Exploring the Philippine economic landscape and structural change using the input‐output framework

Abstract

PurposeThe purpose of this paper is to evaluate the degree of structural change of the Philippine economy and examine how linkages among sectors evolved during 1979‐2000.Design/methodology/approachThe authors use the input‐output tables of the Philippines to draw the economic landscape of the Philippines and to examine the degree of structural transformation that the economy has undergone since the 1970s. They perform a linkage analysis of 11 major economic sectors and through the multiplier product matrix, plot the economic landscape of the Philippines for 1979‐2000. This allows identification of the sectors that have exhibited the highest intersectoral linkages. The authors also undertake a more disaggregated analysis within manufacturing and consider export sophistication and competitiveness.FindingsManufacturing is consistently the key sector of the Philippine economy. Resource and scale‐intensive manufacturing industries exhibit the highest linkages. The authors also find a growing impact on the economy of private services and transportation, communication and storage sectors, probably due to the globalization of these activities. But overall, compared to manufacturing, the service sector exhibits lower intersectoral linkages.Originality/valueThe economic landscape of the Philippines shows the structural changes that have taken place. The empirical findings lead to the conclusion that the Philippines cannot afford to leapfrog the industrialization stage and depend solely on a service‐oriented economy, when the potential for growth still lies primarily on manufacturing. The results of this study can be used for government policy formulation. The government should institute policy reforms that directly target the industrial sector to accelerate economic growth.