2020. The growth
in the Philippine economy’s first contraction in over deceleration was in large part driven by a combination of
two decades. In early January 2020, the eruption of Taal sluggish demand (due to the spread of COVID-19), a likely
Volcano caused severe disruptions in tourism, agriculture, decline in remittances as the impact of COVID-19 deepens
and manufacturing activities. In early March, as COVID-19 globally,6 and the implementation of strict containment
cases increased rapidly in the Philippines, the government measures to flatten the COVID-19 infection curve. The
imposed an ECQ in Luzon1 on March 16th in an effort to slowdown in consumption growth was broad-based across
flatten the infection curve. The necessary containment all major categories of consumption, as traditional modes
measures led to losses in income for both firms and of consumption activity were disrupted.7 The consumption
workers as temporary job losses mounted2. As a result, of non-essential goods was impacted the most, with the
the Philippine economy contracted by 0.2 percent, year- hospitality and recreation industries among the hardest
on-year, in the first quarter of 2020, the lowest growth rate hit by the COVID-19 pandemic.8 The consumption of health
since the Asian Financial Crisis.3 The economic impact was products was the only exception, which saw its growth rate
broad-based, driven mainly by a decline in investment double in the first quarter of 2020, as demand for health
while private consumption growth fell to its lowest level in products soared amid the COVID-19 pandemic.9
thirty-five years.
Fixed investment growth contracted by 4.3 percent, year-
Leading indicators that track economic activity in real on-year, in the first quarter of 2020, as lingering weakness
time suggest that the Philippines has yet to experience from the prior year was exacerbated by the increased level
the worst effects of COVID-19. An analysis of big data of uncertainty brought by the global pandemic.10 Private
(Box 1) that provide a frequent and updated snapshot of investment spending, which had weakened over the past
the economy reveals that the abrupt decline in economic year as firms delayed investments due to the uncertainty
activity due to COVID-19 continued to deepen in the second surrounding the corporate tax and fiscal incentive reform,
quarter of 2020. For instance, it is expected that activities in persisted into 2020 as investments in durable equipment
the tourism sector, which accounted for 12.1 percent of GDP continued to contract in the first quarter of 2020. This
in 2018 and employs over 5 million Filipinos,4 will come to a drop in investment activity was driven by a sharp fall in
complete halt in the first half of 2020 and travel bans could business confidence, which fell to its lowest level since the
result in a loss of up to 1.4 million international tourists.5 2007-08 global financial crisis.11 Meanwhile, investments in
construction declined for the first time since 2014, as the
eruption of Taal Volcano in early January caused disruptions
The impact of COVID-19 on private consumption growth has
in construction activities in Calabarzon, and as construction
been steep and swift. Private consumption growth, which
activities stopped in line with the implementation of
has been the country’s main growth engine in recent years,
1 Luzon is the country’s main economic growth engine, accounting for around 70 percent of GDP and 56 percent of the population.
2 The Department of Labor and Employment estimated a total of 1.1 million unemployed Filipinos since mid-March, during the implementation of the ECQ.
In addition, over 20,000 overseas Filipino workers have been repatriated to the Philippines as of April 25, 2020 according to the Department of
Foreign Affairs.
3 The Asian Financial Crisis caused the Philippine economy to contract by 0.4 percent, year-on-year, in 1998.
4 2019 data for the Tourism Satellite Accounts, forthcoming.
5 Source: National Economic Development Authority (NEDA).
6 Thus far, over 20,000 overseas Filipino workers have been repatriated as a result of the COVID-19 pandemic (Department of Foreign Affairs).
7 Even the consumption of food and non-alcoholic beverages, which continue to benefit from relatively low and stable inflation, registered weaker growth
in the first quarter of 2020, as growth decelerated to 4.7 percent, year-on-year, down from 5.9 percent a year ago.
8 The hotel and restaurant industry as well as alcoholic beverages and tobacco consumption experienced substantial double-digit contractions, as these
are heavily linked to the tourism sector, which experienced a significant drop in activity in the first quarter of 2020. Moreover, the consumption of alcoholic
beverages was also impacted by various local governments’ liquor bans during the ECQ period.
9 Consumption growth related to health products accelerated to 11.5 percent, year-on-year, in the first quarter of 2020, up from 5.0 percent in the same
period in 2019.
10 Fixed investment growth contracted in 2011, as government underspending, particularly on infrastructure projects, worsened throughout the year.
11 Business confidence fell to 22.3 percent in the first quarter of 2020, based on the BSP’s business expectations survey, the lowest level since 2009. The
decline in business confidence stemmed in large part from the uncertainty caused by the COVID-19 pandemic, in addition to existing concerns regarding
the government’s reforms of corporate income taxes and fiscal incentives.
materials and imports of intermediate goods, reflecting

disruptions in global value chains caused by the
COVID-19 pandemic.
Mobility restrictions and personal avoidance behavior

curbed not just demand, but also the production of
goods and services, with, for instance, the services sector
growing at its slowest pace in nearly three decades in the
first quarter of 2020. Growth in the services sector slowed
from 7.1 percent, year-on-year, in the first quarter of 2019
to 1.4 percent in the same period in 2020, despite the ECQ
period only covering two weeks in March. The impact on
services was broad-based, with the exception of areas
related to human health and social work. In particular, the
transport and accommodation and food services industries
the ECQ in Luzon. Moreover, the slump in construction were impacted the most, contracting by 10.7 percent and
investments was also driven by the slow start of the 15.3 percent, year-on-year, respectively. Meanwhile, the
government’s infrastructure program for 2020, prior to the agriculture sector posted a slight contraction in the first
implementation of the ECQ.12 quarter of 2020, as output declined by 0.4 percent, year-on-
year (compared to 0.5 percent growth in the same period
in 2019),15 due in large part to the eruption of Taal Volcano,
External demand weakened substantially as the spread
which resulted in damages worth Php3 billion in the
of COVID-19 crippled tourism and disrupted global value
agriculture sector.16
chains. Philippine export growth, which had already
been weakening since 2019, further weakened as both
merchandise and services export growth shrunk in the first The industry sector contracted for the first time in nearly
quarter of 2020, with transport and travel export services a decade. The manufacturing sector contracted by 3.6
hit the most as travel restrictions were implemented in the percent, year-on-year, in the first quarter of 2020. The
Philippines and globally.13,14 However, exports of electronics weakness in manufacturing output was broad-based,
products, which account for half of total merchandise impacted by the initial COVID-19 outbreak in China, which
exports, showed some resilience in the first quarter, growing caused large disruptions in global value chains. Moreover,
at 5.7 percent, year-on-year, similar to the 6.0 percent in the eruption of Taal Volcano caused significant disruptions
the same period in 2019 possibly suggesting that importers in manufacturing activity in the Calabarzon region, which
have turned to alternative sources to China. Yet, electronics accounts for nearly 40 percent of manufacturing output in
product export growth was not enough to compensate the Philippines. The construction sector contracted by 1.8
for the 8.3 percent contraction of other exports, resulting percent, a reversal from the 5.0 percent growth recorded
in a 1.8 percent contraction in total merchandise exports. a year ago. This was partly due to the failure of the public
Meanwhile, imports contracted by 9.0 percent, year-on- infrastructure program to gain steam in the first quarter
year, in the first quarter of 2020, a reversal from 8.9 percent of the year, exacerbated by Taal Volcano eruption and the
growth registered a year ago driven by weaker domestic implementation of the ECQ in March. Overall, the industry
demand. The fall in imports reflected weaker consumption sector contracted by 3.0 percent, year-on-year, in the first
activity during the quarter, the fall in capital-goods imports quarter of 2020, a reversal from the 4.9 percent growth
as investment activity shrunk, and a contraction in raw recorded in the same period a year ago.
12 The government’s public infrastructure spending contracted in the first two months of 2020.
13 Transport services exports contracted by 34.4 percent, year-on-year, in the first quarter of 2020, while travel-services exports contracted by 15.2 percent
over the same period. Cumulatively, both sectors account for roughly one-fourth of the country’s total services exports.
14 Revenue from international tourism fell by 35 percent year-on-year in the first quarter of 2020 due to imposed travel restrictions as a result of the
COVID-19 pandemic.
15 The contraction was driven by reductions in output in both the crops sub-sector (-1.7 percent) and the fisheries sub-sector (-5.2 percent).
16 Source: National Disaster Risk Reduction and Management Council.
Box 1. Tracking the Impact of COVID-19 in Real Time
Tracking the impact of COVID-19 in real time is dropped by 95 percent between the week of March 9th
challenging given the significant lag of official data. and the week of April 6th (Figure 3). Similarly, visits to
As of mid-April, PSA has data on GDP and GNI from malls, restaurants, and movie theaters dropped by the
Q4 2019, the March inflation rate, the February trade 80 percent, year-on-year, in the same period dropped
balance, the January employment rate, and the underscoring the hit taken by retail activity (Figure 4).
February integrated survey of selected industries.
None of these official data sources can capture the Big data can also help authorities monitor the impact
decline in economic activity after ECQ measures were of the lockdown on public mobility and sentiment.
implemented. Moreover, future data may become Using Apple’s driving mobility data, traffic in Manila
more challenging to obtain, as the PSA has already began to slowdown during the second week of March
announced that preparations for surveys such as the (Figure 5). During the ECQ, traffic in Manila was around
Census are being postponed to ensure the safety of 20 percent of the volume in mid-January. Moreover,
its employees. Google Trends reveals that since the lockdown the
desire to travel has dropped to a yearly low and the
The short-term impact of the ECQ on travel and retail interest in movie streaming and food delivery is at an
can be measured using freely available big data. annual high (Figure 6).
Flight data show that departures from Manila airport
Figure 3. Since the start of the enhanced community quarantine, Figure 4. …visits to retail locations have dropped by over
air travel has dropped by 95 percent… 80 percent…
DEPARTURES OUT OF MANILA AIRPORT 20
0
400
-20
NUMBER OF FLIGHTS
300
-40
200
-60
100
-80
0
-100
9-MAR 16-MAR 23-MAR 30-MAR 6-APR 15-FEB 22-FEB 29-FEB 7-MAR 14-MAR 21-MAR 28-MAR 4-APR 11-APR
Source: FlightRadar24 (April 13, 2020) Source: Google Covid-19 Community Mobility (April 9, 2020)
Figure 5. …Manila is experiencing 80 percent less traffic… Figure 6. …and people’s interests and desires have changed.
MANILA: CHANGE IN ROUTING REQUEST ON APPLE MAPS SINCE JANUARY 13, 2020 INTEREST OVER TIME
60
120
40
20 100
0 80
-20
-40 60
-60 40
-80
20
-100
13-JAN 20-JAN 27-JAN 3-FEB 10-FEB 17-FEB 24-FEB 2-MAR 9-MAR 16-MAR 23-MAR 30-MAR 6-APR 13-APR 0
1-JAN 8-JAN 15-JAN 22-JAN 29-JAN 5-FEB 12-FEB 19-FEB 26-FEB 4-MAR 11-MAR 18-MAR 15-MAR 1-APR 8-APR
Travel Netflix Delivery

Source: Apple Maps Mobility Trends Reports (April 13, 2020) Source: Google Trends (April 15, 2020)
Box 2 . Recent Global Developments
The COVID-19 pandemic has caused massive Advanced economies are faced with an unprecedented
disruptions in global economic activity. The global slump in economic activity as they grapple with the
composite Purchasing Managers’ Index (PMI) fell to 39.4 far-reaching consequences of the COVID-19 pandemic.
in March, as a bounce-back in the China composite PMI As the number of COVID-19 cases soared in advanced
failed to offset a record plunge in that of the euro area, economies, governments implemented mitigation
and it is fast approaching its 2009 low of 36.8 (Figure measures, such as lockdowns and other restrictions,
7). Moreover, the Chicago Board Options Exchange to slow the spread of the outbreak and ease the
(CBOE) volatility index—a measure of market risk and burden on healthcare systems. In the United States,
investor sentiment—increased sharply in the beginning high-frequency service-sector indicators point to
of 2020 (Figure 8). Incoming data suggest that the sharp an unprecedented economic collapse, especially for
slowdown in global economic activity likely deepened services and travel. Compared to the global financial
in April 2020, as many governments, particularly in crisis, weekly unemployment claims have risen much
emerging market and developing economies (EMDEs), faster, while industrial production and retail sales
imposed new or broadened existing mitigation have fallen much more sharply. In the euro area,
measures. Capital flows to emerging markets have many countries are heavily reliant on tourism, a
retreated sharply, with 4-week average non-resident sector virtually shut down by government policies and
equity and debt flows to emerging markets falling to a particularly prone to slow recoveries, which means that
level lower than that during the global financial crisis the pandemic has had a significant impact on economic
of 2007–08. Most commodity prices plunged further in activity. In contrast to the United States, the rise in
March and into April as concerns about the impact of unemployment has been modest so far in the European
the pandemic on commodity demand intensified.17
Figure 7. As a result of the COVID-19 pandemic, economic activity Figure 8. …while volatility has increased dramatically.
has fallen sharply…
90
55
80
50 70
60
45 50
40
40
30
20
35
2018 2018 2018 2018 2018 2018 2019 2019 2019 2019 2019 2019 2020 2020 10
JAN MAR MAY JUL SEP NOV JAN MAR MAY JUL SEP NOV JAN MAR
Global PMI: Composite Ouput 0

1/2/2018
3/2/2018
5/2/2018
7/2/2018
9/2/2018
11/2/2018
1/2/2019
3/2/2019
5/2/2019
7/2/2019
9/2/2019
11/2/2019
1/2/2020
3/2/2020
Global Manufacturing PMI

Global PMI: Services
Volatility Index (VIX) Close
Note: An expansion is represented by 50+. Source: Chicago Board Options Exchange.

Source: Haver Analytics
17 The International Energy Agency is expecting demand to decline by 23 percent in the second quarter of 2020, before gradually recovering
through the rest of the year. While Brent crude oil prices fell 40 percent in March, with the fall in prices exacerbated by the breakdown of the
production agreement by Organization of the Petroleum Exporting Countries (OPEC) and its partners, including Russia, in early March.
Figure 9. Real GDP Growth, 2016-19 Figure 10. Global Trade Growth, Jan 2016-Jan 2020
(Regional Aggregates, %, Year-on-Year) (%, Year-on-Year)
7
7
6
6
5
5
4
4
3
3 2
2 1
1 0
0 -1
2016 2016 2016 2016 2017 2017 2017 2017 2018 2018 2018 2018 2019 2019 2019 2019
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
-2
-3
World Emerging markets
JAN 2020
JAN 2016
APR 2016
JUL 2016
OCT 2016
JAN 2017
APR 2017
JUL 2017
OCT 2017
JAN 2018
APR 2018
JUL 2018
OCT 2018
JAN 2019
APR 2019
JUL 2019
OCT 2019
Asia and Pacific Advanced economies
Asia and Pacific (excl China)
Source: Haver Analytics Source: Haver Analytics
Union, in large part due to the widespread use of capacity of their healthcare systems. EMDEs have also
shorter work-time policies. Policymakers have promptly faced unprecedented external headwinds from much
provided an unprecedented degree of fiscal and weaker activity in major economies, sharp declines in
monetary support to households, firms, and financial commodity prices, disruptions to global supply chains
markets, but conditions in advanced economies remain and tourism, markedly lower remittances, and financial
at considerable risk. market turmoil. Manufacturing activity and new export
orders have sharply contracted, particularly in EMDEs
The pandemic has also dealt a massive blow to EMDEs. with a large presence of manufacturing or export-
Many have adopted mitigation measures, including oriented firms.
economy-wide lockdowns, international border and
school closures, and restrictions on domestic travel. In China has seen a precipitous decline in economic
many EMDEs, efforts to avoid the virus have weighed activity, but there are signs of a fragile recovery. In
heavily on private consumption, generated widespread the first quarter of 2020, the Chinese economy shrank
unemployment, and led to a sharp decline in retail for the first time since 1976, as GDP growth contracted
sales. Uncertainty over the spread of COVID-19 and by 6.8 percent, year-on-year, due to the COVID-19
the lifting of mitigation measures have coincided with pandemic. The impact of the pandemic on China
the erosion of business confidence and a decline in was broad-based, steep, and deep, as consumption,
investment. Businesses have also had to contend with export, and investment growth, the three main engines
delivery delays in intermediate inputs, severe drops of Chinese GDP growth, all experienced substantial
in receipts, and limited access to financing. Moreover, double-digit contractions. But coal consumption, which
domestic outbreaks are beginning to overwhelm is a widely followed indicator of electricity generation,
healthcare systems in a rising number of EMDEs— and hence economic activity, is gradually increasing.
including low-income countries and countries in Sub- Similarly, prices of manufactures of construction
Saharan Africa—because of the small size and limited machinery increased in March 2020, as sales hit a
record high, potentially hinting at a recovery for chains. Trade is typically more volatile than output
China’s construction sector. In addition, a majority of and tends to fall more sharply in times of crisis. The
firms in China have started to resume operations, fall in trade activity has been concentrated in usually
as 98 percent of industrial enterprises above more stable services sectors. Travel restrictions and
designated size18 and about 80 percent of small and concerns about COVID-19 have led to a precipitous
medium-sized enterprises (SMEs) have reportedly fall in tourism—a sector that in recent years has
resumed operations as of April 10th, according to accounted for about 6.5 percent of global exports of
the Ministry of Industry and Information Technology. goods and services—with sharp declines in economies
Moreover, leading macroeconomic data suggest a with the most severe outbreaks. As the pandemic
continued recovery for China, as growth in total credit has spread, stringent border controls and production
to the non-financial sector accelerated in April,19 while delays have weighed on trade. Measures to slow the
export and import growth rebounded in March, despite outbreak have limited or delayed the supply of critical
continued contraction.20 inputs, particularly in the automotive and electronics
industries. The collapse of air transport has resulted in
Recent indicators suggest that global trade will suffer a steep rise in air freight costs, putting further strain on
one of the worst contractions in post-war history industries that rely on just-in-time delivery of foreign-
in 2020, partly owing to the impact of the COVID-19 sourced intermediate goods.
pandemic on international travel and global value
Source: World Bank. 2020. Global Economic Prospects June 2020. Washington, DC: World Bank; Haren, and Simchi-Levi 2020; and Baldwin and Tomiura 2020.
18 Refers to industrial enterprises with annual main business revenues of 20 million yuan or more.
19 Growth in total credit to the non-financial sector was 11.7 percent, year-on-year, in April, up from 10.9 percent in March.
20 Goods exports fell 6.6 percent year-on-year in March, following a decline of 17.2 percent year-on-year in January-February.
1.2 FISCAL POLICY: ACCELERATING SPENDING

