Outlook for 2011-15

• The resounding victory won by Benigno Aquino in the May 2010 presidential election suggests that the Philippines is on course for a period of relative political stability.
• Mr Aquino's predecessor, Gloria Macapagal Arroyo, will use what influence she still has in Congress (the legislature), the Supreme Court and other bodies to block attempts to investigate her for alleged corruption.
• Government revenue will remain low as a proportion of GDP, and the Economist Intelligence Unit expects the budget to remain in deficit, averaging 2.4% of GDP in the forecast period.
• Real GDP grew by 7.3% in 2010, the fastest pace since the mid-1970s, but we forecast that growth will slow to 5.2% in 2011 and will then average 5.6% a year in the remainder of the period.
• Inflation will accelerate to 5.3% in 2011, owing mainly to higher oil and non-oil commodity prices, before slowing to an average of 4.6% in 2012-15.
• After falling in 2011 in response to a rise in oil imports, the current-account surplus will grow in 2012, before declining again from 2013 as a proportion of GDP. The surplus will be equivalent to 3.1% of GDP on average in 2011-15.

Monthly review

• Merceditas Gutierrez resigned from her post as ombudsman on April 29th, ten days before the she was due to face an impeachment trial in the Senate (the upper house of Congress).
• The fiscal deficit stood at P26.2bn (US$607m) in the first quarter of 2011, representing only 23.3% of the projected deficit for the period, mainly owing to underspending on infrastructure.
• On May 5th the Bangko Sentral ng Pilipinas (the central bank) raised interest rates by 25 basis points, taking overnight lending and borrowing rates to 6.5% and 4.5% respectively. The bank began to raise rates at its previous meeting.
• The minimum wage in the capital, Manila, is set to rise by 5-6% from May 26th, following an agreement between government officials, employers and trade unions.
• Consumer price inflation reached 4.5% in April, up from 4.3% in March, according to the National Statistics Office (NSO). This was the highest rate of inflation since April 2009. Core inflation accelerated to 3.8% in April.
• The NSO has reported that the value of merchandise exports totalled US$4.3bn in March, up by 4% year on year-the slowest pace of growth in exports since October 2009.

The resounding victory achieved by Benigno Aquino in the May 2010 presidential election-he beat the second-placed candidate, Joseph Estrada, a former president, by a record margin of more than 5m votes-suggests that the Philippines is on course for a period of relative political stability. The president serves a six-year term, and under the terms of the constitution he cannot be removed from office except through impeachment. Declining poll ratings reflect the fact that he has yet to show that his election victory reflected his own abilities as a leader rather than positive sentiment towards his mother, Corazon Aquino, a former president whose death in August 2009 was mourned by millions of people. Mr Aquino's attempts to investigate corruption that is alleged to have occurred under his predecessor, Gloria Macapagal Arroyo, have already made enemies of those who benefited from the patronage of her administration.

One of Mr Aquino's first acts as president was to pass an executive order establishing a "truth commission" to investigate claims of corruption, but in December 2010 the Supreme Court ruled that the order was unconstitutional. Thwarted in their attempt to investigate Ms Macapagal Arroyo herself, Mr Aquino's supporters in the House of Representatives (the lower house of Congress) then began to target the previous president's allies by voting to impeach the official ombudsman, Merceditas Gutierrez. Rather than stand trial in the Senate (the upper house), Ms Gutierrez resigned on April 29th, thus preventing public hearings into why she had failed to secure any corruption convictions. Still, Mr Aquino now has an opportunity to appoint a new ombudsman in whom he has confidence to lead his anti-corruption campaign.

Although Mr Aquino can count on the support of the House of Representatives, only four of the Senate's 23 members currently belong to his Liberal Party (LP). The president will therefore have to work hard to win the support of the upper house for his policies. So far the administration has been successful in pushing through important pieces of legislation, such as the 2011 budget. But other parts of the president's legislative programme may face more resistance. Proposals supported by Mr Aquino to relax restrictions on birth control risk alienating the Roman Catholic church, a powerful force in the devoutly religious Philippines. Despite calls by some church leaders for a tax boycott and other forms of civil disobedience, the lower house began debating the "responsible parenthood" bill on May 17th. A week earlier the Catholic Bishops' Conference of the Philippines had pulled out of talks with the government aimed at reaching a compromise over the proposed legislation.

