Since the 1990s, the services sector has been a major source of economic growth for the Philippines. On the average, the sector has grown continuously, particularly in the last two decades, as its growth increased from 4% in the 1990s to 5.3% in the 2000s. For the 2010 to 2014 period, it posted a very modest growth rate of 6.6%. Broad growth has taken place in the sector as most of its sub-sectors have also registered consistently rising growth rates over the years.

The 2010 to 2014 average growth rates of most of the sub-components of the services sector have increased from their 1990s and 2000s values. The most notable increases have been manifested by the construction, finance and real estate sub-sectors. Meanwhile, the sub-sectors that have experienced a slowdown in average growth rate are private services, transport, communication and storage. Nonetheless, it is crucial to point that the recent average growth rates of these two sub-sectors are still above 5%, indicating modest growth performances.

Growth Performance (in percent)

^aat constant 1985 prices; ^bat constant 2000 prices.

Source of basic data: National Accounts of the Philippines, National Statistical Coordination Board

The Philippine economy’s output structure is characterized by a relatively large services sector. The share of the services sector increased from an average of 52.4% in the 1990s to 55.7% in the 2000s. Moreover, from 2010 to 2014, the sector’s value added share further increased, on the average, to 65.4%.

Of all the sub-sectors of the services sector, the trade and private services sub-components are among those which have the biggest value added contribution for the period of 2010 to 2014. Utilities (transportation, communication and storage) and government services meanwhile have the smallest value added share in the gross domestic product for the same period. Majority of the sub-sector have value added shares for 2010 to 2014 that are higher than their 1990s and 2000s figures.

 Value Added Contribution (in percent)

Source of basic data: National Accounts of the Philippines, National Statistical Coordination Board.

In terms of employment contribution, the services sector has started in the 2000s to become the largest employment provider. Currently, it is still the biggest provider of jobs. In the past decade, it registered an average share of about 54.3% in total employment. This is higher than its average contribution of 47.3% in the 1990s.

Of the services sub-sectors, the wholesale and retail trade segment and the aggregated community, social and personal services are some of the biggest contributors to employment relative to the other sub-sectors. With the exception of the construction sub-sector, all sub-components of the services sector have manifested an increased average employment contribution in the 2010 to 2014 period relative to their 1990s and 2000s average shares.

Employment Contribution (in percent)

Sources: Yearbook of Labor Statistics (1980-2000) and Current Labor Statistics (2001-2002), Bureau of Labor and Employment Statistics, Department of Labor and Employment and Employed Persons by Major Industry Group, National Statistics Office Labor Force Survey (2003-2010).

Net services trade balance shifted from continuous deficits during the first half of the 2000s to surpluses during the 2006 to 2010 and 2010 to 2013 periods. A change in the structure of services exports is also evident as exports of travel, transportation, and communication services declined over the years alongside a tremendous increase in the average shares of computer and information and other business services.

Balance of Trade in Services (in billion US$)

Source of basic data: World Trade Organization

Revealed comparative advantage (RCA) gives an indication of those industries in which a country may have a comparative advantage. The RCA compares how much a country is exporting a given product relative to its total trade, in comparison to the share of that product in world trade. A country is said to have a revealed comparative advantage when its share of export of a given product exceeds the equivalent share of export of the world. This is captured when the RCA is above 1. An RCA below 1 suggests that the country does not have a revealed comparative advantage in a given product.

The RCA indices show the Philippines’ growing competitiveness in computer and information services as well as in other business services. While the RCA index in communications increased from 2.64 in 2000 to 6.05 in 2003, it steadily declined thereafter from 5.6 in 2004 to 1.00 in 2010. The RCA index in travel also dropped from 2.08 in 2000 to 0.93 in 2010; in transportation, it fell from 1.32 in 2003 to 0.51 in 2010; and in construction, it decreased from 1.5 in 2000 to 0.42 in 2010 indicating declining competitiveness.

 Revealed Comparative Advantage in Services Sector

Source of basic data: UN Services Trade Data