AMID AN EROSION OF FISCAL SPACE
The government’s fiscal balances have showed signs of deterioration with the implementation of
strict containment measures to prevent the spread of COVID-19 as its tax revenue base weakened
amid both supply and demand shocks due to the COVID-19 pandemic. However, the fiscal deficit has
remained well within target in the first quarter of 2020, as a result of government underspending
and a substantial boost in non-tax revenues.
The government’s fiscal deficit fell within its programmed percent in Q1 2019) in Q1 2020 driven by the increase in
target for the first quarter of 2020, primarily as a result of personnel services expenditures, with the implementation
an early remittance of non-tax revenues and as spending of the first tranche of the Salary Standardization Law V, and
fell short of the target (Figure 11). The fiscal deficit shrunk maintenance spending by various line agencies (Figure
to 1.7 percent of GDP in the first quarter of 2020, nearly 12). Yet, government spending fell short of its programmed
80 percent lower than the programmed target. This was target for the first quarter of 2020 as infrastructure
primarily a result of a combination of underspending by spending contracted22 and as the enforcement of the ECQ
the government, while revenue collections exceeded the caused delays in program implementation.23
programmed target. The higher-than-programmed revenue
collections were primarily driven by a three-fold increase in Tax revenue collections experienced a sharp contraction
non-tax revenues as a result of early dividend remittances amid the implementation of the ECQ in March. The
to the Bureau of the Treasury (BTr) from GOCCs given implementation of ECQ in Luzon and other affected regions
shortfall in tax revenues amid the impact of COVID-19 and resulted in a nearly flat growth in tax revenues generated
the corresponding containment measures. by the Bureau of Internal Revenue (BIR) and Bureau of
Customs (BOC) in the first quarter of 2020. Tax collection
Public spending accelerated in March 2020 in response in March by the BIR fell by 10.7 percent, year-on-year, in
to the COVID-19 pandemic. After a slow start in the first nominal terms, when ECQ started.24 In addition, revenue
two months of 2020, government spending accelerated from the BOC fell by 9.4 percent, year-on-year, in nominal
in March21. In particular, the government released around terms in March as a result of lower import volumes due
Php350 billion to various national government agencies to the impact of COVID-19 related containment policies on
(NGAs) and local government units (LGUs) to support global supply chains and business activity. To offset the
their respective COVID-19 response measures since the anticipated shortfall in tax collections, non-tax revenues
passage of the “Bayanihan to Heal as One Act” (Box 3). increased more than three-fold,25 due to early dividend
Government spending reached 19.0 percent of GDP (17.6 remittances of the BSP and GOCCs to the BTr. As a result,
21 Public spending growth decelerated in the first two months of 2020, as disbursements expanded by 5.2 percent year-on-year in nominal terms
compared to 6.9 percent over the same period in 2019, driven by a significant contraction in public infrastructure spending by 20.7 percent year-on-year.
However, national government disbursement growth accelerated to 16.0 percent year-on-year in March 2020, after growing by 5.2 percent in the first two
months of 2020.
22 In the first two months of 2020, public infrastructure spending contracted by 20.7 percent year-on-year, mainly attributed to the base effect of high
public infrastructure spending in the first quarter of 2019 due to the payment of prior years’ accounts payable for completed projects under the DPWH.
In addition, the implementation of the ECQ in March likely caused delays to the construction sector.
23 The national government fell short of its programmed target by Php143.8 billion in the first quarter of 2020.
24 Income tax return deadlines for individuals and corporations as well as for withholding tax have been extended by up to one and a half months under
Revenue Regulation (RR) 10-2020 which was issued on April 14. Other taxes postponed by at least one month under the issuance include, value-added tax
(VAT), excise tax, and documentary stamp tax, among others. Moreover, the Philippines’ two state-run pension funds – the Government Service Insurance
System (GSIS, for government employees) and the SSS (for private sector employees) have both deferred contribution payments to June 1. The extension of
tax compliance deadlines is expected to cause a shortfall of Php470 million in tax revenue in the first half of 2020.
25 In the first quarter of 2020, non-tax revenues increased to Php154.4 billion from Php49.9 billion in the first quarter of 2019.
total public revenues increased by 17.4 percent, year-on- percent of GDP in 2019 from 39.9 percent in 2018. Publicly
year, in nominal terms in the first quarter of 2020 to reach guaranteed debt also remains small at 2.5 percent of GDP.
17.3 percent of GDP (15.5 percent of GDP in Q1 2019). These trends continued into the first quarter of 2020, as
national government debt fell slightly to 41.8 percent of
Nevertheless, the country’s overall fiscal health remains GDP in the first quarter from 42.0 percent over the same
sound, providing the government enough fiscal space to period a year ago. Moreover, debt metrics continue to
respond to the ongoing COVID-19 pandemic (Figure 13 and remain favorable, composed largely of long-term debt (72.7
Figure 14). Despite a larger than expected increase in the percent) while around two-thirds of the country’s total debt
country’s deficit in 2019, the national government’s public is composed of peso-denominated debt.
debt ratio continued to improve, declining slightly to 39.6
Box 3. The Bayanihan to Heal as One Act
The President of the Philippines signed Republic Act COVID-19 response. In particular, the law authorizes the
No. 11469, known as the “Bayanihan to Heal as One discontinuance of appropriated programs, activities,
Act”, on March 25, 2020, providing the legal framework or projects (PAP) of the Executive Department,
for the government’s comprehensive response to including GOCCs, in both the 2019 and 2020 General
the COVID-19 pandemic. The law, valid for three Appropriations Act (GAA). The discontinued PAPs may
months should Congress not terminate or extend be revived within the next two years after the national
the coverage, issues a formal declaration of State of emergency has ended. In addition, all unutilized or
National Emergency26 and provides the President with unreleased balances in the special purpose fund
the authority to exercise additional powers to mitigate would be considered abandoned and considered as
and contain the spread of COVID-19 while providing the savings, to be automatically appropriated for measures
government with the resources to address the impact of to support the COVID-19 emergency operations and
the pandemic on the Philippine economy. In particular, response measures of priority budget items. In terms of
the law grants the president additional powers to local government financing, LGUs are allowed to exceed
adopt temporary emergency measures in the health, the mandatory 5 percent budget for their respective
economic, and social-protection sectors. The President calamity funds, with additional support coming
is also allowed to realign items in the 2019 and 2020 from the national government. In order to ensure
budgets to ensure that the proposed measures receive transparency and effective use of public resources, the
adequate funding. The law was passed against the government is mandated to submit a report to Congress
backdrop of a continued acceleration in the number that includes the details of the realignment of the
of COVID-19 cases,27 and as disruptions in the economy budget as well as the utilization of funds.
caused losses of income, unemployment, interruptions
in local supply chains, and sharp declines in both In the health sector, additional authorized powers are
consumer and business confidence. centered on mitigation and containment measures
while improving the capacity of the country’s
RA No. 11469 provides additional powers to the healthcare system. Primarily, RA No. 11469 prioritizes
government to mobilize existing resources to fund its the implementation of measures to prevent and
26 The declaration came after earlier presidential declarations of state of public health emergency (Proclamation No. 922, March 8, 2020) and
state of national calamity (Proclamation No. 929, March 16, 2020) that placed the whole of Luzon in an ECQ. Other cities and provinces across
the country have also enforced travel restrictions, strict home confinement, heightened presence of uniformed personnel to enforce isolation
procedures, and suspension of transportation lines, as well as work in both public and private sectors, except for those engaged in frontline,
basic and essential services.
27 By March 23, 2020, the total number of confirmed cases rose to 462, a sharp increase from 5 confirmed cases on March 5, 2020.
contain the spread of COVID-19 in the Philippines and will include the implementation of an expanded
through effective education, detection, protection, and and enhanced conditional cash-transfer program that
treatment. In terms of detection, the law mandates the will cover workers in the informal sector and non-
reduction of bureaucratic red tape in the accreditation beneficiaries of the current program. In addition to
of testing kits to facilitate the prompt testing by both cash and in-kind assistance, the law provides relief
public and private medical institutions. The law reduces to all individuals affected by the ECQ by extending
bureaucratic hurdles by ensuring clearance and no the deadlines for filing and submitting documents
delays in the donation, acceptance, and distribution and paying taxes, fees, and other charges, as well
of health products and by expediting procurement as implementing a thirty-day grace period on loan
of relevant goods and services28 for health and social payments and residential rents.
service delivery. In addition, the law takes additional
steps to ensure that the country’s front-line health The law creates the necessary legal framework to
workers are provided additional compensation and ensure that the Philippine economy continues to
protection for their services while hiring additional function in the midst of the ECQ. Additional powers
temporary health workers to augment the existing granted to the president include the implementation
health workforce. Moreover, the Department of Health of measures to protect consumers from hoarding,
(DOH) and the Philippine General Hospital (PGH) product deception, and price manipulation in relation
will receive priority budgetary support to improve to essential goods. In addition, the law ensures the
the capacity of the health sector to respond to availability of credit to productive sectors by lowering
the pandemic. effective lending rates and reserve requirement ratios
for lending institutions. The law also authorizes the
RA No. 11469 includes a strong social-protection continued use of alternative work arrangements
pillar, focusing largely on financial support to the during the ECQ period for both the private and public
poor and vulnerable, which anchors the government’s sector. Moreover, the law authorizes the government to
broader social-protection response. The law includes take the necessary steps to ensure the availability of
emergency cash transfers worth Php5,000-Php8,000 per essential goods through the facilitation of local supply
month for two months to around 18 million households chains and the conservation and distribution of power,
who are either poor or in the informal sector. The cash- fuel, energy, and water to ensure adequate supply for
transfer program will cost a total of Php200 billion the public.
28 This includes personal protective equipment (PPE), medical equipment, and items purchased for social-service delivery and support, the
lease of real property for health workers, and the construction and operation of temporary medical facilities (e.g., telecommunications facilities
and utilities).
Figure 11. National Government Fiscal Balance (% of GDP) Figure 12. National Government Expenditure by Component (% of GDP)
25 3.5 25
2.5
FISCAL BALANCE (PERCENT OF GDP)

20
20
1.5 5.5 5.4 4.4
PERCENTAGE POINT
4.4
PERCENT OF GDP
15 4.2 4.8
15 0.5
-0.5 10
-1.7 14.0 14.0 14.8
10 -1.5 13.3 13.4 12.7
-2.1 -2.0
5
-3.1 -2.5
5 -3.4 -3.7
0
-3.5
2016 2017 2018 2019 2019 2020
0 -4.5 Q1 Q1
2017 2018 2019 Q1 Q1 Q1 Net lending
2018 2019 2020 Capital outlays
Revenues Expenditures Current operating expenditures
Fiscal Balance (RHS)
Source: DBM, PSA. Source: DBM, PSA.
Figure 13. The government continues to finance its deficit mainly Figure 14. The overall debt-to-GDP ratio moderated slightly in 2019.
through domestic borrowing.
400 45 4.0
300 40 3.4 3.5

35 2.9
200 3.0
IN PERCENT OF GDP
2.7 2.7
30 2.5 2.5
100 2.5
IN BILLION PESOS
25
- 2.0
20
(100) 1.5
15
(200) 10 1.0
(300) 5 0.5
JAN JUL JAN JUL JAN
0 0.0
2018 2019 2020 2016 2017 2018 2019 Q1 Q1
2019 2020
Net Foreign Financing Net Domestic Financing External debt Domestic debt
Budget Surplus/Deficit NG Guaranteed Debt (RHS)
Source: BTr. Source: BTr, PSA.
Box 4. ASEAN-5 Policy Response to COVID-19
The ASEAN-5 countries have taken extraordinary Governments have also ramped up fiscal measures that
measures to address the impact of the COVID-19 include tax reliefs and public spending on health and
pandemic.29 Among these countries, the COVID-19 social-protection programs. Fiscal packages have been
infection rate has varied, with Singapore recording prominent among the ASEAN-5 economies, and the they
the highest number of cases at over 30,000 cases as have generally included tax relief and deferments as
of the fourth week of May, followed by Indonesia, the well as tax breaks to both households and businesses.
Philippines, and Malaysia with over 20,000, 14,000, Indonesia has gone further than any of the ASEAN-5
and 7,000 cases, respectively. Vietnam seemed to have economies by permanently reducing the corporate
managed the outbreak with only 327 cases. Despite income tax rate from 25 percent to 22 percent in
different infection rates, all the ASEAN-5 countries have 2020−21 and to 20 percent starting in 2022. To mitigate
adopted strong policy responses to address the health, the social impact, cash transfers and wage subsidies
social, and economic impact of the pandemic. In their have been provided to targeted groups, including
policy toolkit, the authorities have used monetary and low-income households, unemployed and displaced
financial, fiscal, and real-sector policy measures. workers, pensioners and retirees, and individuals in
the informal sector. MSMEs are supported with tax
cuts, deductions, and deferments (Indonesia, Thailand,
Monetary and financial policy measures have focused
and Vietnam), on top of mandates for commercial rent
on maintaining domestic liquidity and providing
deferment and loan and grant programs (Philippines,
support to the banking sector. The ASEAN-5 countries
Malaysia, and Thailand).
have all reduced their key policy rates, with countries
like Indonesia, Malaysia, and the Philippines also
reducing their reserve requirements. These measures Besides monetary and fiscal measures, governments
were taken to maintain the level of domestic liquidity have also taken stringent health and travel measures
and cash in the economy at a time when business to arrest the spread of the virus locally. Governments
disruptions have resulted in extremely weak market in Indonesia, the Philippines, Thailand, and Vietnam
activities. To support both businesses and households, have all declared a state of national emergency in
central banks have mandated financial credit measures their respective countries. Authorities in the ASEAN-5
such as loan repayment moratoriums, payment countries have implemented travel restrictions and
deadline extensions, and loan restructuring. There have lockdown, quarantine, and movement control orders to
also been extraordinary measures, including the central contain the spread of the virus, despite the disruptions
bank of the Philippines’ (BSP) reverse repurchase in business operations and market activities. In the
agreement with the BTr worth Php300 billion, and health sector, governments have provided incentives,
the creation of a liquidity stabilization fund to buy set up contingency funds, and streamlined processes
corporate and government bonds in Thailand. for the procurement of PPE, medical kits, and other
health equipment. Some countries have also directly
supported select sectors such as agriculture, tourism,
and the airline industry, among others.
Source: For updates on the COVID-19 policy responses, visit the IMF Policy Responses to COVID-19, accessible at https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19.
29 The ASEAN-5 countries are Indonesia, Malaysia, the Philippines, Thailand, and Vietnam.
1.3 MONETARY AND MACRO-PRUDENTIAL

POLICIES: GEARED TOWARD MITIGATING THE
IMPACT OF THE COVID-19 PANDEMIC
Thanks to muted inflationary pressures in the first four months of 2020, monetary policy focused
on injecting liquidity into the financial market to help mitigate the impact of the COVID-19
pandemic on the economy.
Inflation remained comfortably within BSP’s target range impact of the COVID-19 outbreak. The BSP reduced its key
in the first four months of 2020. The headline inflation policy rate in February and March by a total of 75 bps to
rate dropped significantly from an average of 5.2 percent 3.25 percent, followed by a 50 bps off-cycle rate cut in April,
in 2018 to 2.5 percent in 2019, before stabilizing at 2.6 bringing the benchmark rate to 2.75 percent. The reserve
percent in the first four months of 2020—within the BSP’s requirement ratio (RRR) faced by universal and commercial
2-4 percent target range (Figure 15). In the first four months banks was reduced by 200 bps in April to further support
of 2020, both food and non-food inflation slowed (Figure domestic liquidity.31 The BSP has also adopted other
16), primarily driven by cheaper local rice and global crude regulatory measures and taken preemptive actions to
oil30, the latter of which led to slower or negative inflation minimize the economic fallout of the COVID-19 pandemic.32
for energy-related commodities (Figure 17). Rice prices The liquidity injection benefited households more than
remained lower in the first four months of 2020 than in the firms, since credit to households accelerated while credit to
same period in 2019 due to the rice tariffication scheme firms moderated.33
adopted in 2019 (Figure 18). Excluding volatile food and
energy items, the core inflation rate averaged 3.3 percent The Philippines’ financial system remains resilient based
in 2019, down from 4.1 percent in 2018. A similar downtrend on available data.34 Philippine banks are well capitalized,
was observed in the first four months of 2020, as the core with a total capital adequacy ratio of 15.6 percent in
inflation rate averaged 3.1 percent, year-on-year, down from December 2019, an improvement compared to 15.0
3.8 percent in same period in 2019. percent in December 2018 and well above the 10.0 percent
regulatory minimum. The share of non-performing loans
The benign inflation environment in the first four months (NPL) slightly increased to an average of 2.1 percent from
of 2020 provided monetary policy space to mitigate the January to December 2019, up from an average of 1.9 percent
30 In the first four months of 2020, the price of Brent crude oil averaged US$43.73/bbl, a 33 percent decline from an average of US$65.25/bbl in the same
period in 2019, as the world oil market suffered from oversupply and weakening demand amid travel restrictions imposed by several countries.
31 The RRR for universal and commercial banks was reduced incrementally by a total of 400 bps, from 18 percent in 2018 to 14 percent in 2019. Likewise,
the RRR imposed on thrift banks and non-bank financial institutions with quasi-banking functions (NBQBs) was reduced by a total of 400 bps, from 8
percent and 18 percent, respectively, in 2018 to 4 percent and 14 percent, respectively, by end-2019. Meanwhile, a cumulative total of 200 bps was deducted
from rural banks’ RRR, which stood at 3 percent by end-2019.
32 The BSP relaxed know-your-customer (KYC) requirements to facilitate the delivery of welfare funds to identified beneficiaries who have no available
valid IDs or transactional account with any financial institution. The BSP also digitized some operations and waived some types of penalties and fees for
foreign exchange transactions. Furthermore, the BSP purchased government securities from the BTr under a repurchase agreement in the amount of Php
300 billion, with a maximum repayment period of 6 months, and remitted Php20 billion in dividends to help boost government resources. To incentivize
physical distancing and prevent the spread of COVID-19, charges on electronic payment and financial services filing, processing, and licensing/registration
fees relative to applications have been suspended effective for a period of six months, starting on March 8, 2020. The BSP has also provided some relief
measures to micro, small, and medium enterprises by (i) temporary reducing the credit risks assigned to their loans; and (ii) assigning a 0 percent risk
weight for their guaranteed loans.
33 Credit to firms reached Php8.8 trillion and grew by 10.7 percent, year-on-year, in March 2020, lower than 12.3 percent in March 2019. By contrast,
household loans grew by 12.5 percent, year-on-year, in March 2020, up from 10.8 percent in the same period in the previous year.
34 Based on data up to and including March 2020.
in the same period in 2018. Preliminary data for March 2020 assets at 1.3 percent in 2019 (up from 1.2 percent in 2018).
shows a slight increase in NPLs to 2.2 percent. Nevertheless, The share of net interest income to total operating income
the country’s banking sector was highly profitable pre- increased from an average of 76.0 percent in 2018 to 76.8
COVID, with an average return on equity at 10.0 percent in percent in 2019.
2019 (up from 9.6 percent in 2018) and an average return on
Figure 15. Inflation eased in 2019 and was within the BSP’s target range Figure 16. …due to slower food and non-food inflation…
in the first four months of 2020… JANUARY-APRIL AVERAGE INFLATION AND COMMODITY GROUP CONTRIBUTIONS (PERCENT)
4.0
10 3.6
8 43%
50% 2.6
6
7% 50%
PERCENT
4 5%
2 50% 11%
44%
0 39%
-2 2018 2019 2020

