(DP 2003-07) The Philippine Economy During the Japanese Occupation, 1941-1945

Gerardo P. Sicat


Few studies have analyzed the Philippine economic experience during the Japanese occupation. Although such studies are in the nature of history and commentaries, they have not focused on the economic analysis of the war experience. The present study hopes to close this gap if only partially by recounting what was known about the course of the economy. A recently discovered intelligence document written late in wartime by American sources on economic changes during the occupation period provided the initial impetus for the review. Relying on limited relevant work to make an assessment of this intelligence report, the author carries the discussion to modern day interpretation covering the various sectors of the economy. In the final part of the paper (Part IV), the Philippine economy is compared before and after the end of the war, investigating the extent of the fall in national output by the war’s end, quantifying the extent of the hyper inflation that was experienced in the course of the war, and approximating the relative value of the economic damage (mainly to capital stock) caused by the war in terms of the level of national output. Using intuitive knowledge based on the review of these sectors and employing conservative assumptions about the Philippine economy, the author suggests that at the end of the war, national output was at least 30 percent of the level of the prewar output. In effect, total output in 1945 was 70 percent lower than that of 1940. Going to the estimate of the war damage in today’s current terms (2003), the economic loss (not including human, of course) suffered during the war was equivalent to 13 percent of the current GDP of 2003. Translating this to the output of 1940 on the very conservative assumption that there was no growth of per capita output over the years, the economic loss from the war was 62 percent of the GDP of 1940. Since the economic damage to capital happened over time and furthering the output loss as the war went on, these estimates conform to the assessment that Philippine GDP in 1945 – at the end of the war – was close to 30 percent of the output of 1940.

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