Mr Aquino must avoid alienating the armed forces. Ms Macapagal Arroyo faced a series of military mutinies during her presidency, but she survived them with the support of the army's most senior generals. In an early attempt to win the backing of the armed forces, Mr Aquino has offered to pardon all those implicated in the mutinies against his predecessor. However, he may come to regret this decision: granting pardons to those who rebelled against the previous commander-in-chief will do nothing to dissuade errant officers from taking up arms again in the future. Civilian-military relations have been strained recently by Senate hearings into Ms Gutierrez's role in investigating high-level corruption in the military, including claims that army funding was siphoned off into a "retirement fund" for senior generals. The risk of a coup should not be overstated, but political divisions could prove destabilising if they permeate through the ranks.

Security risks will also persist throughout 2011-15. Despite years of negotiations, Ms Macapagal Arroyo failed to finalise a peace agreement with the Moro Islamic Liberation Front (MILF), the main separatist movement on the southern island of Mindanao. However, the rebel organisation responded positively to Mr Aquino's election victory, and formal negotiations with the government resumed in February 2011. But serious obstacles to a peace agreement remain. Any attempt, for example, by Mr Aquino to reinstate the terms of a collapsed 2008 peace accord-and especially the previously proposed boundaries of an autonomous Muslim homeland-would encounter strong opposition from Christian politicians on Mindanao. There will also be difficulties hammering out a deal with the National Democratic Front, the umbrella organisation of the Communist Party of the Philippines, and its military wing, the New People's Army. Official negotiations resumed in February 2011, aimed at ending a rebellion that has lasted for more than 40 years.

The next presidential election is due to be held in 2016. Under the constitution, Mr Aquino will not be permitted to stand for re-election, although it is possible that his supporters in Congress will attempt to revise the charter before then to allow the president to serve again. Elections will be held in May 2013 for one-half of the seats in the Senate and the entire lower house. The congressional elections will provide Mr Aquino and the LP with an opportunity to strengthen their position in the legislature.

Relations with the US will remain of paramount importance for the Philippines in 2011-15. Aside from historical connections-the Philippines was once a US colony-ties are strong for a number of reasons, including an important commercial relationship (the US is the Philippines' largest trading partner) and close military associations (the US army provides support for the government's campaign against Muslim separatists on Mindanao). US military presence will continue to take the form of intelligence support and joint training exercises. China's importance as a trade partner and a source of investment will grow in the forecast period. Under diplomatic pressure from China, Mr Aquino chose to side with the likes of Cuba, Iran and Venezuela in boycotting the December 2010 ceremony at which Norway's Nobel committee awarded a peace prize to a Chinese dissident, Liu Xiaobo But the status of the Spratly Islands in the South China Sea will remain a source of tension between the two countries.

The main policy challenge for Mr Aquino's administration in the early part of the forecast period will be to demonstrate its commitment to strengthening the public finances. The budget has been in deficit for the past 13 years, and the public debt to GDP ratio is among the highest in South-east Asia, standing at 55.4% in 2010. Mr Aquino's administration has abandoned the goal of balancing the budget, arguing that a deficit is unavoidable if public services are to be improved, but it is targeting a gradual reduction in the deficit to 2% of GDP by 2013. In an attempt to upgrade the country's infrastructure, Mr Aquino aims to establish around 80 public-private partnerships, with aggregate investment capital of P740bn (US$17bn), by the end of his presidency in 2016. In March 2011 the government announced details of five of at least ten such projects that are expected to be put out to tender this year. Private investors have previously been deterred from becoming involved in all but the most commercially attractive projects by the government's refusal to offer guarantees. However, Mr Aquino has said that he is prepared to provide guarantees in some circumstances-a policy that will add to the government's contingent liabilities.