JAN-18 APR-18 JUL-18 OCT-18 JAN-19 APR-19 JUL-19 OCT-19 JAN-20 APR-20 Non-food
Alcoholic beverages and tobacco
Core Inflation Headline inflation
Food & Non-alcoholic beverage BSP Key policy rate Food and non-alcoholic beverages
Source: PSA and BSP Source: PSA
Figure 17. ...as rice inflation remained negative, utilities prices rose only Figure 18. There was a sustained overall decline in rice prices in the
marginally, and transport prices deflated between January and April 2020. beginning of 2020, except in the early weeks of April.
8 50
7
6 40
PHP PER KILOGRAM
5
4 30
3
PERCENT
2 20
1
0 10
MAR-17
MAY-17
JUL-17
SEP-17
NOV-17
JAN-18
MAR-18
MAY-18
JUL-18
SEP-18
NOV-18
JAN-19
MAR-19
MAY-19
JUL-19
SEP-19
NOV-19
JAN-20
MAR-20
APR WK2
-1
-2
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
JAN
FEB
MAR
APR
2018 2019 2020 Palay (Dry)

Well Milled Rice (WMR) - Retail
Rice Utilities
Well Milled Rice (WMR) - Wholesale
Transport Others
Regular Milled Rice (WMR) - Retail
Food (except rice) Headline inflation
Regular Milled Rice (WMR) - Wholesale
Source: PSA Source: PSA
1.4 THE EXCHANGE RATE AND THE EXTERNAL

SECTOR: RESILIENCE DRIVEN BY STRONG
INITIAL CONDITIONS
2019 was a strong year, capped with a balance of payments (BOP) surplus in the Philippines.
This may explain the country’s resilience in the external sector despite the COVID-19, with
a peso that appreciated while regional currencies depreciated, and capital flows that were
among the lowest in the region.
The Philippines entered 2020 with strong external was mainly driven by net outflows in the Philippine Stock
balances, thanks to a narrower current account deficit Exchange market which was battered in mid-March with
and a BOP surplus in 2019. The current account deficit the onset of the COVID-19 outbreak and the subsequent
fell by nearly 95.0 percent in 2019, from US$8.8 billion (2.5 imposition of the ECQ in the country. Transactions in
percent of GDP) in 2018 to US$0.5 billion (0.1 percent of government securities have also contributed to the
GDP) (Figure 19). Goods imports contracted by 3.0 percent, net outflows. Nonetheless, using comparable data, the
while goods exports expanded by 2.7 percent, supported by Philippines has performed remarkably better than regional
exports of electronics, agro-based and mineral products. peers with portfolio capital outflows among the lowest in
Net services exports grew double-digits with reports of the region (Figure 20).
higher tourist arrivals and better IT-BPO earnings receipts,35
while foreign remittances increased due to higher inflows The Philippine peso appreciated in early 2020. The
from the United States and Japan. Meanwhile the capital Philippine peso steadily appreciated in nominal terms
and financial accounts registered a lower surplus of US$6.3 against the U.S. dollar throughout most of 2019 due to
billion (1.7 percent of GDP) in 2019 from US$9.4 billion slower import growth and capital inflows. In the first
(2.7 percent of GDP) in 2018. Long-term investments were four months of 2020, the Philippine peso appreciated
impacted by uncertainties in the global environment and by an average of 3.0 percent, year-on-year, driven by the
the proposed corporate tax reform package. With lower contraction in imports, resulting in weaker demand for
current-account deficit and net capital inflows, the balance U.S. dollars. In real terms, the peso has appreciated by as
of payments registered a US$7.8 billion (2.1 percent of GDP) much as 5.4 percent in the first four months of 2020. The
surplus in 2019, an improvement from a US$2.3 billion (0.7 peso appreciation comes at a time when the currencies of
percent of GDP) deficit in 2018 (Table 1). regional peers have depreciated (Figure 21). The currency
appreciation was accompanied by a re-accumulation of
The strong initial conditions have likely contributed to foreign reserves throughout 2019 and early 2020, reaching
tempering the capital outflows from the country. BSP- US$87.6 billion in February 2020, which represents 7.7
registered foreign portfolio investments (FPIs) recorded at months’ worth of imports and payment of services and
least US$1.4 billion-worth of foreign portfolio investments primary income.
flowing out of the country in the first quarter of 2020. This
35 Based on its latest assessment, the BSP estimates 5.0 percent growth in BPO sector earnings in 2019, a rebound from the 2.9 percent growth in 2018.
While data tourism receipts are not yet available, tourist arrivals rose by 15.2 percent year-on-year in 2019 from 8.3 percent in 2018. See https://www.
philstar.com/business/2019/12/16/1977247/bpo-revenues-unlikely-overtake-remittances-soon-says-bsp.
Figure 19. Composition of the Overall Balance-of-Payments Position
4.0
3.0
2.0
1.0
PERCENTAGE OF GDP
(1.0)
(2.0)
(3.0)
(4.0)
2015 2016 2017 2018 2019
Current account Capital and Financial accounts Net unclassified items Overall BOP position
Source: BSP
Figure 20. Portfolio equity outflows from the Philippines have been Figure 21. The Philippine peso appreciated at a time when many
the lowest among the region. regional currencies depreciated
4,000
110
3,000
105
Index of USD / LCU (May 1, 2019=100)
2,000
100
1,000
IN MILLIONS USD
95
-
90
(1,000) 85
(2,000) 80
01/05/2019
01/06/2019
01/07/2019
01/08/2019
01/09/2019
01/10/2019
01/11/2019
01/12/2019
01/01/2020
01/02/2020
01/03/2020
01/04/2020
01/05/2020
(3,000)
JAN 2019
FEB 2019
MAR 2019
APR 2019
MAY 2019
JUN 2019
JUL 2019
AUG 2019
SEP 2019
OCT 2019
NOV 2019
DEC 2019
JAN 2020
FEB 2020
MAR 2020
APR 2020
PHL Peso IDN Rupiah THA Baht

VNM Dong MYS Ringgit
Philippines Indonesia Thailand
Vietnam Malaysia
Note: Decrease denotes depreciation.
Source: Institute of International Finance Source: BSP and Wall Street Journal (WSJ) Markets.
Table 1. Balance of payments, 2015 to 2019
In million US$ / In percentage of GDP 2015 2016 2017 2018 2019

Current account 2.4 (0.4) (0.7) (2.5) (0.1)
Goods (7.6) (11.2) (12.2) (14.7) (12.3)
Exports 14.1 13.4 15.8 15.0 14.2
Imports 21.7 24.6 28.0 29.7 26.5
Services 1.8 2.2 2.6 3.3 3.5
Primary Income 0.6 0.8 1.0 1.1 1.4
Secondary Income 7.6 7.8 8.0 7.7 7.3
Capital and Financial accounts (0.7) (0.0) 0.9 2.7 1.7

Capital account 0.0 0.0 0.0 0.0 0.0
Financial account 0.8 0.1 (0.9) (2.7) (1.7)
Net Direct Investment (0.0) (1.8) (2.1) (1.7) (1.2)
Net acquisition of financial assets 1.8 0.8 1.0 1.2 0.9
Net incurrence of liabilities 1/
1.8 2.6 3.1 2.9 2.0
Portfolio investment 1.8 0.5 0.7 0.4 (0.5)
Financial derivatives 0.0 (0.0) (0.0) (0.0) (0.0)
Other investments (1.0) 1.4 0.5 (1.4) (0.0)
Net unclassified items2/ (0.8) 0.1 (0.5) (0.8) 0.5
Overall BOP position 0.9 (0.3) (0.3) (0.7) 2.1
Memo:
Basic Balance 2.4 1.5 1.5 (0.8) 1.0
Gross International Reserves (in billions USD) 80.7 80.7 81.6 79.2 87.8
Import Coverage (in months) 9.9 8.8 7.8 6.9 7.7
1/ Net incurrence of liabilities refers to net foreign direct investment to the Philippines.
2/ The term “Net unclassified items” is a balancing figure. There are two methods of computing the BOP position: the first approach uses the change in net international reserves due to
transactions, while the second approach computes the sum balances of the current account, capital account less financial account. The two measures do not necessarily tally. The BSP uses
the first approach to determine the overall BOP position.
Note: Following the BSP presentation, BOP balance = Current Account balance + Capital Account balance - Financial Account balance + Net Unclassified Items
1.5 POVERTY AND EMPLOYMENT: PROTECTING

GAINS AMID THE COVID-19 PANDEMIC
While the Philippines continued to make gains in poverty reduction prior to the outbreak of
COVID-19, the outbreak has resulted in an unprecedented shock to the country’s economy and
health system, threatening to undo these gains.
While labor market conditions continued to improve in automotive, and consumer products industries are likely to
early 2020, recent measures taken to contain the COVID-19 be affected especially hard by the pandemic.
pandemic will likely result in higher unemployment
and underemployment. In January 2020, the country’s The disruption in household income due to the COVID-19
unemployment rate remained at 5.3 percent and pandemic could lead to an increase in poverty if no social
underemployment reached its lowest level in a decade protection measures are in place. Based on simulated
at 14.8 percent (Figure 22). Most the jobs were created in estimates from the Family Income and Expenditure Survey,
the agriculture and services sectors. The imposed ECQ in the poverty incidence could have increased by at least 3.3
Luzon in March led to disruption to economic activity that percentage points if there would have been no mitigation
affects the 7.4 million daily wage earners in particular. measures in place. This assumes the disruption of work due
These workers are concentrated in the construction and to ECQ lead to household incomes from seasonal wage and
manufacturing sectors that were already shedding labor entrepreneurial activities to decline by 16.7 percent in 2020,
as early as January 2020. While all economic sectors are which is equivalent to a loss of 2 months’ worth of income.
impacted by the crisis, the tourism and hospitality, aviation,
Figure 22. Unemployment and Underemployment Rates (%) Figure 23. Quarterly Labor Force Participation Rates
25 66
65
Underemployment rate
20
64
63
15
62
61
10
Unemployment rate 60
59
5
58
0 57
JAN
APR
JUL
OCT
JAN
APR
JUL
OCT
JAN
APR
JUL
OCT
JAN
APR
JUL
OCT
JAN
APR
JUL
OCT
JAN
APR
JUL
OCT
JAN
APR
JUL
OCT
JAN
APR
JUL
OCT
JAN
JAN
APR
JUL
OCT
JAN
APR
JUL
OCT
JAN
APR
JUL
OCT
JAN
APR
JUL
OCT
JAN
APR
JUL
OCT
JAN
APR
JUL
OCT
JAN
APR
JUL
OCT
JAN
APR
JUL
OCT
JAN
2012 2013 2014 2015 2016 2017 2018 2019 2020 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: PSA-Labor Force Survey (LFS) (various rounds). Source: PSA-LFS Labor Force Survey (various rounds).
Figure 24. Share of Job Creation by Subsector

AGRICULTURE Fishing and aquaculture 1%
Agriculture, hunting and foresty 49%
INDUSTRY Electricity, gas, steam, and air conditioning supply 1%
SERVICES Financial and insurance activities 2%
Human health and social work activities 2%
Administrative and support service activities 4%
Education 5%
Accommodation and food service activities 12%
Public administration and defense, compulsory social security 12%
Wholesale and retail trade; repair of motor vehicles and motorcycles 36%
0% 10% 20% 30% 40% 50% 60%

Source: PSA-LFS January 2019 and January 2020 rounds.
Figure 25. Top 10 Subsectors with the Most New Jobs (100,000s)
Electricity, gas, steam, and air conditioning supply 10
Fishing and aquaculture 19
Financial and insurance activities 38
Human health and social work activities 38
Administrative and support service activities 73
Education 81
Accommodation and food service activities 201
Public administration and defense; compulsory social security 201
Wholesale and retail trade; repair of motor vehicles and motorcycles 581
Agriculture, hunting and forestry 799
0 100 200 300 400 500 600 700 800 900

Source: PSA-LFS January 2019 and January 2020 rounds.
The government has approved an extensive financial assistance for the beneficiaries of the country’s flagship
package worth over US$4 billion to protect households and safety net program (i.e., the Pantawid Pamilyang Pilipino
firms from the impact of the COVID-19 pandemic, including Program or 4Ps), and unemployment benefits through
the short-term mitigation measures (Box 5). The package the social security system. In addition, there is targeted
focuses on supporting the health sector, safety nets for financial support to MSMEs, the agriculture sector, and the
the poor and vulnerable groups, and micro, small, and tourism industry to protect vulnerable firms affected by the
MSMEs and jobs. About 18 million Filipino families are being crisis. With the implementation of the SAP, the government
supported36 through the Social Amelioration Program (SAP) hopes to temper the negative impact of COVID-19 on its
for ECQ-affected workers and businesses, including top-up poverty reduction efforts.
36 About 4.3 million households are assisted by the 4Ps, 2.9 million indigent senior citizens benefit from a social pension program, and 2.2 million other
poor families are identified in the country’s social registry—Listahanan— as beneficiaries of unconditional cash transfers. However, there are an estimated
8 million informal-sector workers and vulnerable individuals who are not a part of existing social-assistance programs.
Box 5 . Social Protection Measures to Support Poor and Vulnerable Households
The COVID-19 pandemic, along with the subsequent quarantine measures, has had a significant negative impact
on the lives of many Filipinos, especially poor and vulnerable families. Poor and vulnerable families are less
likely to be able to afford medical care and are more likely to resort to harmful coping mechanisms to deal with
income loss and higher consumer prices. As the government is implementing measures to contain the infection
(e.g., travel restrictions and quarantines), workers in the informal economy (in sectors such as tourism, transport,
agriculture, etc.) are severely affected. Other vulnerable groups include those at greater risk of the disease (e.g.,
people with underlying health conditions and older people), health workers involved in disease prevention and
control, and those at greater economic risk, including young people (who have higher rates of unemployment and
underemployment) and migrant workers (who may be unable to return to their home countries or work).
The Philippine government’s response has been strong, providing various types of assistance worth over
Php200 billion (US$4 billion) through the enactment of the “Bayanihan to Heal as One Act” on March 24, 2020. To
streamline and harmonize the social amelioration measures of different government agencies, the Inter-Agency
Task Force for the Management of Emerging Infectious Diseases (IATF-EID) Technical Working Group on Social
Amelioration issued the Joint Memorandum Circular (JMC) No.1 on March 29, 2020. The following are the social
protection-related public measures that target groups and sectors affected by the pandemic in the Philippines:
Social Safety Net
• Affected families have been receiving food and non-food items from the Department of Social Welfare and
Development (DSWD) and LGUs, complemented by support from non-government organizations and the
private sector. The total cost of relief assistance amounts to more than Php4.2 billion to date.
• About 18 million low-income families, including Pantawid beneficiaries, will receive emergency subsidies from
the DSWD amounting to Php10,000-Php16,000, depending on the prevailing minimum wage and rice subsidies
and grants to Pantawid beneficiaries.
• Small rice farmers will also receive cash assistance (Php5,000) from the Department of Agriculture (DA).
• To support MSMEs during the crisis, the Department of Trade and Industry (DTI) will provide Php5,000-
Php8,000 to qualified individuals and enterprises.
• Public and private health workers who contract the disease while on duty will be compensated with
Php100,000. In case of death, their families will receive Php1 million. All frontline public health workers are
entitled to a special risk allowance, equivalent to a maximum of 25 percent of their monthly salary, for the
duration of the ECQ.
• Stranded overseas Filipino workers affected by the travel ban due to COVID-19, along with those who were
repatriated, will receive US$200, or Php10,000, or its equivalent in local currency of the host country. Affected
repatriates are also provided with temporary shelter, food, and transportation assistance.
Public Works
• Informal sector workers who have lost their livelihood can enroll in a temporary ten-day emergency
employment program and disinfect/sanitize their houses and the immediate vicinity through Department
of Labor and Employment’s (DOLE’s) Tulong Panghanapbuhay sa Ating Displaced/Disadvantaged Workers
#Barangay Ko, Bahay Disinfection/Sanitation Project. Program beneficiaries can receive 100 percent of the
highest prevailing minimum wage.
Fee Waivers and Subsidies
• Affected workers in the formal sector employed by private firms that have adopted flexible work arrangements
or temporary closure are entitled to receive one-time financial assistance equivalent to Php5,000 under
DOLE’s COVID-19 Adjustment Measures Program (CAMP).
• Banks and other financial institutions are directed to implement a thirty-day grace period for the payment
of all loans and credit card payments that are due within the ECQ period. Interests, penalties, fees, and other
charges are waived. The thirty-day grace period is also extended to paying residential rents.
• LGUs can access loans with a 5 percent fixed interest rate per annum (with one-year grace period on principal
payment and payable for up to 5 years) under the Php10 billion Help via Emergency Loan Assistance to LGUs
(HEAL) program, which was launched by the Land Bank of the Philippines (LBP).
Social Insurance
• Workers who lost their jobs as a result of layoffs or closures of private companies can receive unemployment
benefits from the Social Security System (SSS), subject to membership contributions and eligibility
requirements.
• The SSS and Philippine Health Insurance Corporation (PhilHealth) have extended the period for payment
contributions and filing for claims. PhilHealth will also cover the cost of treating COVID-19 patients.
Employment Retention and Promotion Policies
• All government workers who physically report to work during the Luzon-wide ECQ are entitled to hazard pay.
Source: Administrative Order No. 28 on the grant of special risk allowance to public health workers, dated 6 April 2020; DOLE. Department Orders 211 and 212 Dated 21 March and 8 April
2020; DSWD. Disaster Response Updates. Disaster Response Operations Monitoring and Information Center (DROMIC) Report No. 43 dated 10 April 2020; POEA. Governing Board Resolution
No. 9 dated 10 April 2020; and Report to the Joint Congressional Oversight Committee Pursuant to Section 5 of RA 11469, dated 6 April 2020.
PART 2
OUTLOOK AND RISKS
The COVID-19 pandemic, alongside the enhanced healthcare system. Meanwhile, downside growth
community quarantine, have effectively disrupted risks remain high as the full extent of the pandemic
activities and paralyzed the Philippine economy remains uncertain. In the interim that a vaccine is not
in the first half of 2020. The Philippines faces a yet available, the government must take a balanced
looming recession in 2020 driven by contractions in approach between policies that flatten the infection
household consumption and capital investment. In curve to save lives and those that flatten the
addition, prolonged weakness in global and domestic recession curve to save livelihoods. It is important
demand will likely result in negative exports and that the economic policies prevent temporary
imports growth. The Philippine government is shocks from having permanent effects, which is very
responding with unprecedented stimulus measures, relevant considering that the foreseeable economic
both fiscal and monetary, to support the economy, contraction in 2020 is likely to cause increase
businesses, vulnerable households, and the in poverty.
PART 2 OUTLOOK AND RISKS 27
2.1 GROWTH OUTLOOK

