Includes bibliographical references (pages 55-59)

Overview of services -- The Philippine services sector -- Harnessing services for regional development.

The services sector is composed of a diverse range of services, including retail and business services, education, and health, among others. Some services are used as inputs in production, while others have direct impacts on human capital development. In the Philippines, the services sector accounts for 60 percent of gross domestic product and almost 57 percent of employment. Across regions and subsectors, however, the contribution of services varies. Using a simple shift-share technique, this study examines the patterns at the regional and subsector level and decomposes the changes into three factors: national share (growth effect), industry mix (sectoral effect), and regional shift (competitive effect). Focusing on changes in employment, the shift-share decomposition reveals that the overall growth of the economy from 2012 to 2018 had a positive impact in all sectors and regions. However, some industries showed negative sectoral effects, namely, accommodation and food service activities; arts, entertainment, and recreation; and education. Industry-specific factors in education services were quite strong that the economy’s dynamism failed to offset the industry mix effect. It was the only sector that registered lower total employment during the period. In terms of the regional shift effects, 109 out of the total 204 regional service industries (53%) displayed locational disadvantages. Shift-share is a purely descriptive tool, and further analysis must be done to explain the factors that influence sectoral changes and a region’s economic potential and constraints. As services are critical for production, human capital development, and, more broadly, in the enhancement of the quality of life, understanding the drivers or inhibitors of services growth and addressing the locational weaknesses in the relevant service industries will be useful in promoting growth in the region and a more balanced economic development for the country.