The fiscal deficit will shrink as a percentage of GDP in 2011-15, but the budget will not be brought into balance. The 2011 budget, approved by Congress in December 2010, set a deficit target of 3.2% of GDP. The government raised expenditure, notably on welfare, but announced no increase in taxes. Mainly owing to underspending on capital projects, the deficit in the first quarter of 2011 amounted to only 9% of the target for 2011 as a whole. As a result, the Economist Intelligence Unit expects the deficit to narrow to 2.2% of GDP this year. As capital spending accelerates, the deficit will average 2.4% of GDP in 2012-15. Revenue will be equivalent to only 14.2% of GDP on average in 2011-15, a level below its average of 15.7% in the five years before the 2009 global recession. Although it is not targeting a balanced budget, the government will want to establish a reputation for economic competence among its foreign creditors, given that it depends on the global bond market to finance its deficit.

After leaving policy interest rates unchanged at record lows since July 2009, the Bangko Sentral ng Pilipinas (BSP, the central bank) has begun to tighten monetary policy in response to accelerating inflation. At its most recent meeting on May 5th the BSP's monetary board raised overnight lending and borrowing rates by 25 basis points each, to 6.5% and 4.5% respectively, taking t0 50 basis points the cumulative increase in interest rates since monetary tightening began in March. Although the central bank will want to avoid sharp rises in interest rates, it may be forced to tighten monetary policy more aggressively to control inflation. The BSP has been one of the slowest to raise interest rates among the major central banks in South-east Asia. Strong inflows of foreign capital have contributed to low market interest rates in recent years, but Treasury yields will rise as global monetary conditions tighten, especially given the persistent fiscal deficit.

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The Philippine economy expanded by 7.3% in 2010 (to record its fastest pace of growth since the mid-1970s) as demand rebounded following the 2009 global recession. We expect the rate of economic expansion to slow in 2011. In addition to a weaker global economy, the Philippines will struggle in the face of a sharp rise in the international price of oil. Slower growth in Japan and disruptions to manufacturing supply chains as a result of the March 11th earthquake and tsunami may also adversely affect Philippine growth. We expect GDP to expand by only 5.2% this year. Growth will then average 5.6% a year in the remainder of the forecast period. Private consumption will be supported by a fall in unemployment and increased spending by the government on conditional cash transfers. The 2009 global recession and the seizing up of credit markets in 2008-09 had a damaging impact on fixed investment in the Philippines. However, gross fixed investment has since recovered as firms have revived expansion plans, but the growth rate in 2010 of 17.1% will not be sustained in 2011-15. Without improvements in the business environment the country will not attract the levels of foreign direct investment needed to raise investment significantly, given the low national saving rate. Exports of goods and services recovered strongly in 2010, expanding by 25.6%, but growth in exports will slow to an average of 6.5% a year in 2011-15. From 2012 onwards import growth will track that of exports, as a large proportion of imports to the Philippines consists of components used to manufacture goods that will be sold abroad.

The main downside risk to our GDP growth forecast comes from the possibility of a sharp slowdown in the global economy in 2011 as stimulus measures that have been implemented around the world in the past three years are withdrawn. The ongoing political unrest in the Middle East and North Africa also poses risks to the Philippines. In addition to driving up oil prices, the conflict may result in a drop in remittances from overseas workers in that region, which accounts for around 14% of Philippine remittance receipts. Any drop in remittances would depress private consumption.

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A gradual recovery in domestic demand, higher global oil prices and a poor domestic harvest owing to a drought associated with the El Niño weather phenomenon contributed to an acceleration in inflation in 2010, when consumer prices rose at an annual average rate of 3.8%. Inflation will accelerate again in 2011, to 5.3% on average, in line with higher global commodity prices, especially for oil; we expect international crude oil prices (dated Brent Blend) to average US$108.5/barrel this year. Agricultural production, especially of rice, the country's staple food, has recovered this year, meaning that the Philippines will be partially insulated from an increase in global food prices. Annual inflation will average 4.6% in 2012-15. Wage pressures are likely to increase in line with economic growth, but the country's labour surplus will deter excessive wage demands.