The Philippine economy is expected to contract in 2020, as the COVID-19 pandemic continues
to disrupt global and domestic economic activities. The government is responding with
unprecedented fiscal and monetary measures to support the economy while targeting the
healthcare system and vulnerable sectors. Downside risks and uncertainty remain high, with no
clear view of when and how the pandemic ends.
The Philippine economy faces a recession in 2020 given a uncertainties weigh heavily on the growth outlook and may
series of unexpected events. Amid domestic and external lead to a lower than projected growth rates.
unexpected events and the severity of the global pandemic,
the Philippine economy is projected to contract by 1.9 The country’s growth trajectory follows a similar pattern to
percent in 2020 (Figure 26). This is the first contraction since the global economy, which is expected to contract in 2020,
the Asian Financial Crisis, when the economy shrank by before recovering in 2021. The global economic contraction
0.5 percent in 1998. This projection assumes containment is expected to be broad-based, with advanced economies
measures are gradually relaxed in the second half of the and major EMDEs expected to experience a recession in
year, and economic activity returns in some sectors of the 2020 (Box 6). Widespread social distancing measures, a
economy. Nonetheless, consumer and business confidence sharp tightening of financial conditions, and a collapse in
remain weak leading to negative growth in household external demand are depressing economic activities across
consumption and capital investment. The growth prospect the globe. Global trade is anticipated to contract, given the
is expected to improve in the succeeding years, with disruptions to global value chains and international travel.
growth projections of 6.2 percent in 2021 and 7.2 percent in The global economy is expected to shrink by 5.2 percent in
2022, as the economy gradually recovers from the impact 2020, which would be the deepest global recession since
of the COVID-19 pandemic. Future economic growth will World War II, before rebounding to 4.2 percent growth in
be dependent on public investments and a rebound in 2021, as the negative economic effects of the pandemic
consumption as incomes recover, and there will also be gradually fade. Nonetheless, the global contraction in the
base effects, given the economic contraction expected 2020 baseline forecast could prove optimistic, as there are
in 2020. substantial downside risks to the projection.
The growth projection faces a high degree of uncertainty. The government has abandoned its pre-COVID fiscal
The full impact and duration of the COVID-19 pandemic deficit target for 2020, given the expected revenue
on the Philippines remain highly uncertain with various shortfall and increase in public expenditure to address
models predicting different peaks of infection cases. The the outbreak. Under the “Bayanihan to Heal as One Act”,
degree to which the Philippines can effectively manage the the government approved measures to provide financial
pandemic will impact its growth recovery trajectory. A return and in-kind support to low-income households, overseas
to normalcy seems to rest on the discovery of a vaccine, OFWs, farmers and fisherfolks, MSMEs, and workers in
but in the meantime, social and economic activities have to the informal sector, among others. In addition, new fiscal
operate under a new normal characterized with stringent measures of unprecedented sizes and nature are currently
social distancing measures, health and hygiene protocol, being deliberated in the Congress of the Philippines, with
protection of the vulnerable such as the elderly, the young, proposals to support more sectors after the ECQ is lifted.37
and those individuals with co-morbidities, and continued To finance the fiscal packages, the government is
monitoring of infection cases and contact tracing. All these
37 The Economy Moving Forward as One Act is a Php370 billion stimulus package that aims to protect businesses and labor employment by (i)
compensating payroll costs during the extended ECQ; (ii) offering capacity-building programs; and (iii) providing zero-interest loans. The Philippine
National Stimulus Strategy is another proposal that involves structural adjustment plans, including credit refinancing and mediation services, a negative
interest loans plan, and a national emergency investment corporation.
Figure 26. The Philippine economy is projected to contract in 2020. Figure 27. Business sentiment weakened during the first quarter of 2020.
9.0 80
FORECAST
7.0 60
40
5.0
20
PERCENT
PERCENT
3.0 0
-20
1.0
-40
-1.0 -60
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1
-3.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Overall Business Confidence Index (Current quarter)
April 2020 projections Actual growth Overall Consumer Confidence Index (Current quarter)
June 2020 projections Source: BSP.
Source: PSA, World Bank staff calculation.
ramping up its war chest through the realignment of budget Private consumption is expected to contract due to strict
items, advanced dividend payouts by GOCCs, a reverse containment measures, the associated income losses,
repurchase agreement with the BSP, loan financing from and less remittances. Household consumption has been
various multilateral and bilateral sources, and tapping into the primary driver of economic growth in the Philippines,
domestic and international bond markets. Public revenues with household expenditures representing more than
from income taxes, the value-added tax, customs tariffs, two-thirds of GDP. However, the ECQ and social distancing
and other non-tax sources are projected to contract this measures have paralyzed local economies in all provinces
year due to weak business and consumer activity. As a of the country, resulting in business disruptions and income
result, the World Bank projects the fiscal deficit to reach 7.0 and wage losses in both the formal and informal sectors.
percent in 2020, above the government’s pre-COVID target of For households that rely on foreign remittances, regular
3.2 percent. inflows are jeopardized as the U.S., Europe, Singapore,
Hongkong, and the Middle East—key sources of remittances
Monetary authorities are anticipated to use all of their to the Philippines—are managing their own localized
policy tools to proactively support the economy during COVID-19 outbreaks. About 16,000 OFWs have returned to
this extraordinary time. The BSP has been utilizing an array the country unemployed, contributing to the Philippines’
of policy tools to support the distressed financial sector rising unemployment rate.38 These developments will
and the economy. Further reductions of key policy rate are effectively lower the rate of consumption, which is projected
possible given the ample policy space to lower the domestic to contract by 2.6 percent in 2020, before rebounding in
rate, the low prevailing U.S. Federal funds rate (0.05 percent 2021 (5.7 percent) and 2022 (6.1 percent), if the pandemic
as of mid-April), and easing domestic inflation. Furthermore, is resolved and containment measures are effectively
the BSP has access to large foreign reserves, totaling managed (Table 3).
US$89.0 billion at end-March, to manage potential currency
fluctuations, and it has provided regulatory forbearance to
the banking industry.
The COVID-19 pandemic is expected to plunge the global
38 Bettina Magsaysay, “All frontliners, PUIs, PUMs, in Metro Manila to undergo COVID-19 test,” Available Online: https://news.abs-cbn.com/news/04/28/20/
all-frontliners-puis-pums-in-metro-manila-to-undergo-covid-19-tests, May 9, 2020.
Box 6. Global Economic Outlook
economy into recession in 2020. The global economy The global contraction in the baseline forecast could
is expected to shrink by 5.2 percent this year, with prove optimistic, as there are substantial downside
advanced economies contracting, China experiencing risks to the projection. If COVID-19 outbreaks persist
record-low growth, and EMDEs facing external and longer than expected, lockdowns and other restrictions
domestic headwinds (Table 2). This global recession on movement and interactions may have to be
would be the deepest since World War II and more than maintained or reintroduced, prolonging the disruptions
twice as steep as the 2009 global recession. Output to domestic activity and further lowering consumer
is envisioned to rebound in 2021, as the negative and investor confidence. Economic disruptions are
economic effects of the pandemic gradually fade, but weakening businesses’ ability to remain in operation
it is unlikely to return to its previously expected level. and service their debt, while increased risk aversion
This forecast assumes that (i) the pandemic recedes in globally has raised interest rates for higher-risk
response to domestic mitigation measures, which can borrowers. In an environment in which debt levels were
be lifted by mid-year; (ii) adverse global spillovers ease already at historic highs, this could lead to cascading
during the second half of the year; and (iii) dislocations defaults and financial crises across many economies.
in financial markets are temporary. The recovery could also be delayed if the crisis causes
lasting changes in consumer and investor behavior, or if
The global economic contraction is expected to pandemic-related shortages of inputs sourced through
be broad-based in 2020. Advanced economies global value chains trigger a widespread retreat from
are projected to shrink by 7.0 percent in 2020, as globalization, as companies reassess their risk exposure
widespread social distancing measures, a sharp and governments act to protect industries from
tightening of financial conditions, and a collapse in foreign competition.
external demand depress activity. Due to the negative
spillovers from weaknesses in major economies, Global trade is suffering one of the worst contractions
alongside the disruptions derived from domestic in post-war history in 2020. The COVID-19 pandemic
outbreaks and associated containment measures, has caused disruptions to international travel and
EMDEs are forecasted to contract by 2.3 percent in global value chains. Trade is typically more volatile
2020. The projected fall in activity is broad-based, with than production and tends to fall particularly sharply
more than 70 percent of EMDEs expected to register in times of crisis. Investment, which is more cyclical
negative growth this year. The impact will likely be and more trade-intensive than other categories of
most pronounced for countries with large domestic expenditure, has declined worldwide, as firms face
outbreaks and limited healthcare capacity. Moreover, cash-flow problems and delay their expansion plans.
countries deeply integrated in global value chains, Exporting firms tend to be particularly active in credit
heavily dependent on foreign financing, and that rely markets and more adversely affected when the cost of
extensively on international trade, commodity exports, credit increases. Disruptions in credit markets played
and tourism are expected to suffer disproportionately an important role in the contraction in global trade
from the impact of the pandemic. Nonetheless, during the global financial crisis and the subsequent
growth is projected to rebound in 2021 to 3.9 percent weakness of the recovery.
in advanced economies and 4.6 percent in EMDEs,
supported by the expected pickup in China and a
recovery of trade flows and investment.
Countries need to act decisively with strong policy and vulnerable populations, and improve countries’
measures to cushion the impact of the pandemic. capacity to prevent and cope with similar events in
Per capita incomes in a large majority of EMDEs are the future. As EMDEs are particularly vulnerable, it is
expected to shrink this year, with many millions falling critical to strengthen their public health care systems,
back into poverty. This crisis, therefore, highlights the address the challenges of limited safety nets, and
urgent need for health and economic policy actions— undertake structural reforms that enable strong and
including global cooperation—to mitigate the negative sustainable growth.
impact of the outbreak, protect poor households
Table 2. Real Growth Projections

2017 2018 2019e 2020f 2021f
World 3.3 3.0 2.4 -5.2 4.2
Advanced economies 2.5 2.1 1.6 -7.0 3.9
Emerging market and developing economies 4.5 4.3 3.5 -2.3 4.6
Developing East Asia & Pacific 6.5 6.3 5.9 0.5 6.6
Philippines 6.9 6.3 6.0 -1.9 6.2
Note: Developing East Asia & Pacific includes Cambodia, China, Fiji, Indonesia, Lao PDR, Malaysia, Mongolia, Myanmar, Papua New Guinea, Philippines, Solomon Islands,
Thailand, Timor-Leste, and Vietnam.
Source: Global Economic Prospects June 2020.
Table 3. Economic Indicators for Baseline Projections

2017 2018 2019 2020f 2021f 2022f
Real GDP growth, at constant market prices 6.9 6.3 6.0 -1.9 6.2 7.2
Private Consumption 6.0 5.8 5.9 -2.6 5.7 6.1
Government Consumption 6.5 13.4 9.6 10.6 10.0 10.5
Gross Fixed Capital Investment 10.6 12.9 3.9 -7.5 8.5 13.4
Exports, Goods and Services 17.4 11.8 2.4 -4.6 1.7 8.0
Imports, Goods and Services 15.1 14.6 1.8 -6.7 5.1 11.4
Inflation (period average) 2.9 5.2 2.5 1.8 2.5 3.0
National government balance (% of GDP) -2.1 -3.1 -3.4 -7.0 -4.2 -3.5
National government debt (% of GDP) 40.2 39.9 39.6 46.9 46.6 46.1
Current account balance -0.7 -2.5 -0.1 -0.5 -1.4 -1.7
Source: PSA and WB staff projections.
Economic disruptions, heightened uncertainty, and stress Weak international trade will soften both import and
in financial markets discourage capital investments. export growth in the Philippines. As countries across
An expected slowdown in private investment, on top of the world mitigate the impact of COVID-19 with strict
delays in the implementation of government infrastructure containment measures, global trade will weaken, resulting
projects due to the ECQ, is expected to result in a 7.5 percent in lower levels of goods exports and imports in the
contraction in capital formation in 2020, a sharp reversal Philippines. Demand for tourism services, which accounted
from the 3.9 percent expansion in 2019. The contraction for 12.1 percent of GDP in 2018, and adjacent industries fell
is dependent on weak business sentiment, which can precipitously in the first quarter of 2020,40 and it will remain
further deteriorate should there be a prolonged outbreak low as long as countries continue to restrict travel. While
or a return to strict lockdown measures. The Business receipts for the BPO industry will likely be maintained
Confidence Index dipped from 40.2 in the fourth quarter of as the sector remains open for business, the industry’s
2019 to 22.3 in the first quarter of 2020, the lowest rate since growth prospects are subdued. Likewise, growth in foreign
2009 at the height of the global financial crisis.39 Similarly, remittances may decelerate as laid off workers repatriate
the country’s stock exchange index plunged by 46.9 percent, and the economies of source countries are disrupted by
quarter-on-quarter, to 5,321 in end-March, down from 7,815 the pandemic. The current-account deficit is projected to
in end-December, largely tracking developments in global settle at 0.5 percent in 2020 due to weaker services exports
markets. In early May, Fitch Ratings downgraded its outlook and remittance inflows, before widening in 2021-22 as
for the country from positive to stable, as the economy the economy normalizes and imports rise, including for
faces the prospect of a recession. domestic infrastructure projects.
39 The Business Confidence Index is computed as the percentage of respondents that answered in the affirmative less the percentage of respondents that
answered in the negative with respect to their views on a given indicator.
40 International tourist arrivals declined by 40 percent in the first quarter of 2020.
2.2 POVERTY AND SHARED PROSPERITY

Figure 28. Actual and projected $3.2-a-day poverty rates.
45%
40%
35%
30%
20%
20%
15%
10%
5%
0%
2006 2009 2012 2015 2018 2021
Source: World Bank staff calculations.
The foreseeable broad-based economic contraction in slow. Second, cash distribution was done without proper
2020 is likely to cause increase in poverty. The imposed data verification, indicating that there are potentially
ECQ that began in mid-March has cut off income streams inclusion and exclusion errors as well as duplications.
from seasonal wages and entrepreneurial activities. Among these, exclusion errors are of concern as these
Workers relying on these income sources will likely see reduce the program’s ability to mitigate the negative
annual income losses of at least 16.7 percent. The growth of impacts of the COVID-19. Other operational issues include
household incomes in recent years, particularly those from security and logistical challenges in reaching remote
the lower income deciles, have been propelled by non- communities. If these implementation challenges and
agricultural wages, mostly from low-end service jobs, which delays continue as the government moves on to the next
have been severely affected by COVID-19 and ECQ. tranche of cash assistance, vulnerable households excluded
in the program or did not receive benefits in a timely
manner are likely to fall to poverty.
While the emergency subsidy under the Social
Amelioration Program is expected to partially offset
income losses, the initial cash distribution to intended The expected growth contraction in 2020 and associated
beneficiaries have had multiple challenges. First, income loss among poor and vulnerable families is likely
identifying the beneficiaries beyond those included in to result in poverty increase in the short term. Poverty
existing social programs such as the 4Ps and Unconditional is projected to increase to 21.5 percent based on the
Cash Transfer (UCT) have been difficult. Local governments middle-income poverty line of $3.20/day in 2020. This is
have been tasked to distribute the paper application forms equivalent to 1.2 million Filipinos more falling to poverty
(Social Amelioration Card [SAC]), collect data submitted from the estimated poor in 2019. As the threat of COVID-19
through SAC, and submit encoded information to DSWD. pandemic dissipates and the business activities gradually
The large size of the program and number of potential return to operation, economic growth recovery is expected
beneficiaries as well as the observance of social distancing to contribute to poverty reduction, as the poverty rate will
have made the transfer of the benefit cumbersome and decline to 20.4 percent and further to 19.1 percent by 2022.
2.3 RISKS AND POLICY CHALLENGES

