Country profile: Philippines

Under the leadership of President Gloria Macapagal Arroyo, the Philippines has undergone an economic transformation, deregulating its energy sector and offering new incentives for foreign investment. President Arroyo came into power when former President Joseph Estrada was forced to resign in 2001, and in May 2004, she was reelected to another six-year term. Her tenure has not been without controversy, however. Most recently, in February 2006, President Arroyo decided to invoke a week-long state of emergency after an apparent coup attempt. President Arroyo has also survived two impeachment attempts over alleged corruption.

Despite some political instability, the Philippines has experienced strong economic growth over the last two years. Real gross domestic product (GDP) grew at 5.0 percent in 2005, down somewhat from the 15-year high growth rate of 6.2 percent seen in 2004. The country is currently experiencing a minor cyclical downturn, driven by high global oil prices and a slowing world economy. However, growth remains strong, with the Philippine economy growing an estimated 5.5 percent during the first half of 2006. A key driver of continued economic growth is overseas workers’ remittances, which help sustain strong private consumption in the Philippines. During 2005, total remittances from approximately seven million overseas workers stood at $10.7 billion, or about 11 percent of nominal GDP.

The Philippines is one of the claimants, along with China, Taiwan, Malaysia, and Vietnam, to the Spratly Islands, located in the South China Sea. Potential oil and natural gas reserves surrounding the islands have sparked the interest of all the littoral states. In September 2004, the Chinese and Philippine governments reached an agreement to jointly pursue seismic survey work in the Spratlys, but without giving up their respective territorial claims. Vietnam joined the agreement in March 2005, and it was formalized with a memorandum of understanding between the three governments.