The Philippines was the recipient of record inflows of portfolio investment in 2010 owing to the relatively high yields available in the country, contributing to a 5.7% appreciation in the value of the peso against the US dollar in that year on an annual average basis. Capital inflows are likely to remain strong this year, but they may weaken next year as central banks in the developed world tighten monetary policy, making Philippine yields less attractive. Nonetheless, the country's relatively rapid economic growth, together with continued current-account surpluses, should help to support the peso in the forecast period. The currency is forecast to appreciate against the US dollar, strengthening to an average of P43.6:US$1 in 2015, from P45.1:US$1 in 2010. But the peso would be vulnerable if global risk aversion were to increase in response to, for example, renewed concerns about sovereign debt defaults in Europe. The peso would also be hit if inflation were to accelerate more rapidly than forecast.

Despite the continuing merchandise trade deficit, a large surplus on the current transfers account will ensure that the current account remains in surplus in 2011-15, to the tune of 2.5% of GDP on average. The current-account surplus will fall in 2011 as the value of goods imports rises sharply in line with higher global oil prices. Although the recent political turmoil in the Middle East and North Africa could result in a drop in remittances from Filipinos working in the region, a general improvement in overseas labour markets will help to support a rise in the transfers surplus. Merchandise exports will expand by an average of 11.2% a year in the forecast period, driven by healthy final demand in the Philippines' main export markets. Imports will expand by 12% a year on average in 2011-15, driven mainly by strengthening demand for the country's exports, which include a high imported component. The Philippines has recorded services surpluses since 2006 and will continue to do so in 2011-15. Services exports have been boosted by the country's growing importance as a base for business-process outsourcing, and the outsourcing sector will continue to record strong growth in 2011-15.

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Merceditas Gutierrez resigned from her post as ombudsman on April 29th, ten days before the she was due to face an impeachment trial in the Senate (the upper house of Congress). Just over a month earlier, on March 22nd, the House of Representatives (the lower house) had voted overwhelmingly to impeach Ms Gutierrez for her failure to secure any convictions in relation to cases of corruption that are alleged to have occurred under the previous president, Gloria Macapagal Arroyo. A close ally of Ms Macapagal Arroyo, Ms Gutierrez had been due to remain in post until late 2012. Her role as the Philippine state's prosecutor of officials suspected of corruption will now be taken over by an appointee of the current president, Benigno Aquino.

Ms Gutierrez's decision to resign made it easier to remove one of Ms Macapagal Arroyo's most important allies than had seemed likely. The ombudsman can be removed only through impeachment by Congress (the legislature). Although there had been an overwhelming vote for impeachment in the lower house, with 212 votes in favour to 44 against, the result of a trial in the upper house was less predictable. In contrast with the administration's large majority in the House of Representatives, only four of the 23 members of the Senate are members of Mr Aquino's Liberal Party. A guilty verdict requires two-thirds support. Another consequence of Ms Gutierrez's decision to pre-empt her impeachment trial is that the Senate will not now be embroiled in hearings that would certainly have delayed progress on the legislative agenda.

However, Ms Gutierrez's resignation has also deprived the Philippines of an opportunity for a public examination of the allegations against the previous president. Mr Aquino had originally hoped to achieve this through a "truth commission", which he established in July 2010, but the Supreme Court ruled that the commission was unconstitutional. The impeachment trial would have been an alternative means of investigating the accusations levelled against Ms Macapagal Arroyo, which include claims of corruption surrounding a broadband contract signed by the government and a Chinese state-owned company, ZTE, in 2007, and the allegation that funds from the Department of Agriculture were used to finance Ms Macapagal Arroyo's election campaign in 2004. There is speculation that Ms Gutierrez resigned to protect Ms Macapagal Arroyo.