The full extent and duration of the COVID-19 pandemic remains uncertain. As businesses gradually
return to operation, the new normal remains to be determined. It is essential that the government
continues to protect the poor and vulnerable to protect recent gains in poverty reduction and
shared prosperity. The government must take a measured and balanced approach between
policies that flatten the infection curve to save lives and those that flatten the recession curve to
save livelihoods.
The full extent and duration of the COVID-19 pandemic financial volatility can affect the country’s economy through
remain uncertain. Epidemiological models predict that the equity, bond, and credit markets, either through capital
COVID-19 infections in the Philippines may peak either in outflows or a rise in the cost of credit, which can be
the second or third quarter of 2020.41 This suggests that the challenging for the Philippine government as it is increases
risk of continued transmission will remain after the end public spending to mitigate the impact of COVID-19.
of the ECQ on May 30. Nevertheless, a prolonged lockdown
comes with severe economic and social consequences. The Tighter financial conditions have become more apparent
government should, therefore, proceed with a balanced with rising borrowing spreads. The emerging market bond
and cautious approach to ensure that neither lives nor index (EMBI) strip spreads have shot up across the Asian
livelihoods are needlessly jeopardized. This would require region, including in the Philippines where it rose from 66.5
further strengthening of health facilities and equipment, on bps in end-2019 to 221.5 bps in end-March 2020. The surge
top of efforts to improve contact tracing, infection testing, in cost reflects tighter international financing conditions
and the capacity to isolate and monitor infection cases, so amid a higher perceived risk of financial stress arising
as not to overwhelm the healthcare system. The mandate from debt accumulation globally and significantly weaker
for continued social distancing must remain, with selective growth prospects. Nonetheless, in April, the government
lifting of the ECQ in places with manageable infection cases successfully raised US$2.35 billion through the sale of
and close monitoring. Learning from the experiences of 10-year and 25-year U.S. dollar bonds, priced at the lowest
other countries that were able to flatten the curve can coupon rate that can be achieved for those debt papers,
provide insights and solutions for the Philippines. signaling that thanks to good macro fundamentals, the
country is still able to access international financing with
The global pandemic has amplified downside risks in the good rates. With the high global uncertainty, capital flight
external environment. With the global economy in turmoil to safety may be prolonged. As global activities recover,
from a global health shock, the risk of a global recession interest rates are likely to rise, and lead to higher debt
has escalated, with many advanced economies and major service cost for those that accumulated debt during
developing economies experiencing severe contractions in the pandemic.
economic growth. The likely global recession, along with
stringent international travel restrictions, will result in There are no immediate systemic financial stability risks in
considerable weaker external demand and trade, leading the Philippines, but credit risks in highly indebted sectors
to a potential contraction in goods and services exports could be amplified by the COVID-19 crisis. The banking
from the Philippines. Moreover, increased international sector had strong capital levels and the asset quality of the
41 Experts from the DOH and the World Health Organization (WHO) estimate that the virus could peak by June 2020 if not properly contained (Source:
https://www.rappler.com/nation/254982-doh-experts-philippines-coronavirus-cases-estimate-june-2020-if-not-contained). Also, a simulation from the
Philippine Institute of Development Studies shows that the peak will occur in August 2020 (Source: https://pidswebs.pids.gov.ph/CDN/PUBLICATIONS/
pidsdps2015.pdf ).
financial system was good at the onset of the crisis42. Gross

loans contributed to 60 percent of banking sector assets in
2019, most of which was directed to corporates (83 percent).
However, nonfinancial corporate leverage in the Philippines,
measured by the total debt to total assets ratio, has
steadily increased since 2010 and is among the highest in
the region43. Utilities and mining/energy firms are the most
leveraged, followed by those in manufacturing and real
estate. In addition, a significant share of Philippine firms’
outstanding debt is denominated in foreign currencies
(17 percent in 2018). As some corporate vulnerability
indicators started to deteriorate in recent years, risks from
the corporate sector could be further exacerbated by the
COVID-19 crisis. The thorough assessment of risks gets
more challenging in the country given the existing complex
mixed conglomerate structures, which could potentially
exacerbate spill overs between the real sector and financial
institutions. Moreover, bank secrecy laws undermine the
effective supervision of banks44 and prevent the
supervisory authorities to fully understand the risks of the
financial system.
Containment measures and lower economic growth

across the globe have resulted in fewer overseas jobs for
Filipinos, leading to workers returning to the Philippines
unemployed. Business disruptions in major economies,
protect the economy. The authorities are financing their
along with the plunge in oil prices that has especially
pandemic-related measures through domestic and foreign
affected the Middle East, have weakened the demand for
borrowing. The combination of contracting economic growth
OFWs. Furloughed OFWs, including seafarers and domestic
and a widening fiscal deficit is expected to result in a higher
workers, have returned to the Philippines, dimming the
debt-to-GDP ratio in the near term, although it is likely to
growth prospect of foreign remittances. Unlike in previous
remain sustainable in the medium term. The debt-to-GDP
global health crises such as the SARS outbreak, the current
ratio may reach as high as 46.9 percent in 2020, up from 39.6
pandemic affects all regions of the world, so a decline in
percent in 2019. While additional borrowing would raise the
remittances from one region is unlikely to be offset by
debt level, the debt ratio is expected to remain relatively
an increase in remittances from another. While returning
similar to the average of the last decade (46.0 percent). As
OFWs have benefited from the public financial assistance
the government borrows more from foreign sources, the
program, a prolonged pandemic may lower their chances of
share of its foreign debt is estimated to grow from 34.0
swiftly returning back to their host countries, increasing the
percent in 2019 to an estimated 37.6 percent in 2020.
pressure on the domestic labor market.
The government’s economic policy goal should be to

The country’s fiscal and monetary policy response to the
prevent temporary shocks from having permanent effects.45
COVID-19 pandemic will be costly. Nevertheless, it is a cost
While expansionary fiscal policies are less effective in
that the country must assume in order to save lives and
42 The universal and commercial banks consolidated risk-based capital adequacy ratio (CAR) of 16.0 percent and consolidated leverage ratio of 9.8 percent
indicates the overall industry strength in terms of its ability to absorb unforeseen business losses, while allowing buffer for further expansion
43 IMF. 2020. “Selected Issues paper on Philippines.” IMF Publications. February. file:///C:/Users/wb220103/Downloads/1PHLEA2020002%20(2).pdf.
44 Banking supervision, Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) timely access to accounts. Source: Asia Pacific Group
on Money Laundering AML/CFT Mutual Evaluation 2019.
45 World Bank, “East Asia and Pacific in the time of COVID-19,” Washington DC: World Bank, April 2020.
increasing production and employment during periods of In the medium term, critical reforms need to be
lockdowns and social distancing, they can be important accelerated to boost private sector confidence to support
to facilitate the economic recovery. Fiscal policies should a sustainable economic recovery. Given the duration of the
include social-protection measures to help households, COVID-19 pandemic remains uncertain, negatively impacting
especially the most economically vulnerables, to provide consumer and business confidence, the government should
temporary relief. Moreover, employment support can help accelerate pending reforms to unleash the country’s
workers reintegrate into the economy and ensure that growth potential such as amendment of public sector
temporary deprivation does not translate into long-term act that would open up the telecom sector to foreign
losses of human capital. Firms will also need liquidity investors and fast-tracking the digital transformation of the
injections or bridge financing to help them stay in business. country, particularly important under the new normal. The
While the optimal economic policy response changes over government would also support the recovery by following
time and depends on the evolution of the shock, the policy through the implementation of recent game changing
goal remains to ensure that temporary shocks do not have reforms such as the rice liberalization law, the ease of doing
permanent effects. business, introduction of a national ID, among others, which
are essential for inclusive growth in the long term.
To successfully execute the government’s policies, capacity
and implementation constraints must be addressed to Moreover, given Philippines’ high risk to natural disasters,
effectively reach targeted businesses and households. factoring climate change in the design of public
Capacity and implementation constraints have been a infrastructure projects will not only support economic
constant challenge for successive administrations to fully recovery in the short term but also contribute to country’s
deliver effective public services. The COVID-19 outbreak has long term resilience. As private investment is expected to
brought these constraints to the forefront, as some public recover very gradually, accelerating public investment would
programs, including the social amelioration package for re-start the economy by providing jobs to newly displaced
low-income households, have faced temporary setbacks in workers. Considering Philippines is one of the most natural
comprehensively identifying their beneficiaries. To address disaster prone country in the world, largely affected by
some of these constraints, national and local government climate change, priority public investments need to support
authorities need to coordinate their efforts to ensure the resilience to natural disasters and climate change to
timely and efficient deployment of public policies. Moving support country’s sustainable long term growth.
swiftly to provide cash transfers, wage subsidies, and tax
rebates to households and businesses will help people
Similarly, digital technologies can help address the impact
meet their basic needs and businesses stay afloat.
of the COVID-19 pandemic in the short term while boosting
the country’s growth potential in the long term. Before a
Strengthening the capacity of the healthcare system commercial vaccine is available, innovative solutions should
should be an ongoing priority throughout the duration of be considered to keep the economy open, even partially,
the pandemic. The DOH has mobilized all hospitals and while avoiding the resurgence of the virus. One such
frontline health workers to accommodate COVID-19 patients, solution lies in the use of digital technology. In countries
and it has ramped up the testing capacity of its Research like the Republic of Korea, information and communication
Institute for Tropical Medicine and other subnational technologies (ICT) have been used to encourage social
laboratories. Despite these efforts, the country’s health distancing, identify COVID-19 cases with speedy tests, and
system still lacks the necessary capacity to effectively even facilitate treatment. In the Philippines, there have
deal with the pandemic and faces the risk of shortages in reportedly been more e-commerce and online financial
medical supplies and PPE in case there is a second wave transactions, virtual meetings, and web-based work during
of infection outbreak. Given the urgency of the present the pandemic. Yet, to fully harness these ICT solutions,
situation, the government needs to prioritize efforts to more needs to be done to improve the digital enablers,
boost the health system’s capacity to contain the spread of especially in terms of providing relevant infrastructure,
the virus and treat patients, and it needs to adopt policies to fully unleash country’s potential in the global digital
that mitigate the negative socioeconomic effects of disease market. Chapter III discusses the challenges in the country’s
prevention measures. digital infrastructure and the policy recommendations to
address them.
Box 7. Digital Delivery of Large-Scale Cash Transfers for COVID-19 Pandemic Response
Many countries have announced a vertical and Other countries (e.g., Jordan, Thailand, Brazil) set up
horizontal expansion social assistance programs as online self-application platforms, through websites
part of their response to the COVID-19 pandemic.46 The and mobile applications. They provide access to
objective is to continue to support the traditionally anyone who wants to apply, but their eligibility and
poor (e.g., existing social assistance beneficiaries ID is verified against the existing databases and the
including the income poor, people with disabilities, national ID system. In the Philippines, the large majority
indigent senior citizens) and to protect the newly of SAP beneficiary families had to use paper forms
vulnerable group (e.g., informal sector workers) from known as SACs. This paper-based process for the SAC
falling into poverty. The Philippines was one of the first was cumbersome and slow while also being disposed
countries to have announced a significant expansion to high risks of fraud and errors as it does not require
of social assistance through its SAP. The eligibility cross checking with existing databases. This is partly
criteria set for the provision of emergency cash subsidy due to lack of a national ID system that would allow
under SAP includes both existing social assistance for an easy way to verify and match individuals across
beneficiaries and newly impoverished, vulnerable databases, such as to check if a beneficiary family
populations, covering 18 million families. received assistance from another program.
While the Philippines was an early mover in policy Making payments safely and securely during the
actions, it has encountered implementation pandemic
challenges: (i) expanding the list of eligible
beneficiaries; and (ii) making payments safely and Digital payments have been increasingly used, taking
securely during the pandemic. advantage of high mobile phone penetration in
developing countries. The delivery of physical cash
Expanding the list of eligible beneficiaries comes with substantial costs and logistical complexity
and is not safe in normal times and even more so
during a pandemic. Account-based transactions (e.g.,
Some countries (e.g., Chile, Colombia, Pakistan, Peru)
bank account, mobile money) provide opportunities
have been using their existing social registry or
not only for transparent, timely payments but also for
integrated social protection information systems to
longer-term financial inclusion. Non account-based
identify new beneficiaries who meet the eligibility
transactions (e.g., one time passcode, e-vouchers)
criteria. Dynamic registries and information systems
allow temporary but widely accessible means for digital
with up-to-date information of households, including
payments. In the Philippines, the majority of Pantawid
on economic activities, greatly facilitates the program
beneficiaries have the cash cards issued by the LBP.
expansion to the near poor and vulnerable non-poor
Although the LBP cash card, being a single purpose
who would not have been in the existing safety nets. In
account, has some constraints including insufficient
the Philippines, the Listahanan is outdated for social
payout points and does not result in financial inclusion,
registry-based beneficiary identification and targeting
it has been able to facilitate digital payments for most
as it is based on the 2015 survey and the 2019-2020
Pantawid beneficiaries. The new SAP beneficiaries,
survey has not yet been completed.
however, relied on house-to-house cash delivery or
collection of cash at pay-out points, which slowed down
the delivery process and was often inconsistent with
social distancing and no-mass-gathering guidelines.
46 A total of 171 countries have announced social protection measures in response to the COVID-19 pandemic, among which new cash transfers
introduced in 88 countries comprise a significant share, as of May 8, 2020.
Robust digital delivery system is needed going forward approach so that Listahanan draws information
from key government administrative data sources
(e.g., PhilHealth, BIR, SSS, and GSIS) would reduce
Given that the impact of COVID-19 may continue,
errors and constantly update the beneficiary list as
particularly in terms of the economic fallout, and that
circumstances change.
the provision of social assistance benefits is not a one-
time event, a more robust digital delivery system will
be required going forward. In the Philippines, digital 3. Promote digital payments. Both account and
platforms and technologies will be able to enormously non-account transactions are useful during the
improve the speed, impact, transparency and crisis period. However, a stronger emphasis on
accountability of social assistance delivery. However, account-based transactions and broader financial
such digital solutions are not just about developing a inclusion through multiple and flexible payment
website or a digital tool but must also be combined service providers should be warranted during the
with beneficiary centered policy and process while economic recovery phase.
ensuring accountability and integrity of the program.
The Government could prioritize the following 4. Build a robust and integrated Management
five areas (Figure 29) that would strengthen social Information System (MIS). Currently, multiple
assistance delivery: social assistance programs have their own
information system without inter-operability and
1. Enhance the access of potential beneficiaries cross matching. Closely linking and orchestrating
to various social assistance programs offered the end-to-end business process through MIS will
by government. Strategic communications and transform the beneficiary experience and greatly
community reach-out including through media and enhance the effectiveness and efficiency of social
digital platforms would be useful. protection in the Philippines.
2. Strengthen Listahanan to become a more dynamic 5. Incorporate a robust grievance redressal

social registry and targeting instrument. Currently, mechanism. Citizens (both beneficiary and non-
Listahanan is carried out through a massive beneficiary) should be able to lodge grievances
‘’census-sweep”, with the latest done in 2015 through multiple channels including local offices,
and the upcoming one in 2019-20 still pending. hotlines and mobile messages, and web portals. At
As an immediate next step, completing the new the same time, backend systems should be able to
Listahanan, ensuring its quality, and adopting it classify the type of grievances, track the progress in
for targeting purposes are required. At the same resolution, and enable follow ups as needed, which
time, pursuing a more dynamic and integrated digital tools can greatly facilitate.
Figure 29. Strengthening social assistance delivery through digital payments.

Community reach-out Eligibility assessment (Listahanan) Compliance verification
1 and beneficiary listing 2 and verfication 3 and payments
Grievance Redressal Management Information

5 Mechanism (GRM) 4 System (MIS)
PART 3
SPECIAL FOCUS NOTE: ACHIEVING FASTER AND
MORE AFFORDABLE INTERNET SERVICES FOR ALL
PART 3 SPECIAL FOCUS NOTE: ACHIEVING FASTER AND MORE AFFORDABLE INTERNET SERVICES FOR ALL 39
3.1 INTRODUCTION
Affordable, reliable and widely available internet services including Facebook, Google, Alibaba, Grab, and Lazada,
are essential to support economic recovery post COVID-19 whose platforms for e-commerce, online sharing, and social
in the medium term, and more equitable growth and media have gained strong foothold in the country. Similarly,
competitiveness in the long term. The ongoing COVID-19 the Philippines has penetrated foreign markets, being a
outbreak and imposed ECQ highlight the need to accelerate leader in the Information Technology and Business Process
the digitalization of the Philippine economy. This would Outsourcing (IT-BPO) industry.
require having resilient and affordable internet services
that enable business continuity; disease tracking and The digital economy in the Philippines is far from
monitoring; supply chain management; expansion of reaching its full potential, and the country’s performance
e-commerce; digital financial services; technology-based generally trails behind many regional neighbors. The
entrepreneurship; and digital public service and social World Bank Digital Adoption Index (DAI) and its three
protection delivery47. sub-indices on people, government and business reveal
that the Philippines fell behind the world average on
The Philippines is potentially a significant player in the digital adoption. In general, the country’s digital adoption
global digital market. From 23 million in 2010, the number is on par with its level of economic development when
of Filipino internet users has more than tripled to 73 million compared to countries around the world, but it performed
in 2020. Connected Filipinos are world leaders in internet poorly compared with regional peers (Figure 30). Among
usage and social media. On average, every Filipino spends the three key agents in the Philippines, businesses and
nearly 10 hours on the internet per day, the most worldwide; people are more accustomed to the use and adoption
with over five hours on mobile internet. The size of the of digital technology than the government. The relatively
country’s domestic market, with over 105 million consumers, poor performance in digital adoption can be traced to a
has attracted international and regional ICT companies multitude of factors including to problems of digital
Figure 30. Digital adoption index and sub-indices relative to world average
2.5
1.5
STANDARD DEVIATION DIFFERENCE
0.5
-0.5
-1
-1.5
-2
MYANMAR LAO PDR CAMBODIA INDONESIA PHILIPPINES VIETNAM THAILAND BRUNEI MALAYSIA SINGAPORE
Digital Adoption Index Business sub-index People sub-index Government sub-index
Source: World Bank (2018). “Information and Communications for Development: Data Driven Development,” Washington DC: The World Bank.
Note: Droplines show the standardized difference of indicator values between ASEAN countries and the world average.
47 There is discussion globally about establishment of a meaningful connectivity standard defined as: when a user has access to a smartphone and or 4G
equivalent quality mobile internet, along with reliable fixed wired or wireless access at home, school, or work every day
Table 4. Broadband Penetration and Speeds, Philippines vs. ASEAN

