I. Introduction

The use of digital media and transactions has been part of many activities globally. With the technological advancement in various industries, the digital economy has evolved, and the use of digital technologies has become more accessible. Although these advances in technology resulted in a more complex measurement of the digital economy, there are various country efforts done to measure the contribution of digital activities to the Gross Domestic Product (GDP). However, it was noted that measuring digital activities has been challenging due to issues on definition, classification, and measurement.

In 2019, the Philippine Statistics Authority (PSA), through the Macroeconomic Accounts Service (MAS), collaborated with the World Bank (WB) in estimating the size of digital economy and its contribution to the country’s economy. While there is still no internationally agreed definition and classification for the digital economy, the PSA builds on earlier initiatives of other institutions such as the Organisation for Economic Cooperation and Development (OECD), US Bureau of Economic Analysis (BEA), and the Australian Bureau of Statistics (ABS), and the experiences and insights gained through these initiatives.

With the results of the PSA-WB Project, PSA is committed to continue improving its methodology and exploring other indicators to capture the contribution of digital economy. In 2020, the World Bank released the Philippines Digital Economy Report with initial estimates providing the share of digital economy to GDP.

The pilot estimates on the size and contribution of the digital economy were released by PSA in October 2022. The preliminary 2018 to 2021 estimates on digital economy provide information on the Gross Value Added (GVA) of e-commerce, digital media/content, and digital-enabling infrastructure which includes: 1) Computer, electronic and optical products; 2) Wholesale trade, except of motor vehicles and motorcycles; 3) Telecommunication services; 4) Professional and Business services; and 5) Repair of computers and communication equipment.

II. Data and Data Sources

The data used for the compilation of the preliminary estimates on digital economy are obtained from several sources. Below are the major data sources for the estimation of the size and contribution of the digital economy.

III. Methodology

III.A. Estimation Methodology

The estimation on the size and contribution of the digital economy to the Philippine economy is measured using the Production Approach or Value-Added Approach. This method consists of summing the GVAs of all industries that are identified as part of the digital economy.

The list of core ICT industries of the Philippines serves as the basis in defining the statistical coverage of the digital economy. These industries represent the digital-enabling infrastructure and digital media/content components of the digital economy. In addition, for more comprehensive coverage, digital transactions or electronic commerce (e-commerce) of the country is also included. Estimates for this component are computed using the percentage of industries with e-commerce transactions or those non-core ICT industries which received orders via the Internet.

For each industry classified as part of the digital economy, the Gross Output (GO) is estimated. The GVA ratio from NAP was applied to GO of each industry to derive the GVA. The sum of GVAs of industries identified as part of digital economy is the total GVA for digital economy.

The benchmark estimates were derived using data from the CPBI and SUT. For the non-benchmark years, relevant indicators from the national accounts are used to derive the estimates for the corresponding gross output and gross value added of the different components and sub-components.

Digital-enabling infrastructure and Digital media/content

For the benchmark data, the estimation of GO of digital-enabling infrastructure and digital media/content used the structure of CPBI.

where:

DE1= digital-enabling infrastructure
DE2 = digital media/content
GODE2018 = estimated GO for digital-enabling infrastructure and
                  digital media/content in 2018
GODEd2018 = estimated GO for 2-digit industry under digital-enabling
                    infrastructure and digital media/content
d = 2-digit industry in the 2018 CPBI
m = number of 2-digit industry in DE1
p = number of 2-digit industry in DE2
i = industries in the following 2-digit industries from 2018 CPBI:

1. Manufacture of computer, electronic and optical products

2. Wholesale trade, except of motor vehicles and motorcycles

3. Telecommunications Services and Computer Programming, Consultancy and Related Activities

4. Office administrative, office support and other business support activities

5. Repair of computer and communication equipment

6. Content and Media Industries, Motion picture, video and television programme production, sound recording and music publishing activities, Programming and broadcasting activities, and Data processing, hosting and related activities

c = 5-digit industry under digital-enabling infrastructure and digital media/content from 2018 CPBI
GOs2018 = GO of major industry available in the 80-industry classification in the 2018 SUT that corresponds to each 2-digit industry i, namely:

1. Manufacture of computer, electronic and optical products
2. Wholesale trade, except of motor vehicles and motorcycles
3. Communications
4. Professional, Scientific and Technical Activities; Administrative and Support Service Activities
5. Other service activities
6. Information and Publishing

n = number of 5-digit industry within i number of c

E-commerce transactions

For the benchmark data, the estimation of GO of e-commerce transactions utilized the number of non-core ICT establishments that received orders for goods and services via Internet from SICT, and the sales from e-commerce transactions from ASPBI.

where:
GODE2018 = estimated GO for e-commerce in 2018
GODEi2018 = estimates GO for industry I under e-commerce
Ni2018 = estimated number of establishments which received orders for           
               goods and service via Internet in 2018
i = industry
q = number of 2-digit industry in e-commerce
Salesi2018 = estimated e-commerce sales per establishment in 2018

Employment in digital economy

For infrastructure and digital media components, the structure of the CPBI was utilized to derive the ratio of employed persons in digital economy by industry. The ratio was applied to LFS to derive the total number of persons employed by component.

For E-commerce, the ratio of employees with computer and internet access from SICT served as parameter to provide the employment structure. The ratio was applied to the estimated total number of employed persons for non-core ICT industries.

III.2. Digital Economy Tables

The following are the available tables:

IV. Concepts and Definition of Terms

The digital economy refers to a broad range of activities, which include the use of knowledge and information as factors in production, information networks as a platform for action and how the information and communication technology (ICT) sector spurs economic growth.

The Philippine approach learned from the experiences and similar efforts of various countries and institutions like the US BEA. BEA defines the digital economy primarily in terms of the Internet and related information and communications technologies (ICT). Conceptually, BEA includes in its definition of the digital economy the following:

1. Digital-enabling infrastructure needed for a computer network to exist and operate.

2. Digital transactions that take place using that system (“e-commerce”); and

3. the content that digital economy users create and access (“digital media”).

The digital‐enabling infrastructure is comprised of the basic physical materials and organizational arrangements that support the existence and use of computer networks and the digital economy. This includes computer hardware and software, telecommunications equipment and services, and internet of things (Barefoot et al., 2018).

Digital Transactions or electronic commerce (e-commerce) includes all transactions (i.e., the purchase and sale of goods and services) that happen over computer networks. They may be digitally ordered, digitally delivered, or platform-enabled transactions. E-commerce includes business-to-business, business-to-consumer, and peer-to-peer transactions (Barefoot et al., 2018).

Digital media refers to the content that people create, access, store, or view on digital devices such as direct sale digital media, free digital media, and big data (Barefoot et al., 2018).

Other relevant concepts

Digitization refers to the encoding of information or procedures into binary bits that can be read and manipulated by computers and that can take many forms such as the translation of analogue measurements; encoding business and industrial processes; voice over Internet protocol (VOIP); social networks (as alternatives to face-to-face interactions), etc. (Ahmad and Ribarsky, 2018).

Digitalization (Digital transformation) refers to the changes produced by different forms of digitization, the resulting applications, systems, platforms, and the effects on economic and social activity constitute (Ahmad and Ribarsky, 2018).

V. Dissemination of Results and Revision

The schedule of release of the revised digital economy estimates is four months after the reference year. Press release, publication, statistical tables, social cards, and infographics on digital economy are posted on the PSA website.

VI. Citation

Barefoot, K., Curtis, D., Jolliff, W., Nicholson, J.R., Omohundro, R. (2018). Defining and Measuring the Digital Economy, Working Paper. https://www.bea.gov/sites/default/files/papers/defining-and-measuring-the-digital-economy.pdf

Ahmad, N. & Ribarsky, J. (2018). Towards a Framework for Measuring the Digital Economy. Prepared for the 16th Conference of the International Association for Official Statistics (IAOS), OECD Headquarters, Paris, France.

The World Bank (2020). Philippines Digital Economy Report 2020, A Better Normal Under COVID-19: Digitalizing the Philippine Economy Now. https://documents1.worldbank.org/curated/en/796871601650398190/pdf/Philippines-Digital-Economy-Report-2020-A-Better-Normal-Under-COVID-19-Digitalizing-the-Philippine-Economy-Now.pdf

VII. Contact Information

Mr. Gerald Junne L. Clariño
Chief Statistical Specialist
Satellite Accounts Division
(632) 8376-2019
g.clarino@psa.gov.ph

For data request, you may contact: 
Knowledge Management and Communications Division 
(632) 8462-6600 locals 839, 833 and 834
info@psa.gov.ph