One of the most misunderstood and often misrepresented facts about the Philippine economy is the belief that it was once Asia’s second richest nation. There’s a lot of gossip and misinformation about the true state of the Philippine economy. Many people and false claims suggest that during the Marcos Era (from the mid-1960s to the mid-1980s), the Philippines was second only to Japan. Some even claim that the Philippines’ decline was due to poor governance by various administrations after Marcos.
In this article, we’ll explore whether the Philippines really was the second richest in Asia, when this might have happened, and what led to its fall from such a position. The information we’ll discuss comes from a book edited by Arsenio M. Balisacan, titled “The Philippine Economy: Development, Policies, and Challenges.” Mr. Balisacan is a respected economist and currently serves as the Secretary of the National Economic and Development Authority under President Bongbong Marcos. He is also a professor of economics and the dean at the University of the Philippines School of Economics, so the insights provided are highly credible.
Let’s get straight to the point—the Philippines was indeed one of East Asia’s richest countries at one time. This is a fact. The country had the highest per capita income in East Asia, higher than Taiwan, South Korea, and much higher than Thailand, Indonesia, and China. However, it was still behind Japan, Malaya, and the city-states of Hong Kong and Singapore. But this economic status didn’t occur during the 1960s; it happened much earlier, right after World War II. What makes this even more impressive is that the Philippines was heavily damaged by the war, yet it still had one of the highest per capita incomes in East Asia. So, if the Philippines really had such a high per capita income, what went wrong? There are many theories, but first, we need to understand why the Philippines was even rich in the first place and why there were high expectations for its economic success.
The Philippines had several advantages as a newly independent country in Asia. The transition to independence was relatively smooth compared to other nations. The Philippines didn’t have serious ethnic divisions and boasted some of the highest educational standards in the developing world. Its colonial ties to the United States also gave it access to American markets, allowing for significant economic exchange until the Laurel-Langley Agreement expired in 1974. Unlike many of its neighbors, the Philippines had a functioning democratic system, with the rule of law, although corruption was present at times. The country also had fertile agricultural land, which supported economic growth for several decades. Furthermore, the Philippines did not face the same level of external conflicts that troubled its neighbors, like the Vietnam War or the tensions between Indonesia and Malaysia.
However, the promise of economic development was not sustained. Just a few decades after the 1950s, the Philippines was overtaken by other East Asian countries. Korea and Taiwan surpassed the Philippines in per capita income in the 1950s, followed by Thailand in the 1970s, Indonesia in the 1980s, and China in the 1990s. While the Philippines started out ahead of these countries in the 1950s, by the end of the century, it had fallen behind. Explaining this decline is complex, but a key factor is the country’s GDP growth rate. From 1950 to 1960, the Philippines had a GDP growth rate of 6.5%, higher than Thailand, Indonesia, and Malaysia. But from 1960 to 1970, growth slowed to 5.1%, still higher than Indonesia but lower than other countries, including Singapore. The worst period was from 1980 to 1990, when the Philippines’ GDP growth averaged just 1%, making it the slowest in the region, where others averaged more than 6%. From 1990 to 2000, growth improved to 3.2%, but it was still the slowest in the region.
The real issue, however, was the 1980s to 1990s. During this time, the Philippines experienced a significant slowdown in GDP growth, which was heavily influenced by the debt-driven growth of the 1970s and early 1980s. The country borrowed heavily from foreign lenders, leading to unsustainable debt levels by the 1980s. This debt burden dragged down the economy from the mid-1980s into the 1990s. While this explanation focuses on macroeconomic data, it’s clear that the debt crisis was a major factor in the Philippines’ economic slowdown during this period. But we’d love to hear your thoughts. Thanks for watching!