Philippines ASEAN
Share of population which are active broadband subscribers 70% 88%
4G/LTE mobile broadband network coverage 72% 82%
Share of population which are fixed broadband subscribers 4% 10%
3G/4G mobile average download speed 7Mbps 13Mbps
Fixed broadband average download speed 26Mbps 59Mbps
Sources: Alliance for Affordable Internet (A4AI), International Telecommunication Union (ITU), Ookla Speedtest.
infrastructure and connectivity, high cost of broadband and broadband speed, the cost of a fixed broadband plan in the
internet services, and uneven quality of internet service, Philippines is close to the cost of similar plans in Singapore
among others. and Thailand, countries which have the fastest speeds in
the region.
The current state of internet in the Philippines, however,
calls for urgent and substantial improvements for the Increasing digital adoption and its contribution to
digital economy to play a key role in the economic economic growth requires government actions to create
recovery. The country’s broadband (high-speed) internet a conducive and competitive business environment.
penetration is below the expected level of countries The Philippines’ digital infrastructure has always been
with comparable per capita income.48 For instance, only private sector led. From the monopoly and fixed line
70 percent of Filipinos are active mobile broadband era, the country shifted to mobile services, as the
subscribers, lower than the ASEAN regional average of telecommunications sector was liberalized, and new
88 percent;49 72 percent of the population can access the market entrants competed. However, unchecked mergers
country’s 4G/LTE mobile broadband network coverage, lower and acquisition over the years have resulted in a highly
than the regional average of 82 percent;50 only 4 percent concentrated market, with two dominant players each
of Filipinos are subscribed to fixed broadband services, controlling and operating their own single, vertically
much lower than the regional51 average of 10 percent;52 the integrated network. The current state of internet in the
Philippines’ 3G/4G mobile average download speed of 7 Philippines is thus the result of under-investment in
Mbps is considerably slower than the regional average of 13 broadband internet network resulting from insufficient
Mbps;53 and the country’s fixed broadband average speed competition and an outdated legal, policy and regulatory
of 26 Mbps is lower than the regional average of 59 Mbps framework. It will need the government to set up a sound
(Table 4).54 Furthermore, the Filipinos pay higher price for regulatory environment with strong implementation that
lower download speed. At USD 6.30 per month for 500 MB of encourage competition, guarantee accountability, and
prepaid, handset-based mobile broadband, the Philippines protect consumers to unleash the full potential of the
has the fourth highest cost next to Singapore, Brunei, and digitalization of the Philippine economy.
Malaysia.55 Surprisingly, despite middling in terms of fixed
48 World Bank. 2019. The Digital Economy in Southeast Asia: Building the Foundations for Future Growth.
49 Based on the International Telecommunication Union’s (ITU) key information and communication technologies (ICT) indicators, as of June 2018. Source:
ITU. 2018. Measuring the Information Society Volume 2. https://www.itu.int/en/ITU-D/Statistics/Documents/publications/misr2018/MISR-2018-Vol-2-E.pdf
50 Based on latest Opensignal report on mobile networks, as of May 2019. Source: Opensignal. 2019. The State of Mobile Network Experience: Benchmarking
mobile on the eve of the 5G revolution. https://www.opensignal.com/sites/opensignal-com/files/data/reports/global/data-2019-05/the_state_of_mobile_
experience_may_2019_0.pdf
51 “Regional” refers to Southeast Asia, which includes Brunei, Cambodia, Indonesia, Laos PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand, and
Vietnam.
52 Based on the ITU country ICT data, as of 31 December 2019. Source: ITU. https://www.itu.int/en/ITU-D/Statistics/Pages/stat/default.aspx.
53 Download Speed Experience shows the average download speed experienced by Opensignal users across an operator’s 3G and 4G networks. It factors in
3G and 4G download speeds along with availability of each technology. Source: Opensignal. 2019.
54 Based on the Ookla Speedtest report on fixed broadband, as of January 2020. https://www.speedtest.net/global-index Accessed 25 February 2020. The
last Akamai State of the Internet (SOTI) report recorded the Philippines’ fixed broadband average download speed at 5.5 Mbps for Q1 2017, lower than the
regional average of 11.23 Mbps. The SOTI report on broadband quality of service after 2017 was not available.
55 ITU, “World Telecommunication/ICT Indicators Database 2017,” 2017.
3.2 MARKET FAILURES IN THE PROVISION OF

DIGITAL INFRASTRUCTURE
The digital infrastructure—defined here as the physical line telephony. The installation of fixed internet services
networks and resources that facilitate Internet typically requires some civil works. Mobile internet
connectivity, including radio spectrum—is the basic is delivered to mobile phones or other devices (e.g.,
foundation of the digital economy. Digital infrastructure tablets) through radio signals transmitted via networks
requires physical facilities and resources that facilitate of towers. These radio signals are transmitted at different
connection to the Internet, whether fixed or mobile.56 This frequencies (measured in megahertz or gigahertz) of the
includes different network segments that allow packets of electromagnetic spectrum, impacting the speed of data
data to be transmitted to their destination, as summarized transmission, from 2G (lowest) to 3G, 4G, and 5G (highest).
in Figure 31. See Box 8 for the country’s Internet The speed of transmission (e.g., for uploading/downloading
Network System. data) is measured in megabits or gigabits per second.
A country’s spectrum is a scarce resource managed by
government regulators; and it is divided into different
These network segments transmit packets of data that
frequency bands that are allocated to particular services
are delivered to end-user devices through fixed (wired) or
such as broadcast TV, radio, and mobile telephony/internet.
mobile (wireless) technologies. Fixed internet connections
include optical fiber, cable or copper wires used for fixed
Box 8. Digital Infrastructure Components
The Philippines digital infrastructure consists of the following components:
i. First mile. The first mile or backbone links the Philippines to the World Wide Web (WWW). The first data
transmission link is made between international networks, which consist of international submarine cable
systems and satellites, and associated terrestrial infrastructure, and the domestic backbone network, which
connects cable landing stations to major regions throughout the country. The Philippines is well-served by
international cable networks (Figure 31).
ii. Middle mile. This connects the domestic backbone network to the core networks of telecom/internet service
providers in provinces and/or cities and municipalities through points of presence.
iii. Last mile. This refers to the towers and cables that provide connections to computers, phones, mobile devices
of end users. Users include government offices, public facilities, businesses and households.
iv.
iv. Digital infrastructure also includes: internet exchange points (IXPs) that allow exchange of local internet traffic;
content delivery networks (CDNs - geographically distributed servers coordinated for fast delivery of internet
to users); and data centers that host servers containing digital content and services.
56 A fixed internet connection is accessed in homes and other physical establishments, while mobile connection is accessed typically through cellular
phones.
Figure 31. How the Philippines Connects to the Internet
Satellite
Data Centers,
IXPs, CDNs
INTERNET
Ballesteros
Cavite Daet
FOBN International
Submarine
Cable Systems
Last Mile
La Union Batangas
TELECPHIL
DFON Davao
Cable Landing
Domestic International Station
Middle Mile Backbone Cable Backhaul
Source: The Philippines National Broadband Plan, adapted by the World Bank.
The Philippines’ market for internet services is effectively example, there are no open access or non-discriminatory
a duopoly market.57 As a result of mergers and acquisitions, pricing regulations for the domestic backbone that would
and the absence of a comprehensive competition law58 guarantee any service provider access to the backbone
before 2015, the country’s internet market is dominated infrastructure built by PLDT or Globe. Also, there are
by two telecommunication firms – PLDT and Globe – that no regulations that prevent price discrimination, which
have almost an equal share of the market in all segments59. contributes to the high price of wholesale broadband
The two dominant service providers each operate a access. According to the industry’s regulatory body, the
vertically integrated network, where one company has a National Telecommunications Commission (NTC), there
significant stake and operates in all segments of the digital is limited competition in international connectivity and
infrastructure—from the international submarine cables, nationwide backbone networks, while the access network
cable landing stations, backbone, middle mile, and last mile can be considered very competitive for fixed connectivity
networks, down to the devices and equipment at customer but still limited for mobile networks.60 For mobile
premises. This can be disadvantageous to smaller internet broadband services, competition between the two providers
service providers particularly outside Metro Manila. For has largely focused on increasing market shares.
57 World Bank. 2019. The Digital Economy in Southeast Asia — Strengthening the Foundations for Future Growth. http://documents.worldbank.org/curated/
en/328941558708267736/pdf/The-Digital-Economy-in-Southeast-Asia-Strengthening-the-Foundations-for-Future-Growth.pdf
58 Prior to the enactment of the Philippine Competition Act in 2015 and the creation of the Philippine Competition Commission, it was the sole
responsibility of the NTC to review and approve mergers and acquisitions in the telecommunications sector.
59 Telecommunications is classified as a public utility in the Philippines and is subject to foreign ownership limitation of 40 percent. PLDT has received
investment from the Salim Group of Indonesia and NTT Docomo of Japan while Globe Telecom has investments from Singtel of Singapore. Dito Telecom, a
new entrant that has not yet commenced operations, has received investments from China Telecom.
60 While there are more than ten providers of fixed-line and fixed wireless broadband networks, including PLDT and Globe, there are only two mobile
network providers in the country. Source: Presentation by NTC Deputy Commissioner Edgardo Cabarios at the celebration of the 25th anniversary of the
Philippine Internet, 29 March 2019, Richmonde Eastwood Hotel, Quezon City.
Figure 32. The Philippines’ Fiber Optic Network and Submarine Cables
Ballesteros
La Union
Nasugbu Daet
Cavite
Batangas
Parang Davao
Philippine Fiber Optic

Network Map
Submarine Landing Station
International Submarine Landing Station
International Submarine Cable Station
PLDT Fiber Network
Globe Fiber Network
While 95 percent of Filipinos access the internet to 1,364 in Vietnam and 3,000 in Indonesia.62 More recent
through mobile devices, the number and location of data gathered by Project Bandwidth and Signal Statistics
cell sites—which determine the access and quality of (BASS)—a volunteer, non-profit group that measures
mobile Internet—is among the lowest in the region. mobile broadband and Wi-Fi quality of service through
The Department of Information and Communications crowdsourced data—reveal a total of 32,183 unique cell site
Technology (DICT) estimates the country’s number of cell IDs (of which 76 percent were 4G/LTE), which is still low
towers to be less than 20,000 in 2019,61 far below Vietnam’s compared to global and regional averages (Figure 34 and
70,000 and Indonesia’s 90,000 towers. This equates to Figure 35). As a result, mobile network coverage and signal
about 5,400 people per tower in the Philippines, compared strength varies widely across the country.
61 Pateña, A.J. “PH needs more cell tower firms, telco stakeholders say”. Philippine News Agency. 27 September 2018. Accessed from: https://www.pna.gov.
ph/articles/1049367
62 Camus, M. 2018. “Gov’t pushes new cell tower scheme for level field, better service.” January 20. Inquirer.net. http://business.inquirer.net/244506/govt-
pushes-new-cell-tower-scheme-level-field-better-service.
48+32+137C 42+58+C
Figure 33. Market Shares in Fixed and Mobile Broadband
Sky
7%
Converge
13%
PLDT PLDT
48% 42%
Globe
58%
Globe
32%
Fixed Market Share Mobile Market Share

(includes mobile broadband)
Note: Total of fixed broadband and mobile service markets are based on combined total subscribers of service providers. Data include fixed wireless.
Source: Various firm financial statements and press releases.
Figure 34. Number of Unique Cell Site IDs Detected as of February 2020 Figure 35. 4G Network Coverage (% of Population)
25,000
Philippines 72.4
20,000
15,000
ASEAN 82.1
Average
10,000
5,000 Global
Average 78.6
0
4G 3G 2G 66.0 68.0 70.0 72.0 74.0 76.0 78.0 80.0 82.0 84.0
Smart Globe
Note: The number of cell sites reflects those detected within range when subscribers use the BASS application. Note: Availability is calculated as the percentage of time that 4G mobile device users were able to
Source: ProjectBass Quick Reference Sheet on Tableau63 access a 4G signal.
Source: Open Signal data (2019)
63 Since BASS results come from crowdsourced data, the cell sites detected are only those within the range of a BASS mobile app user. BASS Quick
Reference Sheet. Accessed February 25, 2020. https://public.tableau.com/shared/GBRGCT86S?:display_count=n&:origin=viz_share_link
Fixed internet access is also very limited in the Philippines. to improve, they remain among the slowest in the region
In terms of deployment of fiber optics, the Philippines is (Figure 36). Similarly, prices for internet services have
far behind countries with comparable GDP per capita like declined, but entry-level fixed broadband (postpaid,
Vietnam64, which has 170 percent more fiber connections 1GB) service is equivalent to 6.5 percent of the country’s
than the two dominant Philippine operators have of all GNI per capita67 per month, which is above the 2 percent
types of fixed broadband subscribers combined.65 In 2018, affordability threshold recommended by the United Nations
the United Nations Broadband Commission reported that Broadband Commission and the Alliance for Affordable
about 40 percent of the Philippines’ total population of Internet (Figure 37).68 Although mobile (postpaid, 1GB)
103 million, or about 57 percent of the country’s 23 million broadband service is more affordable, it is still higher than
households did not have internet access.66 the ASEAN average. For the Economic Intelligence Unit’s
Inclusive Internet Index, competition in the market is a
factor in affordability. In its 2019 report, the Philippines was
Limited infrastructure and weak competition lead to poor
placed in the lower half of rankings in Asia because of “poor
quality and high cost. Access to quality internet services
affordability” caused by a competitive environment that
is a prerequisite to successfully participate and thrive in
ranks last in the group (Figure 38).
the digital economy. While, like internet penetration rates,
the country’s internet download speeds are continuing
64 In 2017, the GDP per capita, PPP (current international US$) was $8,343 in the Philippines, and US$6,776 in Vietnam. Source: World Bank Open Data,
https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD
65 Extrapolated from citations of Philippines fixed line subscribers and Vietnam fixed lines FTTH connections extensively cited in the FTTH section. See
http://newsroom.globe.com.ph/press-release/corporate/2018-02/globe-keeps-revenue-growth.html http://newsroom.globe.com.ph/press-release/
corporate/2018-02/globe-keeps-revenue-growth.html; Mirandilla-Santos et al. 2018.
66 Share of individuals using the Internet and households with Internet access from ITU data, as of June 2018. ITU. 2018. Measuring the Information Society
Report Volume 2. https://www.itu.int/en/ITU-D/Statistics/Documents/publications/misr2018/MISR-2018-Vol-2-E.pdf
67 The Philippines per capita GNI was PHP 25,396 (in constant pesos) in Q1 2019.
68 In 2018, the ITU’s Broadband Commission adopted the A4AI’s target of “1 for 2”—1GB of mobile broadband available for 2% of less of GNI per capita.
Source: A4AI. 2018. UN Broadband Commission Adopts A4AI “1 for 2”Affordability Target. https://a4ai.org/un-broadband-commission-adopts-a4ai-1-for-2-
affordability-target/; A4AI. 2017. The Affordability Report 2017. http://a4ai.org/affordability-report/report/2017/#implementing_policies_to_achieve_the_“1_
for_2”_broadband_affordability_target
Figure 36. Mobile and Fixed Internet Download Speeds (August 2019)- Ookla
Mobile Download (mbps) Fixed Download (mbps)
Indonesia Myanmar
Philippines Indonesia
Cambodia Cambodia
Malaysia Brunei
Lao PDR Philippines
Myanmar Lao PDR
Brunei Vietnam
Thailand Malaysia
Vietnam Thailand
Singapore Singapore
0 10 20 30 40 50 60 0 50 100 150 200 250
Source: Ookla (speedtest)
Figure 37. Price of mobile broadband (1GB, prepaid) Figure 38. Economist Intelligence Unit (EIU) Affordability Score, 2017-2019
as % of GNI per capita Score of 0-100, higher score is better.
Affordability
95
Philippines 1.95% 90
85
80 THA, 78.6
75 SG, 76.4
ASEAN
Average 1.37% 70 MLY, 70.2
VN, 67.6
65
INO, 62.4
60 CAM, 58.9
Global 55 PHL, 53.7
Average 5.46%
50
45
0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 2017 2018 2019 2020
Source: Alliance for Affordable Internet Source: Economist Intelligence Unit
Note: Methodology described in https://theinclusiveinternet.eiu.com/assets/external/downloads/3i-methodology.pdf

3.3 GOVERNMENT INITIATIVES TO IMPROVE

INTERNET SERVICES
The government has recently launched several major agreements and provide internet services to end users.
initiatives to improve internet services and quality. Finally, the government will also install infrastructure and
Through the DICT, the government has been working on: (a) provide direct internet services to end users. While the
the National Broadband Plan (NBP), (b) free public Wi-Fi in government may have the capital resources to fund the
public places, and (c) the selection of a new, third major building of infrastructure, it does not have the expertise
telecommunications player. Other policies and regulations nor the flexibility necessary to build and operate a
recently issued are summarized in Table 7. telecommunications or broadband network. Global best
practice suggests that public authorities should play a role
in addressing regulatory and legal constraints that support
The NBP aims to develop (a) an alternative source of
a market-driven approach by creating a fair playfield for all
international bandwidth, (b) submarine cable landing
operators, rather than provide direct investments and be
stations, and (c) a domestic backbone network. Provisions
directly involved in operations.
in the plan are intended to provide smaller market
participants with a choice of bandwidth sources, other
than PLDT and Globe. However, the optimal business Meanwhile, the government is deploying its own fiber
model for the domestic backbone network has yet to be network to connect the major public agencies in Metro
determined. The NBP outlines three options for expanding Manila and augment the country’s poor fiber network
last-mile connectivity. First, the network and service coverage. According to the DICT, the network is being
providers will install infrastructure and provide internet created using government assets, such as the metro
services to end users. The government may opt to share rail transit (MRT) system, that can provide infrastructure
the cost with private providers. Second, the government and right of way at lower cost. Apart from providing
will develop infrastructure and install the network, while internet service to public agencies, the DICT believes
service providers will access infrastructure through leasing that this initiative will augment the limited fiber optic
network deployed by private telcos nationwide. This strategy and sustainable business model for the program.
could potentially be implemented through availability The government could consider a sunset provision to
and cost oriented pricing for dark fibre, a model currently determine when government funding for free public Wi-Fi is
being considered by the government of Mexico City, for no longer needed in certain areas, which would depend on
example. In May 2019, the DICT signed an agreement with the willingness of private sector operators to come in. This
the Philippine Fiber Optic Cable Network Ltd., Inc. (PFOCN) type of sunset provision should be feasible since RA 10929
which will reportedly invest between US$1 billion and allows ISPs enrolled in the program to sell excess capacity
US$2 billion to establish a shared network infostructure for a fee.
between 2019 and 2028. According to the DICT, the rollout
of the shared network will become part of the Free Public To complement these two government programs, a new
Wi-Fi Network.69 The PFOCN will reportedly give preferential major telecommunication player was selected in 2019
rates to the government while the rest of its capacity will but its defined service obligations are not at par with the
be leased to telecommunications firms, internet service requirements for the two incumbent telcos. In response
providers (ISPs), and cable TV operators. Depending on to a Presidential Directive, the government awarded a
the final business model the shared network model could license to Dito Telecom, through a special selection process
potentially lower the cost of fiber-based internet.70 in 2019. Unlike the incumbent telcos, the new entrant
is expected to comply with defined service obligations,
The Free Public Wi-Fi program is intended to provide including a minimum population coverage and broadband
internet service to low-income locations, but download speed after five years of operation. Not only do
implementation has been slow. The Free Internet Access these requirements make it for difficult for the new telco to
in Public Places Act of 2017 aims to provide internet access provide competitive prices, but failure to deliver will result
in over 100,000 public sites nationwide by 2022 (from the in it losing its performance bond worth Php25.7 billion.
previous target of 20,000), which would extend internet Network planning had started as of early 2020, but the
services to low-income municipalities, and lower the timing for rolling out Dito Telecom’s network, along with
cost for end users. It also aims to improve the quality of its impact on the competitive landscape, is uncertain. A
internet services by using Wi-FI sites to offload mobile fair and level playing field for all operators would require
traffic. Despite the huge budget allocated for the program (a the government to apply the same service obligations and
total of Php6.5 billion for the period 2015-2019)71, only 3,283 performance standards to the incumbent telcos as well as
free Wi-Fi sites or 3 percent of the total target have been the new telco.
put up since 2015.72 Challenges include developing an exit
69 https://dict.gov.ph/dict-partners-with-hyalroute-for-billion-dollar-fiber-network-investment/
70 ICT company and cellular mobile telephone system (CMTS) licensee, NOW Corporation, signed a memorandum of understanding with PFOCN for the
former’s nation wide expansion.
71 Figures from the General Appropriations Act 2015-2019. https://www.dbm.gov.ph/index.php/dbm-publications/general-appropriations-act-gaa
72 Data published, as of 5 February 2020. See http://freepublicwifi.gov.ph/free-wi-fi-for-all-eyes-taytay-and-cavite-for-next-rollout-of-sites/.
3.4 LEGAL AND REGULATORY CHALLENGES