Mr Aquino evidently hopes that his anti-corruption campaign will make more progress under a new ombudsman, and through closer co-operation with the Commission on Audit, the state agency responsible for auditing government finances, to which he has recently appointed Heidi Mendoza, a whistle-blower who appeared at recent Senate hearings into corruption in the military. One of the first cases that the commission will investigate is a new charge against Ms Macapagal Arroyo. On April 26th a former solicitor-general, Francisco Chavez, filed charges of plunder against Ms Macapagal Arroyo and four former officials for the misuse of P555m (US$13m) in state funds intended for the benefit of migrant workers. The main claim is that an executive order issued in 2003 authorised the transfer of P530m from the Overseas Workers Welfare Administration (a state agency that supports Philippine workers overseas and their families) to the national health insurance scheme, PhilHealth. It is alleged that this money was then used to fund PhilHealth cards issued during Ms Macapagal Arroyo's election campaign in 2004.

The budget deficit typically widens sharply in the first three months of the year. However, so far in 2011 it has been much smaller than expected. At the end of March the deficit stood at P26.2bn (US$ 610m), representing only 23.4% of the expected deficit for the three-month period of P112bn, according to the Department of Finance. Revenue was P3.8bn higher than forecast, at P323.1bn, representing a rise of 21.5% year on year, as the main tax agency, the Bureau of  Internal Revenue (BIR), registered stronger than expected growth in tax revenue: collections by the BIR rose by 14.8% year on year to P199.5bn, compared with a target of P197bn. The agency’s strong performance is thought to have been a result of ongoing efforts to improve tax compliance. The Bureau of Customs performed less well, missing its collection target by P770m, as revenue rose by only 3.4% year on year. A boost from higher oil import prices was partially offset by a stronger currency and tariff reductions.

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But the main reason for the narrowing of the fiscal deficit was significant underspending. At the end of March expenditure was P82bn less than planned, at P349.3bn, representing a fall of 12.7% year on year. Lower than expected expenditure on debt interest made a contribution, but the spending shortfall was mainly the result of a fall in expenditure in other areas, which was down by 11.2%. This was a fall that deepened in March, with non-debt interest expenditure down by 23.4% in that month. The main reason was that spending on infrastructure was well below programme, totalling only P24.5bn in the three-month period, compared with a target of P56.7bn. According to statements by the finance department, project reassessments and reviews of cost assumptions have held up spending by the Department of Public Works and Transport. So the fiscal performance in the first three months of the year, although encouraging in that the government looks to be on course to meet its deficit target for the year as a whole, has been achieved only at the expense of spending on infrastructure, one of the economy’s major areas of weaknesses.

The Bangko Sentral ng Pilipinas (BSP, the central bank) has tightened monetary policy for the second meeting in a row. Meeting on May 5th, the central bank's monetary board announced a 25-basis-point increase in its two main interest rates, raising the overnight lending rate (the repurchase, or repo, rate) to 6.5% and the overnight borrowing rate (the reverse repo rate) to 4.5%. The board also increased interest rates on term repo, reverse repo and special deposit accounts by a similar amount. So far this year inflation as measured by the consumer price index has remained within the central bank target's range of 3-5%. But in its latest policy statement the BSP bank said that the target for the year as a whole "remains at risk", mainly owing to the high international price of oil. An increase in consumers' inflationary expectations was also a concern, the central bank said.

Fiscal policy has been much tighter than expected so far this year, with the government's deficit in the first three months equivalent to only 23% of the official target, but the BSP has still felt able to tighten monetary policy owing to signs of sustained economic growth. These signs include high rates of capacity utilisation in the manufacturing sector, which has remained consistently above 80%, as well as strong growth in commercial banks' loans. The BSP is, however, concerned at the possibility that strong inflows of foreign capital could contribute to inflationary pressures. Net portfolio investment reached US$1.6bn in the first four months of 2011, almost three times the year-earlier level of US$595m, according to BSP figures.

Amid a sharp rise in the price of fuel products, the official wage board in the capital, Manila, has decided to implement this year's increase in the minimum wage around two months early, on May 26th. The daily minimum wage is set to rise by P22 (51 US cents) from P367 currently for agricultural workers and to P404 for non-agricultural workers, representing an increase of 5-6%. This is a little above the rate of inflation (consumer prices rose by 4.5% year on year in April), but it is still below the central bank's assumption of a rise of P25. It represents a compromise between the P13.25 increase proposed by the Employers Confederation of the Philippines and the P75 rise sought by the Trade Union Congress of the Philippines. The award by the capital's wage board, which comprises representatives from the government, employers and trade unions, typically sets a benchmark for increases in other regions' minimum wages, which are expected to be announced in the coming months. In a country with a surplus of labour, trade unions typically fail to achieve their wage demands.

