Economy Analysis of Philippines

Executive Summary
Julius Fuentes
May 23rd, 2012
Observations
The inflation level has a steady rate of increase !E"hi#it A$
E"hi#it A %nflation
The &'P also has a steady rate of increase !E"hi#it ($
E"hi#it () &'P !*ource) %nternational Monetary Fund +orld Economic ,utloo-
'ata#ase, April 2012$
The unemployment levels, on the other hand, are not so predicta#le After a constant
drop since 1./0 until 1..0, then it increases drastically at 1..1 %n d1indles #ac-
do1n and reaches another lo1 level at 1..2, #ut clim#s #ac- up 1ith a steady pace
At 2000, ho1ever, levels drop to an all time lo1 !E"hi#it 3$
E"hi#it 3) 4nemployment !*ource) %nternational Monetary Fund +orld Economic
,utloo- 'ata#ase, April 2012$
The imports and e"ports seem to have an inverse relationship e"cept from 200/
E"hi#it ') %mports and E"ports !*ource) %nternational Monetary Fund +orld
Economic ,utloo- 'ata#ase, April 2012$
Causes of the Trends/Changes/Analysis of Correlations
The industriali5ation of Philippines is fairly recent Philippines has #ecome a rapidly
increased the si5e of its economy throu6h four various methods7 automotive creation,
electronics, minin6 and natural resources and outsourcin6 +hile the a6ricultural
sector is a lar6e #usiness in Philippines, service oriented companies such as the call
center industries are the -ey in its economy The continuous increase in technolo6y is
also one thin6 that has ensured Philippines of its rise in &'P and %nflation
8o1ever, one important aspect that most miss is the a#undant natural minin6 resource
that the country has After inspectin6 the trends, it is clear that the minin6 industry
and unemployment have a correlation (oth in 1..0 and 2000, the 6overnment has
passed minin6 acts All of the acts, 1hich include 1..0 9epu#lic Act and in 2000, the
:ational Policy A6enda on 9evitali5in6 Minin6 in the Philippines and the Mineral
Action Plan 1ere aimed to 1as aimed to attract forei6n investors, openin6 up
Philippine mines entirely to forei6n investors
Economic Analysis of the Causes
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%ntuitively, any economist 1ould ar6ue that the inflation rate and unemployment are
trade;offs 8o1ever, in Philippine<s case, the unemployment rate is chaotic and
unpredicta#le Therefore, % 1ill e"amine the unemployment levels independently in
relation to the minin6 situation
(ecause of more forei6n investors, the a66re6ate demand !A'$ for Philippines
increases Therefore, assumin6 that the economy had cyclical unemployment, an
increase in A' 1ould increase the a66re6ate demand for la#or as 1ell !Fi6ure 1$
Fi6ure 1 9ise in cyclical unemployment
,ne other type of unemployment that the Philippines are facin6 is structural
unemployment 'espite an increase in participation of the la#or force, due to the rapid
increase in population, unemployment 1as a pro#lem until 200/ !Fi6ure 2$ Ever
since 200/, the increased forei6n demand for minin6, an occupation that 1as re6arded
as close to e"tinction, structural unemployment 1as countered 8o1ever, this only a
small portion of structural unemployment7 there is also a permanent decrease several
=o#s #ecause of ne1er technolo6y and ne1er occupations such as call centers
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Av
era
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pri
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lev
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b a a
Number of workers
ASL
Av
era
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wa
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rate
LF
Fi6ure 2 *tructural unemployment
To counter the structural unemployment, the 6overnment could implement #oth
interventionist policies and free mar-et policies From a free mar-et approach, the
6overnment could reduce unemployment #enefits to reduce frictional unemployment,
thus encoura6in6 people to find a =o# sooner Also, the 6overnment could dere6ulate
hirin6 and firin6 1or-ers to increase la#or mar-et fle"i#ility This ma-es #usiness
more 1illin6 to ta-e ne1, #etter 1or-ers to improve their company The main ris-
involved in implementin6 this policy is that the t1o 6roups affected #y such policies
1ill have detrimental effects First, the people 1ith lo1er unemployment #enefits
suffer from lo1 livin6 standards This increases ine>uity 1ithin the economy Also,
the la#or mar-et re6ulations that protect the 1or-ers 1ill also #e null, meanin6 they
mi6ht suffer from unfair treatment such as racism or se"ism 'ere6ulatin6 1ill
certainly cause 1orse 1or-in6 conditions
For the Philippines, interventionist policies 1ould also #enefit its people, considerin6
that the 8uman 'evelopment %nde" !8'%$ of the Philippines is relatively lo1 at 112
th

in the 1orld %mprovin6 the education system 1ould not only raise the country<s 8'%,
#ut also allo1 people to #e more occupationally fle"i#le %n a country that ne1
technolo6y seems to manifest everyday, trainin6 adults to #e proficient in computers
is also a 1ay to increase occupational mo#ility, thus decreasin6 structural
unemployment 8o1ever, the t1o main disadvanta6es to the interventionist approach
is that there is a hi6h opportunity cost for the 6overnment in spendin6 their income for
such policies And even if they are implemented, their results 1ill only #e apparent in
the ne"t 6enerations, as these policies are lon6;term solutions 'espite these
inconveniences, the Philippines mi6ht suffer later from lac- of sustaina#le natural
resources 9eliant on e"pediency, the people need to #e educated of the scarcity of
their factors of production :o matter ho1 lon6 it ta-es for these policies to ta-e
effect, this serves to #e the most practical solution
4
ADL
Number of workers
+or-s 3ited
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