Beyond the government’s priority initiatives, there are The requirement for a Congressional franchise is a
key challenges that need to be addressed to improve the significant barrier to entry. The Public Telecommunications
availability, quality and affordability of internet services. Policy Act of 1995 (RA No. 7925) requires an entity wishing
The four key challenges that need to be addressed are: (a) to build a “network” to acquire a license as a public
restrictions on investment and competition; (b) complex telecommunications entity (PTE). In order to become a
permit regulations; (c) infrastructure sharing for the PTE, the entity needs to secure: i) franchise from Congress;
deployment of mobile and fixed networks; and (d) ways to ii) provisional authority (PA) valid for 3 years from the NTC;
more efficiently and effectively manage the radio spectrum. and iii) a certificate of public convenience and necessity
This section also briefly considers the issue of satellite (CPCN) from the NTC which will be co-terminus with the
services for very remote regions. Congressional franchise, and is usually valid for 25 years.
The CPCN approval process is quasi-judicial in accordance
(a) Restrictions on investment and competition. with the provisions of the Public Service Act of 1936 (CA No.
146). A legislative franchise can only be granted to entities
that are at least 60-percent Filipino-owned, as articulated
Public utility designation limits foreign investment.
in Article XII Section 11 of the 1987 Philippine Constitution.
The Public Service Act of 1936 (Commonwealth
Act No. 146) provides a high-level framework for
classifying telecommunications or “wired and wireless The process for becoming a recognized PTE should be
communications” as a “public utility.” A public utility is streamlined – particularly by removing the ability of
subjected to certain regulations, such as restrictions incumbents to oppose the entry of competitors – in
on foreign ownership and a cap on the rate of returns. order to encourage the participation of small, regional or
The law does not distinguish between a “public service” community-based players in the provision of broadband
and a “public utility” so these two terms are often used networks. The quasi-judicial process for acquiring a PA
interchangeably. Moreover, it does not provide a definition or a CPCN can create opportunities for existing market
of “public services” but enumerates businesses—such as participants to quash or delay the entry of potential
ice plants and ice-refrigeration plants along with freight competition. The process allows for an “oppositor” to make
or carrier services, electricity, gas, power, and wired or its case to the NTC against an application because it could
wireless communication systems—as public services. negatively affect its existing business. The trial-like hearings
Under this definition, telecommunications/internet is can go on for several years, making it cumbersome and
considered a public utility, and thus subject to a 40 percent costly for a new player to enter the market.73 Procedural
foreign ownership ceiling. The legislation is in the process reforms at other quasi-judicial agencies, such as the
of revision, however. The recent Congressional approval Maritime Industry Authority, to set strict limitations on what
of House Bill No. 78 on March 10, 2020 distinguishes legal motions oppositors can do during the hearings for the
telecommunication systems as a public service, no longer award of Certificates of Public Convenience, can shorten the
as a public utility. A public service was defined as those hearing process significantly.
which are “non-rivalrous or imbued with public interest.” It
likewise allows for 100 percent foreign ownership of public Inefficient spectrum allocation limits market competition.
services. Hence, this amendment will allow for more players The Radio Control Law of 1931 (Act No. 3846 and its
to enter and usher in competition. amendment RA No. 58474), which governs the management
73 For example, one report involves a PA hearing for a new entrant that went on for four years due to opposition from an incumbent telecommunication
firm. The trial dragged on for so long that the technology and equipment being proposed by the new entrant was already considered old by the time the
process ended.
74 NTC. “Republic Act no. 3846.” http://ntc.gov.ph/wp-content/uploads/2015/10/LawsRulesRegulations/RAs_PDs_EOs/RA_3846.pdf; Corpus Juris. “Republic
Act No. 584.” https://thecorpusjuris.com/legislative/republic-acts/ra-no-584.php
of the radio spectrum, requires a Congressional franchise in Lack of open access to different parts of the broadband
order to secure a permit to construct, install, establish, or infrastructure also limits market competition. The Open
operate a radio station,75 which includes the testing of radio Access in Data Transmission bill identifies the various
equipment for a new and emerging technologies, according segments of the broadband infrastructure and proposes
to the NTC.76 The Radio Control Law also limits the use of to open them up to more and different types of market
the radio spectrum (i.e., limits the transmission of data, participants. This is a means to level the playing field
or internet services) to enfranchised telecommunications and ensure that market participants compete based on
firms only (i.e., only to providers that offer voice telephony services and innovation, not on their capacity to secure
services as well as internet services). This constitutes costly licenses. The Philippines is the only country in
another barrier to entry, as it effectively requires potential the ASEAN region that still requires a franchise from
participants to invest in telephony, even though it is slowly Congress as the first step in obtaining a license to build
becoming obsolete. As demand for internet services and operate a network. Global best practice points to
increases, and as different types of internet-based having administrative license issued by either the industry
technologies emerge (e.g., voice over internet protocol), regulator or ministry in charge of ICT (Table 5). In the 17th
the policies governing the management of the spectrum Congress, a bill proposing an open access framework
should evolve and adapt as well. An updated approach in data transmission was approved in the House of
would be to allow ISPs that do not provide traditional Representatives but failed to move forward in the Senate.
voice telephony to have regional—rather than nationwide— This was a major setback for broadband development in
spectrum assignments, and to consider dynamic spectrum the country, especially since many of the proposals in the
use. This would allow more participants to enter the market NBP are anchored on an open access policy. The bill was
and improve competition, as well as benefit communities refiled by both houses in the 18th Congress, but it is pending
that are not serviced by traditional telecommunications committee approval, to date.
networks.77 Identifying and expanding unlicensed spectrum
opportunities are also critical and will receive a big push
with 6 Ghz band licensing.
Table 5. Licensing of ISPs Across Select Countries in Asia Pacific
Country Licensing
Cambodia License from the Telecommunication Regulator of Cambodia
Indonesia License from the Indonesian Telecommunications Regulatory Authority
Malaysia License from the Malaysian Communications and Multimedia Commission
Philippines Telecommunication franchise law passed by Congress; and PA/CPCN issued by National
Telecommunications Commission
Thailand License from the National Broadcasting and Telecommunications Commission
Singapore License from the Infocomm Media Development Authority
South Korea Registration with the Korea Communications Commission
Japan Registration with the Ministry of Internal Affairs and Communications (if installing cable facilities); and the
ministry needs to be notified prior to providing telecommunications services, including related to internet
Source: Better Broadband Alliance, 2019.
75 Under the law, a “radio station” is interpreted to mean a facility that uses radio equipment for wireless data transmission.
76 Mirandilla-Santos, M., Brewer, J. & Faustino, J. 2018. From Analog to Digital: Philippine Policy and Emerging Internet Technologies. The Asia Foundation:
Manila.
77 In some countries, regulators have adopted innovative licensing, such as a “social purpose” license, and exclusive service license granted in rural
unserved or underserved areas to non-traditional network operators, including community networks. Examples include India, Mexico, and Brazil. Source:
Internet Society. “Policy Brief: Spectrum Approaches for Community Networks.” https://www.internetsociety.org/policybriefs/spectrum/
Current laws make it difficult for existing cable TV A mobile network provider needs to secure separate
providers to provide broadband services. The operation permits for the installation of a radio station;82 importing
of cable TV, governed by Executive Order (EO) No. 436,78 equipment; and obtaining a radio station license. These
is regulated by the NTC through its authority to award PA requirements determine the radio equipment, location,
or a certificate of authority.79 While cable TV operators and frequencies needed for the network. The process for
are not allowed to use their spectrum allocation to offer awarding licenses can be lengthy, and it can even delay or
telecommunications services, they can offer broadband even halt network rollout if providers lack guidance on how
services by sub-leasing any excess spectrum capacity of to expedite the process.
its cable TV system to a third party. However, under RA
No. 7925, cable operators that wish to build any network Various network deployment permits and fees are
segment outside their service area will need to secure a required by different authorities. These are imposed by
franchise from Congress and PA for each municipality the several NGAs, LGUs, and private property management
network will pass through. This requirement can be lengthy firms, such as building administrators and homeowners
and costly for a provider that wishes to operate a network associations. Some of these bureaucratic requirements,
across municipalities. In addition, private companies that arbitrary fees, and permits can be institutionalized barriers
wish to offer retail broadband service at the last mile are to competition” and prevent the timely and cost-effective
subjected to the Retail Trade Liberalization Act of 2000 (RA expansion of last-mile infrastructure. According to Globe
No. 8762),80 which requires capitalization of at least US$2.5 Telecom, the approval process can take up to 8 months
million for foreign companies.81 (see Table 6). Service providers have identified an average
requirement of 25 permits, depending on the cell site’s
The reform or repeal of various legislative barriers is a location and other requirements imposed by the
prerequisite to a more open and competitive broadband approving entity.
market in the Philippines. Policymakers need to amend the
Radio Control Law, the Public Service Act, and the Public Aside from the general need to streamline processes in
Telecommunications Policy Act, and pass the Open Access securing permits and licenses among relevant agencies,
in Data Transmission bill to lower barriers to entry and LGUs, or associations because this acts as a barrier to
allow a more diverse set of providers access the market. For entry, there is a need to look into the issue of exclusivity,
example, the government should remove the requirement particularly between ISPs and certain residences or
for a Congressional franchise and PA/CPCN, and it should homeowners’ associations. The Philippine Competition
consider adopting a simple administrative registration and Commission (PCC) has recently filed a competition case
qualification process for the entry of broadband network against a condominium corporation in this regard.83
operators and for the assignment of the radio spectrum.
(c) Lack of Tower-Sharing Policies and Other Modes of
(b) Permits and licenses Infrastructure Sharing
A proliferation of permits and licenses slows down The absence of a tower-sharing policy for mobile networks
the rollout of broadband networks. The deployment of keep entry costs high. A new firm in the mobile network
broadband networks in urban and rural areas depends not market would either need access to significant capital
only on the availability of infrastructure provided by the to build and maintain its own network infrastructure
major telecommunications firms, but also on a whole gamut or suffer discriminatory charges to use its competitors’
of licenses, permits and other bureaucratic requirements. network. Under infrastructure sharing arrangements,
78 NTC. “Executive Order No. 436.” http://ntc.gov.ph/wp-content/uploads/2015/10/LawsRulesRegulations/RAs_PDs_EOs/EO_436.pdf

79 Cable TV operation is reserved for Filipino-owned entities.
80 Philippine Board of Investment. “Executive Order 8762.” http://boi.gov.ph/wp-content/uploads/2018/02/RA-8762.pdf
81 Below this level of capitalization, only fully Filipino-owned entities can engage and invest in retail trade.
82 Sec. 2 Act 3846, as amended. Source: NTC. “Republic Act 3846.” http://ntc.gov.ph/wp-content/uploads/2015/10/LawsRulesRegulations/RAs_PDs_EOs/
RA_3846.pdf.
83 https://phcc.gov.ph/press-releases/pcc-urbandeca-8990-holdings-abuseodominance-sett-case/
Table 6. Reasons for the 8-month Long Process to Construct a Cell Site in the Philippines
Requirement Permits and Clearances No. of Permits Length of Time

Right of way Negotiations and documentation of prospective cell site location 8 1-2 months
Social acceptability Barangay resolution, homeowners association consent, and 5 1-2 months
residents’ conformity
Various LGU permits Zoning clearance from Housing and Land Use Regulatory Board 5 2 months
(HLURB) city or municipal resolution, occupancy permits, and
mayor’s permits.
National permits Department of Environment and Natural Resources (DENR), 8 1-2 months
Laguna Lake Development Authority (LLDA), Civil Aeronautics
Board (CAB), DOH, Philippine Council for Sustainable
Development (PCSD), Bureau of Fisheries and Aquatic Resources
(BFAR), and National Commission on Indigenous Peoples (NCIP)
Structural permits Zoning permits, locational clearance, building permits including 5 3-5 months
electrical permits, sanitation permits and mechanical permits,
occupancy permits
Construction starts
Source: R. Icogo, Peter. “Why It Takes 8 Months For One Cell Site To Be Constructed In The Philippines?” Giz Guide, https://www.gizguide.com/2016/05/cell-site-construction-ph.html;
ABS-CBN News. “Globe says permit delays delay cell site building.” https://news.abs-cbn.com/business/11/22/18/globe-says-permit-delays-delay-cell-site-building.
however, operators typically agree to share facilities The government has been developing a common tower
ranging from passive infrastructure (e.g., site locations, policy which is expected to be finalized by 2020. In
masts, and cabinets), and radio access networks (e.g., mid-2018 the government announced a plan to issue
base station equipment, operation, and maintenance), to a common tower policy to accelerate the buildout of
active infrastructure (e.g., the radio spectrum, and core telecommunications towers and achieve its target of 50,000
network).84 The deployment of cell sites can consume up towers by 2022. In May 2019, the DICT issued Rules on
to 50 percent of a mobile carrier’s capital expenditure the Accelerated Roll-out of Common Towers,88 which also
and up to 60 percent of its operating expenses. Given the identified 2,500 government sites that can be used for tower
massive amount of capital resources needed to promote installation. Under the current administration, the DICT
an expansion of broadband deployment,85 infrastructure announced that it would issue new common tower policy
sharing policies for mobile networks is becoming global in response to stakeholders seeking “firmer guidelines
best practice.86,87 before committing major investments.”89 To date, twenty
four tower companies have signed a memorandum of
understanding with the DICT to express their intent to enter
the tower market. The common tower policy is expected to
84 International Telecommunication Union. “Mobile Infrastructure Sharing.” https://www.itu.int/itunews/manager/display.asp?lang=en&year=2008&issue=

02&ipage=sharingInfrastructure-mobile
85 The DICT Undersecretary Eliseo Rio, Jr. announced that the Philippines needs 50,000 cellular towers in order to cope with the demand and quality
standards of good mobile services.
86 Towers and base stations also require users to be within 0.5 to 2km radius, which will become more important with the introduction of 5G technology.
87 IFC. 2020. Accelerating Digital Connectivity Through Infrastructure Sharing. https://www.ifc.org/wps/wcm/connect/2d3c4eff-12a8-4b0b-b55d-
9113a950ed33/EMCompass-Note-79-Digital-Infrastructure-Sharing.pdf?MOD=AJPERES&CVID=n2dwWtn
88 The DICT issuance includes a list of DICT towers and real estate that can be used for the tower buildout, a list of about 1,000 “hard to acquire sites”
(according to PLDT and Globe) where government assistance in securing permits is most needed, and GovNet sites. Source: DICT. “Rules on the Accelerated
Roll-Out of Common Towers in the Philippines.” https://dict.gov.ph/rules-on-the-accelerated-roll-out-of-common-towers-in-the-philippines/
89 Business World. “DICT may issue a new common tower policy.” https://www.bworldonline.com/dict-may-issue-new-common-tower-policy/
be finalized in 2020, addressing the following issues. (NEA). Currently, there is no regulation on pole attachment
Once adopted it could also facilitate faster rollout of the for non-electric access seekers, such as telecommunications
third telco: and broadband operators. In August 2018, the DICT, NEA and
the Philippine Rural Electric Cooperatives Association, Inc.
a. Foreign ownership restrictions on independent tower (PHILRECA) signed a memorandum of understanding
companies (ITCs);
b. Limitation on the number of ITCs allowed to enter the for the implementation of the NBP, particularly on the
market; co-use of fiber optic cables.94 However, the rising cost of
c. Mode of engagement for ITCs; pole attachment (from Php100 to Php400 per pole, per
d. Independence of tower companies from mobile attachment, per year) has been challenging.95
network operators; and
e. Financial and technical qualifications of ITCs. The two dominant incumbent players own and control
the country’s broadband infrastructure. The operation of
Poor coordination with the Department of Public Works any broadband network in the country, including that of
and Highways (DPWH) lead to slower deployment the government, is dependent on access to infrastructure
and higher costs for both service providers and the of PLDT and Globe. Any new entrant, unless it plans to
government. The excavation and restoration of roads is build and operate its own network or is provided access
estimated to consume as much as 80 percent of the cost to government assets (e.g., existing roads, railways, towers,
of deploying fixed-broadband networks.90 There are no fiber optic network and/or planned cable landing stations,
common or shared utility corridors in the Philippines that or the National Grid Corporation of the Philippines’ (NGCP)
will allow various operators to use conduits to lay fiber in fiber optic network) will have to bilaterally negotiate
existing roadworks, and there is no “dig once” policy that interconnection and access to the incumbents’ facilities,
requires coordination for one-time civil works.91 Ideally, including cable landing stations, backbone, middle mile,
broadband infrastructure is installed while roads are and access networks. This puts any new player at risk of
being built to minimize disruption.92 With coordination, non-competitive behavior (e.g. discriminatory charging)
the cost for both service providers and the government from the two incumbents.
will be minimized since road construction and broadband
reinstallation are done only once. Synchronizing the It is, therefore, important that there is open and non-
schedules of project implementation is, however, critically discriminatory access to the country’s broadband
important, as national road projects cannot be delayed by infrastructure. Instead of a single, vertically integrated
the deployment of broadband networks.93 network, it is recommended that the government adopts
an “open access” approach. This promotes infrastructure
New regulation on pole attachment can help reduce fiber sharing among service providers and ensures access
deployment costs. Pole attachment is very important for to network segments on fair, reasonable and non-
cable broadband operators and aerial fiber deployment. discriminatory (FRAND) terms. Infrastructure sharing is
Poles are often owned and operated by electricity a way to optimize the use of resources by allowing two
distributors (e.g. Meralco and the provinces’ electric or more service providers to use the same structure
cooperatives) and are within the jurisdiction of electric or network element. With the end goal of increasing
power industry regulators (e.g. the Energy Regulatory broadband connectivity, infrastructure sharing promises
Commission (ERC) and the National Electrification Authority to reduce the cost of deployment, lower asset duplication,
90 According to MetroWorks ICT Construction, which carries out civil works for telecommunications firms and ICT operators.
91 Instead, the operator needs to submit a detailed plan for the civil works and get approval from the regional or district offices.
92 Interview with DPWH Central Office officials and staff for policy and design, and bureau of planning, [date].
93 Interview with DPWH Central Office officials and staff for policy and design, and bureau of planning, [date].
94 https://nea.gov.ph/index.php?option=com_content&view=article&id=744:nea-dict-urge-power-co-ops-cable-operators-and-telcos-to-collaborate-to-
expedite-nbp-rollout&catid=12:news&Itemid=12
95 See Memorandum No. 2018-55 to Electric Cooperatives on Standard Joint Pole Agreement and Pole Rental Rate, https://nea.gov.ph/index.
php?option=com_phocadownload&view=category&download=3256:memo-to-ecs-2018-055-standard-joint-pole-agreement-and-pole-rental-
rate&id=203:2018&Itemid=264
reduce the environmental impact, lower barriers to entry such as roads, railways, and electricity transmission. The
and increase competition, expand network coverage, and policy must include standards, regulation on access and
lower service prices.96 pricing, and a coordinating body to look into how different
utilities, government agencies, and regulators can work
In the absence of a national law on infrastructure sharing, together. The policy should also include provisions for
the DICT could consider issuing its own policy. Using an coordinated planning and construction among various
open-access approach, the DICT should consider allowing government agencies and private service providers. The
private service providers to use government assets such timing is appropriate, as the current administration
the 2Tbps cable capacity from Pacific Light Cable Network is implementing its “Build, Build, Build” infrastructure
(PLCN), the Bases Conversion and Development Authority program, and a number of roads, bridges, and train projects
(BCDA)-built landing stations, or the NGCP’s fiber optic are underway. Finally, in a setting where open access to
network. However, the government needs to balance a private operator’s property is involved, the policy must
maximizing the use of assets, and even monetizing them, provide a mechanism for when and how the government
with providing an alternative source of bandwidth for new can intervene in cases when: (i) the access seeker and
and small providers in rural areas. Infrastructure sharing infrastructure owner fail to reach an agreement within the
can adopt any of the following business models:97 prescribed time period of negotiation, (ii) there are disputes
over the terms and conditions for accessing infrastructure,
• Joint development: infrastructure owners and (iii) there are pricing disputes.
and network operators coordinate planning and
construction activities; (d) Spectrum Management for Mobile Broadband.
• Hosting: infrastructure owner hosts third-party Current laws that regulate spectrum use and allocation
telecommunications network equipment; are outdated. The way the government manages its
radio spectrum resources is crucial to ensuring mobile
• Dark fiber: host provides passive infrastructure for broadband coverage and quality of service, as well as
lease to network operator; in promoting competition in the mobile service market.
However, the laws that govern the radio spectrum in the
Philippines are designed for legacy (analogue) technology
• Joint venture: infrastructure owner allows the network
and they merely provide a general regulatory framework for
owner to use existing infrastructure and offer
the regulator.
commercial services on a profit-sharing basis; and
The country’s radio spectrum has never been allocated