After a poor performance in 2010, when the agricultural sector contracted by 0.5% owing to drought-like conditions associated with the El Niño weather phenomenon, agriculture has had a strong first quarter in 2011. According to the Bureau of Agricultural Statistics, agriculture expanded by 4.1% year on year (at constant prices) as crop production, which accounts for around one-half of value added in the sector, responded to favourable weather and improved irrigation. Crop production rose by 8.2% year on year, with the country's main crop, rice, recording growth of 15.6%. Corn was up by 19.5%. Other agricultural sectors recorded much slower growth, with livestock expanding by only 0.6% and poultry by 3.9%, while fisheries contracted by 3.5%. Although agriculture accounts for only around 14% of GDP, its first-quarter expansion-and especially the growth in food staples-should support personal income while reducing the need for food imports.

Consumer prices rose by 4.5% year on year in April, up from 4.3% in March and representing the fastest pace of inflation since April 2009, according to the National Statistics Office (NSO). In the first four months of the year consumer prices rose by an average of 4.2%, within the central bank’s target range for the whole year of 3-5%. Unusually, the acceleration of the pace of overall inflation occurred despite slower growth in food prices, which rose by 4.3% in April, down from 4.5% in March. Food prices account for around one-half of the overall price index. A slight acceleration in the pace of growth in rice prices (to 1.5%, from 1%) was more than offset by slower growth in most other categories of food as the farm sector recovered from the impact of heavy rain and floods that hit central and southern regions earlier in the year. All other index categories of goods and services recorded faster rates of inflation in April, mainly owing to higher prices for oil products and associated increases in electricity and transport costs. Core inflation, which excludes food and energy items, accelerated to 3.8% year on year in April, up from 3.5% in March, pushing up the average for the first four months of the year to 3.5%.

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The value of merchandise exports totalled US$4.3bn in March, a rise of 4% year on year, representing the slowest pace of growth since October 2009, according to the NSO. During the first three months of 2011 exports totalled US$12.2bn, a rise of 7.8% year on year. The export slowdown partly reflects a return to a more sustainable pace of growth, after a 21.7% fall in exports amid the 2009 global recession, followed by a 33.8% rise in 2010. But the recent rate of export growth is slow even by historical standards. It is mainly explained by a fall in exports of electronics, the country's main export. After rising by 5.3% year on year in January, electronics earnings fell by 2.7% in February and 7.4% in March, the sharpest fall since October 2009, totalling US$6.4bn over the three-month period. The performance of a number of other important categories of exports also deteriorated in March. Exports of machinery and transport equipment fell by 29.2% in that month, following growth of 26.8% in January and 1.5% in February. Garment export growth slowed to 1.9% in March, from 30% in January and 21.2% in February. But there were better performances from some other export categories. Chemicals exports rose by 40.2% in March, mineral products by 31.7% and coconut products by 73.1%. Earnings from these three categories were up by US$208m in March, exceeding the overall rise in exports of US$168m.

Remittances from overseas workers totalled US$1.6bn in April, a rise of 4.1% year on year, representing the slowest pace of growth since August 2009, according to the BSP. During the first three months of the year remittances were up by 5.9%, at US$4.6bn. The political upheaval besetting the Middle East and North Africa at present has raised concerns that growth in remittance receipts is set to slow this year after accelerating to 8.2% in 2010. Of the US$18.8bn in remittances received by the Philippines in 2010, 14.2% came from countries in the Middle East, making it the most important region after the Americas and Europe. There are also signs that fewer Filipinos are finding employment overseas. According to the Philippine Overseas Employment Administration, the number of workers leaving to work abroad fell to 380,188 in the first three months of 2011, from 395,195 in the year-earlier period, mainly owing to temporary bans imposed on travel to conflict-hit countries. In mid-April the government revised down its forecast for growth in remittances this year to 7%, from 8% previously.

