Since 2017, the Philippines has been slipping in the global Index of Economic Freedom. The slide continued in the latest index, with the country falling to 80th place out of 177 economies, from 73rd out of 178 in the previous year. This brings the country to the bottom ranks of the “moderately free” economies.
The index ranks economies based on the rule of law, government size, regulatory efficiency and open markets. US-based think tank The Heritage Foundation, which draws up the annual index, noted weaknesses in the Philippines’ “judicial effectiveness and government integrity,” with lower scores for fiscal health, monetary freedom and property rights.
While the country generally welcomes foreign investment, Heritage noted continued investment restrictions in several sectors. The financial sector is “relatively stable” but capital markets are “underdeveloped,” it noted. Weak infrastructure, high power costs, poor broadband and “inconsistent regulations” posed challenges to businesses, it added.
“Courts are inefficient, biased, corrupt, slow, and hampered by low pay, intimidation, and complex procedures,” Heritage said. “Corruption and cronyism are pervasive. There is little accountability for powerful politicians, big companies, or wealthy families.”
The index covered July 1, 2020 to June 30, 2021 – the pandemic period during which Heritage noted economic freedom slipping worldwide, affected by responses to the global health crisis. It ranked Singapore as the world’s freest economy and North Korea as the least free. Following Singapore are Switzerland, Ireland, New Zealand and Luxembourg.
In the Philippines, scores on government spending and fiscal health dropped, but Heritage cited trade freedom as a “bright spot” and noted that the tax burden is not heavy.
The weaknesses cited in the index show the challenges that the next administration will face. Recovery from the pandemic, both in terms of public health and the economy, can be daunting. This makes voters’ choices in the upcoming elections critical. The country must disprove many analysts’ projections that it will be the regional laggard in pandemic recovery.