• Wholesale telecommunications services: infrastructure
through a competitive bidding process. The NTC has never
owner provides commercial wholesale service to
carried out an open tender for the spectrum because
network operators.
the supply has reportedly always exceeded demand. To
date, all frequencies have been awarded through a simple
The scope of an infrastructure sharing policy should administrative process98 akin to a “beauty contest”,99
be cross-sectoral to include networked infrastructure where the applicants that best show their financial and
96 Deloitte, APC. 2015. Unlocking Broadband For All. https://www.apc.org/sites/default/files/Unlocking%20broadband%20for%20all%20Full%20report.pdf;

World Bank. 2017. Infrastructure Sharing and Co-deploymentIssues. https://www.unescap.org/sites/default/files/Infrastructure%20Sharing%20and%20Co-
Deployment%20Issues%2C%20World%20Bank.pdf
97 World Bank. 2017. “Infrastructure Sharing and Co-Deployment Issues.” https://www.unescap.org/sites/default/files/Infrastructure%20Sharing%20and%20
Co-Deployment%20Issues%2C%20World%20Bank.pdf.
98 The process often involves the submission by an applicant of a letter of request to the regulator for its spectrum needs. This is unlike in other
countries, where there are public consultation documents, market reviews, and spectrum management plans issued by the regulator before spectrum is
assigned or awarded to an entity.
99 On August 23, 2005, the NTC issued Memorandum Circular No. 07-08-2005 or the Rules and Regulations on the Allocation and Assignment of 3G
Radio Frequency Bands, allocating the 825-845MHz/870-890MHz frequency bands for 3G. The NTC issued 3G spectrum to four mobile operators, namely
Smart, Globe, Digitel and CURE. Bayantel was disqualified but won a petition in the Court of Appeals, who, in December 2010, ordered the NTC to
stop the bidding for the last remaining 3G frequencies. The case has been pending in the Supreme Court since April 2010. https://www.philstar.com/
business/2010/04/11/564944/ntc-elevates-3g-award-row-bayan-supreme-court.
technical capacity to provide the required capitalization and spectrum assignment reviews and publishing their results.
infrastructure are granted the spectrum license, regardless Furthermore, the NTC, in coordination with the DICT and the
of their current spectrum holdings or the validity of the PCC, can issue rules and regulations (based on global best
justification for the additional spectrum.100 Given these practice) that govern the shared use of the spectrum. The
criteria, the process is likely to favor incumbents and large NTC and DICT can also explore the adoption of emerging
telecommunications firms, making it very unlikely that management practices such as dynamic
spectrum is awarded to a new entrant. Moreover, spectrum allocation.
the administrative method of assigning frequency has
produced inefficiencies and underutilization of spectrum (e) Addressing Connectivity Needs in Remote Areas.
bandwidth, not to mention limiting the flexibility in service
provision and impeding technological developments.101
The government needs to develop a clear strategy on how
to deploy better broadband services in remote areas. A
The scarcity of the remaining unassigned spectrum bands small number of regions in the Philippines are unable to
will limit the competitiveness of any new entrants. In 2017, readily connect to terrestrial (fixed or mobile) networks
upon the directive of the DICT, the NTC published the result due to geographical constraints. These areas will have
of an audit of “assigned, returned and vacant mobile access to continue to rely on satellite services. However, there
frequencies,” which showed that the spectrum in key bands, is limited information on the government’s plans on to
such as 900 MHz and 1800 MHz, have been assigned to only facilitate access to satellites for broadband connectivity,
two telecommunications firms. A recent Senate report noted other than that satellite technology will be used to address
that the remaining frequencies for the third player will be the needs of isolated locations (i.e., mountainous, coastal
limited to data-driven services,102 which is problematic and small islands areas) where the deployment of the fiber
in a country where at least 40 percent of mobile phone network will be challenging. Nevertheless, there seems to
users remain dependent on basic call and text services. As have been an increasing adoption of satellite technology
spectrum hoarding has become a barrier to competition, through the Free Public Wi-Fi program as satellites are
the government needs to clarify the powers and functions being used to connect free public Wi-Fi sites in unserved
of the NTC in terms of spectrum assignment, recall, and areas in Marinduque and hard-to-reach areas in Bohol,
reassignment, as this is absent in existing laws. It should Davao, and Sorsogon. An option to consider for the
define the guidelines for how and when the NTC initiates medium term may be the deployment of more advanced
proceedings for recalling and reassigning the spectrum to high through-put satellites (HTS) which can also make a
ensure the spectrum is available for multiple operators. In significant impact on cellular backhaul though 200-500Mbps
the current scenario, the third telco will face higher costs to the tower (a near substitute for fiberizing towers) for both
associated with the limited amount of spectrum that it has community Wifi and 4G mobile services.
been allocated (less spectrum requires construction of
more infrastructure to offer the same level of service as a
Open access to satellites can boost the rollout of satellite-
telecommunication firm that has more spectrum).
based broadband services. The government could consider
replacing EO No. 467 (s. 1998) to enable more equitable
The management of the country’s spectrum could be more access to satellites and other emerging technologies that
transparent and dynamic. Spectrum assignments in the can offer innovative solutions for rural and hard-to-reach
Philippines are considered confidential, and the process communities. The tourism, banking, shipping, and mining
for awarding the spectrum is an internal process. Moving sectors are just some of the areas that can benefit from
forward, the authorities need to require the publication of open access to satellite broadband technology. A liberalized
all applications, approvals, and decisions for test permits, satellite market can also help connect the 34,000 or so
demonstration permits, assignment, re-assignment, and co- public schools that remain offline due to lack of internet
use of the spectrum. In addition, public consultations are facilities in their communities.103
needed before the NTC can any issue an approval. Efforts
to increase transparency include defining the period for
100 PCC. Note on Spectrum Management.

101 Gilbert Llanto, Policy Note on Reviewing the Philippines’ spectrum management policy, 2006; PCC’s Policy Note on Spectrum Management, 2018.
102 Senate Committee Report No. 78. 17 May 2016. https://www.senate.gov.ph/lisdata/2505522326!.pdf
103 Based on DepEd data in 2016.
3.5 CONCLUSIONS AND RECOMMENDATIONS

Improving and expanding broadband connectivity will • Fast-track and lower the cost of deploying broadband
be key for the Philippines to thrive in the digital age infrastructure through infrastructure sharing policies
and for Filipinos to be active participants in the digital that address: (a) the use of government assets
economy.104 However, this is hampered by the inadequacy (submarine cable, NGCP dark fiber); (b) the use of
of the country’s digital infrastructure. While the private existing infrastructure across sectors such as roads,
sector should continue to lead investment efforts in the railways, electricity transmission; and (c) coordinated
Philippines’ digital infrastructure, the government plays an build for a shared utility corridor.
important role in creating an enabling policy and regulatory
framework to ensure a competitive broadband market and • Encourage more private sector infrastructure sharing
enhance access to and the affordability of internet services which can be approved under existing bills, such as
throughout the country. This is particularly critical under the proposed Open Access in Data Transmission Act or
the “new normal” as many companies will still be required can be proposed as separate DICT policies to promote
or opted to continue work from home arrangement, at common towers, pole sharing, and access to ducts.
least for part of their workforce; students are expected However, an executive order mandating infrastructure
to continue remote learning in the medium term; and sharing across these passive infrastructure modalities
government agencies will shift many of their transitions would have a more immediate impact.
online. This can be achieved through a combination of the
following measures listed below:
• Make more spectrum available for internet
connectivity. About 95 percent of Filipinos access the
• Lower barriers to market entry by easing the Internet through mobile and wireless devices. Spectrum
restrictions to foreign ownership of equity in management reform would entail amending the Radio
telecommunications and broadband networks. This can Control Law and/or the Public Telecoms Policy Act, and
be accomplished by amending the Public Service Act by passing the Open Access in Data Transmission bill,
and the Public Telecommunications Policy Act, and by including the guidelines that will clarify the powers and
passing the Open Access in Data Transmission bill. functions of the NTC in terms of spectrum assignment,
recall, and reassignment.
• Streamline permit requirements for network
deployment and rationalize fees imposed by various Finally, Government is recommended to focus its efforts on
national and local government agencies, as well as addressing these regulatory and legal issues supportive of a
private sector associations. market-driven approach rather than direct investment and
operation of networks.
• Provide a fair and level playing field for operators that
requires the government to apply the same service
obligations and performance standards for the third
telco to the incumbent telcos.
104 World Bank (2019) The Digital Economy in Southeast Asia: Strengthening the Foundations for Future Growth
Table 7. DICT and NTC Policy and Regulatory Issuances Affecting Broadband Access, Quality and Affordability (2016-present)
TOPIC DICT ISSUANCE POLICY NTC ISSUANCE REGULATION

Shared May 2019 Rules on the Accelerated Roll-Out of
infrastructure Common Towers in the Philippines110
Mobile number NTC MC No. 03-06-2019 Rules and Regulations Implementing
portability Republic Act No. 11202 Otherwise
Known as the “Mobile Number
Portability Act”111
Mobile device DICT-MO-004-2018 Mandatory Unlocking of Mobile NTC MC No. 01-05-2019 Rules and Regulations on Unlocking of
unlocking Phones and Devices After Lock-In Mobile Phones and Devices113
Period and Compliance with Terms and
Conditions Contained in Subscription
Agreements112
Third DICT-MO-001-2018 Policy Guidelines for The Entry of NTC MC No. 09-09-2018 Rules and Regulations on the Selection
Telecommunications a New Major Player in The Public Process for a New Major Player in
firm Telecommunications Market114 the Philippine Telecommunications
Market115
NTC MC No. 12-03-2018 Document Verification Report on
the Requirements Submitted by the
Provisional New Major Player116
Free internet access June 2018 Rules and Regulations to Implement
in public places the Provisions of Republic Act No.
10929 (Free Internet Access in Public
Places Act)117
Radio spectrum DICT-DO-004-2018 Directing the NTC to Review and Make NTC MC 02-02-2018 Additional Frequency Allocations for
Appropriate Adjustments to Increase Broadband Wireless Access (BWA)119
Spectrum User Fees (SUF)118
DICT-DO-003-2018 Directing the NTC to Review and Make
Appropriate Adjustment on SUF for
the 610-790 MHz, 790-960 MHz, and
1710-2025 MHz International Mobile
Telecommunications (IMT) Frequency
Bands120
110 https://dict.gov.ph/wp-content/uploads/2019/05/Final-Version-Rules-on-the-Accelerated-Roll-Out-of-Common-Towers-in-the-Philippines.pdf
111 http://ntc.gov.ph/wp-content/uploads/2019/07/MC-03-06-2019.pdf
112 https://dict.gov.ph/wp-content/uploads/2018/12/Memorandum-Order-No.-004.pdf
113 http://ntc.gov.ph/wp-content/uploads/2019/MC/MC-01-05-2019.pdf
114 http://dict.gov.ph/wp-content/uploads/2017/01/DICT-MO-001-2018-POLICY-GUIDELINES-FOR-THE-ENTRY-OF-A-NEW-MAJOR-PLAYER-IN-THE-
PUBLIC-TELECOMMUNICATIONS-MARKET.pdf; See latest amendments http://dict.gov.ph/wp-content/uploads/2018/09/MEMORADUM-N0.-003.pdf
116 http://ntc.gov.ph/wp-content/uploads/2018/MC/NMP_TWG_Document_Verification_Report_20181112.pdf
117 https://dict.gov.ph/wp-content/uploads/2020/02/RA10929-Published_IRR_Free-Internet-Access-in-Public-Places-Act.pdf
118 http://dict.gov.ph/wp-content/uploads/2018/09/DICT-DO-004-2018-DIRECTING-THE-NATIONAL-TELECOMMUNICATION-COMMISSION-NTC-TO-
REVIEW-AND-MAKE-APPROPRIATE-ADJUSTMENTS-TO-INCREASE-SPECTRUM-USER-FEES-SUF.pdf
120 http://dict.gov.ph/wp-content/uploads/2018/06/imagetopdf.pdf
TOPIC DICT ISSUANCE POLICY NTC ISSUANCE REGULATION

Interconnection DICT-DO-002-2018 Directing the National NTC MC No. 05-07-2018 Interconnection Charge for Short
charges Telecommunications Commission to Messaging Services and Voice
Reduce the Interconnection Rates Service122
Between Public Telecommunications
Operators.121
NTC MC No. 09-11-2016 Interconnection Charge for Voice
Service123
Broadband quality of NTC MC No. 10-12-2016 Rules on the Measurement of Mobile
service Broadband/ Internet Access Service124
NTC MC No. 07-08-2015 Rules on the Measurement of Fixed
Broadband/ Internet Access Service125
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June 2020
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JUNE 2020 EDITION

Rights and Permissions

1.2. Fiscal Policy: Accelerating Spending amid an Erosion of Fiscal Space 12

1.3 Monetary and Macro-prudential Policies: Geared Toward Mitigating

2 OUTLOOK AND RISKS 26

2.1. Growth Outlook 27

2.2. Poverty and Shared Prosperity 32

2.3. Risks and Policy Challenges 33

SPECIAL FOCUS NOTE: ACHIEVING FASTER AND MORE AFFORDABLE

3.2. Market failures in the provision of digital infrastructure 41

3.3. Government Initiatives to Improve Internet Services 47

3.4. Legal and Regulatory Challenges 49

3.5. Conclusions and Recommendations 56

ABBREVIATIONS AND ACRONYMS

ABBREVIATIONS AND ACRONYMS

PART 1 RECENT DEVELOPMENTS

1.1 ECONOMIC GROWTH: COVID-19 HIT THE

Investments GDP Growth Services GDP Growth

materials and imports of intermediate goods, reflecting

Mobility restrictions and personal avoidance behavior

Box 1. Tracking the Impact of COVID-19 in Real Time

Travel Netflix Delivery

Box 2 . Recent Global Developments

Global PMI: Composite Ouput 0

Global Manufacturing PMI

Note: An expansion is represented by 50+. Source: Chicago Board Options Exchange.

1.2 FISCAL POLICY: ACCELERATING SPENDING

Box 3. The Bayanihan to Heal as One Act

FISCAL BALANCE (PERCENT OF GDP)

300 40 3.4 3.5

Box 4. ASEAN-5 Policy Response to COVID-19

1.3 MONETARY AND MACRO-PRUDENTIAL

-2 2018 2019 2020

Source: PSA and BSP Source: PSA

2018 2019 2020 Palay (Dry)

1.4 THE EXCHANGE RATE AND THE EXTERNAL

Figure 19. Composition of the Overall Balance-of-Payments Position

PHL Peso IDN Rupiah THA Baht

Table 1. Balance of payments, 2015 to 2019

In million US$ / In percentage of GDP 2015 2016 2017 2018 2019

Capital and Financial accounts (0.7) (0.0) 0.9 2.7 1.7

Net unclassified items2/ (0.8) 0.1 (0.5) (0.8) 0.5

Overall BOP position 0.9 (0.3) (0.3) (0.7) 2.1

1.5 POVERTY AND EMPLOYMENT: PROTECTING

Figure 24. Share of Job Creation by Subsector

Agriculture, hunting and foresty 49%

INDUSTRY Electricity, gas, steam, and air conditioning supply 1%

SERVICES Financial and insurance activities 2%

Human health and social work activities 2%

Administrative and support service activities 4%

Accommodation and food service activities 12%

Public administration and defense, compulsory social security 12%

0% 10% 20% 30% 40% 50% 60%

Fishing and aquaculture 19

Financial and insurance activities 38

Human health and social work activities 38

Administrative and support service activities 73

Accommodation and food service activities 201