Introduction

The Philippines has performed poorly against the major economies of East Asia and Latin America (Table 4.1). It had the lowest average annual growth rate in the last half century, next only to Argentina. Even during growth periods (1960–1980, 1993–1997, and 2003–2005), the Philippines did not grow as fast as the more successful countries. Its best years equal only those of Brazil and Mexico in the dismal decade of the 1980s. And the Philippines suffered major recessions due to balance-of-payments (BOP) and financial crises, yielding negative average annual growth in the periods 1980–1991 and 1997–1999.

This puts the Philippines in a league with the major Latin American economies—Argentina, Brazil, and Mexico—which suffered recessions or stagnation, with almost zero growth of gross domestic product (GDP) per capita in the 1980s and 1990s. In recent years, however, Argentina has done very well (next only to the People's Republic of China), and the Philippines has not been doing too badly either. The Philippines has been growing at a better pace than have Brazil and Mexico, and at par with the Republic of Korea. In 2007, the Philippines' growth rate was 7.3%.

What explains the rather poor performance during most years?

This chapter starts with a restatement of the importance of macroeconomic stability for growth and investments and discusses how inefficient macroeconomic management is a major reason for the poor performance of the Philippines vis-à-vis other East Asian and Latin American countries.