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Please see graphic below

Please see graphic below

Please see graphic below

Land area

300,179 sq km

Population

88.6m (August 2007 census)

Main towns

Population in '000 (2007)

Metro Manila (National Capital Region): 11,553 Taguig City: 613

Quezon City: 2,679 Valenzuela: 569

Manila (capital): 1,661 Cagayan de Oro: 554

Kalookan: 1,379 Paranaque: 553

Davao: 1,363 Las Pinas: 532

Cebu: 799 General Santos City: 530

Zamboanga: 774 Bacolod: 499

Pasig: 617 Iloilo: 419

Climate

Tropical

Weather in Manila (altitude 14 metres)

Hottest month, May, 24-34°C; coldest month, January, 21-30°C (average daily minimum and maximum); driest month, February, 13 mm average rainfall; wettest month, July, 432 mm average rainfall

Languages

Filipino (Tagalog), English and Spanish; many local dialects

Weights and measures

Metric system; also some local units

Currency

Peso (P); P1 = 100 centavos. Average exchange rate in 2010: P45.1:US$1

Time

8 hours ahead of GMT

Fiscal year

January-December

Public holidays

January 1st (New Year's Day); February 25th (EDSA Revolution Day); April 21st (Maundy Thursday); April 22nd (Good Friday); April 11th (Valour Day); May 2nd (Labour Day); June 12th (Independence Day); August 21st (Ninoy Aquino Day); August 29th (National Heroes' Day); November 1st (All Saints' Day); November 30th (Bonifacio Day); December 25th (Christmas Day); December 30th (Rizal Day); December 31st (New Year's Eve)

Official name

Republic of the Philippines

Form of state

Under the 1987 constitution, the government is based on a separation of powers between the executive presidency, a bicameral legislature and an independent judiciary

The executive

The president is chief executive, head of state and commander-in-chief, serves no more than one six-year term and may approve bills passed by Congress (the legislature) or exercise a veto, which can be overridden by a two-thirds majority of Congress. Cabinet appointments are subject to approval by the Congressional Commission on Appointments

Legislature

The Congress of the Philippines consists of the Senate (the upper house, with 23 members at present), and the House of Representatives (the lower house, which has 278 members, of whom 80% are directly elected and 20% are selected from party lists). Senators are elected for six-year terms and representatives for three-year terms. (The Senate normally has 24 members, but Benigno Aquino, who was a senator, has been elected president, meaning that his former seat is vacant. It should be filled at the mid-term elections in 2013, taking the number of senators back up to 24.)

Legal system

Based on US common law; the 1987 constitution contains a Bill of Rights and provides for a judiciary with the Supreme Court at its apex

National elections

Elections took place in May 2010 for the president and vice-president, the House of Representatives and one-half of the Senate. The next legislative election (for the House of Representatives and one-half of the Senate) is due in May 2013; the next presidential election is due in 2016

National government

Mr Aquino became president for a six-year term in June 2010. However, his party, the Liberal Party, does not command a majority in either house of Congress

Main political organisations

Liberal Party; Lakas-Kabalikat ng Malayang Pilipino-Christian Muslim Democrat (Lakas-Kampi-CMD); Nacionalista Party; Nationalist People's Coalition (NPC); Pwersa ng Masang Pilipino (PMP); Communist Party of the Philippines (CPP); Moro National Liberation Front (MNLF); Moro Islamic Liberation Front (MILF)

President: Benigno Aquino

Vice-president: Jejomar Binay

Key ministers

Agriculture: Proceso Alcala

Budget & management: Florencio Abad

Defence: Voltaire Gazmin

Education: Armin Luistro

Energy: Jose Rene D Almendras

Environment: Ramon Paje

Finance: Cesar Purisima

Foreign affairs: Alberto Romulo

Justice: Leila de Lima

Trade & industry: Gregory Domingo

Central bank governor

Amando Tetangco