In a survey of 178 economies, the Philippines ranked as the 70th freest economy in the world, according to the Heritage Foundation’s 2016 Index of Economic Freedom, moving 6 places from 2015’s ranking.
With an economic freedom score of 63.1, up by 0.9 point from last year, the Philippines is now considered a “moderately free” economy, with its score higher than the global average of 60.7. Its score is also higher than the regional average of 59, making it the 14th freest economy in the Asia-Pacific region.
"These results once again affirm our belief that good governance is good economics," said Presidential Spokesperson Edwin Lacierda in a press statement on Tuesday, February 2.
The report noted that the Philippine economy has been growing steadily, with an average annual growth rate above 6% for the past five years. It also lauded the Philippine government's efforts at pursuing legislative reforms to improve the entrepreneurial environment and to develop a more vibrant private sector that can generate jobs in the country.
"Apart from serving as a strong testament to the effectiveness of reforms, this positive news clearly shows how the Philippines has been progressing under the Aquino administration," Lacierda added.
However, the report goes on to say that, despite these improvements, poor infrastructure remains an impediment to the country's economic growth.
Stacking up the competition
The Philippines’ overall score has gone up by 6 points since 2012. According to the index, economies with scores of 0 to 49.9 are classified as "repressed"; 50 to 59.9 as "mostly unfree"; 60 to 69.9 as "moderately free"; 70 to 79.9 as "mostly free"; and 80 to 100 as "free."
Only 5 countries have been listed under the "free" category: Hong Kong, Singapore, New Zealand, Switzerland, and Australia. Hong Kong remains the world's freest economy since the ranking started in 1995.
Under the “repressed” category, North Korea and Cuba remained at the bottom of the rankings.
Global economies that were also considered “moderately free" like the Philippines were Belgium, Peru, Poland, Rwanda, Spain, and Uruguay.
Among its ASEAN (Association of Southeast Asian Nations) neighbors, the Philippines surged ahead of Indonesia (99th); Cambodia (112th); Vietnam (131st); Laos (155th); and Myanmar (158th). However, it lagged behind Singapore (2nd); Malaysia (29th); Brunei (51st); and Thailand (67th).
The Washington-based government think tank noted in the report the Philippines’ successes in monetary freedom and management of public finance. With a score of 79, the Philippines ranked 92nd in fiscal freedom. It ranked 20th in government spending, with a score of 89.6, thanks to government spending amounting to 18.6% of the GDP (gross domestic product). "Efforts to narrow the budget gap have kept budget deficits under control," added the Heritage Foundation.
With a score of 77.7, the Philippines ranked 86th in monetary freedom under government. "Government subsidies to state-owned or state-controlled corporations jumped by 200% in the first quarter of 2015," noted the think tank.
The Philippines also gained improvements in business freedom: with a final score of 63, up by 7.7 points from last year, the Philippines ranked 99th in terms of ease of doing business. “The time involved in dealing with licensing requirements has been notably reduced, and the cost of completing them has been cut," said the Heritage Foundation.
Since the Index started in 1995, the Philippines has gained 34.4 points in trade freedom; this year, it closed off with a final score of 76.4, placing it in the 94th place under open markets. The country’s financial sector, which the Heritage Foundation noted as “gradually modernizing,” remains stable and sound, which led to a score of 60 in terms of investment and financial freedom.
However, despite the recorded progress of the Philippine economy, the report also noted the areas that remain an impediment to the country’s economic growth, with poor infrastructure being on top of the list.
Rule of law and labor freedom also remain a concern. "The rule of law is generally weak as courts are hampered by inefficiency, low pay, intimidation, and corruption," added the think tank.
Under rule of law, the Philippines ranked 92nd in property rights with an underwhelming score of 30, already down by 20 points since the Index started in 1995. In labor freedom, the country ranked 109th with its score of 57.1. "The labor market remains structurally rigid, although existing regulations are not particularly burdensome," noted the Heritage Foundation.
The report also took into account freedom from corruption, and cited President Benigno Aquino III’s imperative to “root out corruption” when he took office in 2010. The Philippines ranked 87th in terms of freedom from corruption with its final score of 38, up by 2 point from last year. Since the Index started, the Philippines has gained 28 points in freedom from corruption.
While the perceived level of corruption has declined, the think tank noted that more effective anti-corruption measures need to be institutionalized "The judiciary remains susceptible to political interference and does not provide dependable enforcement of the law," said the Heritage Foundation.