A reappraisal of Philippine exports and economic development
Date
1981-06
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Abstract
Less developed countries are alleged to be vulnerable to fluctuations in export earnings as a large proportion of their national income is highly dependent on export earnings from primary products. It is also averred that these fluctuations can cause a serious impediment to the LDC's economic growth. To test whether this phenomenon runs true for the Philippines, an analysis of the short-run fluctuations in its export earnings and the effect of such fluctuations on the domestic economy was made in this study. The analysis includes two sub-periods, 1952-1964 and 1965-1977, to determine if the state of export instability in the country had changed over the years.
Empirical results showed an increasing instability in export earnings from 1952 to 1977. The high dependence of the Philippines on primary exports had led to commodity and geographic concentration of exports. However, the a priori expectation that primary goods specialization and commodity and geographic concentration cause export instability were not supported by statistical results. Instead, it was found that the fluctuations in export receipts came mainly from variations in the volume of goods exported, hence to variations in supply rather than in demand.
These fluctuations in export earnings had adverse effects on the economy as variations in these earnings were positively and significantly related to variations in the GNP, imports and government revenue on a current year basis and to variations in domestic capital formation and cost of living on a one-year lagged basis. Measures to counteract these effects are therefore necessary and timely to aid the beleaguered export sector of the economy.