‘Investments, innovation key to achieving growth’ potential’

MANILA, Philippines — The Philippines will need to make more investments, encourage innovation and upgrade infrastructure to improve productivity and achieve its growth potential, according to the Department of Economy, Planning and Development (DEPDev).

Speaking at the BusinessWorld Economic Forum, DEPDev Secretary Arsenio Balisacan said sustaining economic progress and achieving higher potential growth would require going beyond consumption and services and broadening the country’s economic drivers.

“This requires attracting more investments, generating higher-quality and better-paying jobs – particularly in manufacturing and higher-value-added services – and expanding into new markets,” he said.

Balisacan said that it is equally important to raise the productivity of the country’s economic sectors through the adoption of modern, value-creating, innovative technologies.

In addition, future-proofing the economy through transformative and forward-looking policy reforms will be needed amid disruptions caused by megatrends reshaping the economic landscape, including heightened uncertainty, the rapid evolution of artificial intelligence (AI), intensifying climate risks and demographic shifts.

Balisacan said raising the country’s growth potential has become more important given changing demographics, with the country’s fertility rates declining, working-age population growing and dependency rates falling.

As estimates indicate that the dependency ratio could drop from 33 to 31 dependents per 100 working-age individuals between this year and 2035, Balisacan said there is a more favorable balance for economic growth with greater savings or investment from the working population to fuel such growth.

At the same time, however, the country is beginning to see an increase in the proportion of older adults, with the population expected to be 60 and above rising to 12 percent by 2035 from 10 percent this year.

“This dual trend means that we must work fast so that we do not miss this window of opportunity. To fully harness this demographic dividend and boost annual economic growth for the next few decades, sustained investments in education, healthcare, social protection and supporting infrastructure are crucial,” he said.

Balisacan said these investments would ensure the country a healthy and productive workforce that will drive long-term growth and inclusive development.

At the same event, the Association of Southeast Asian Nations Plus 3 Macroeconomic Research Office country economist for the Philippines Andrew Tsang said upgrading the productivity of the economy would be needed for the Philippines to become a high-income country.

Tsang said the Philippines is expected to achieve upper-middle income status by next year, with real gross domestic product expected to post growth of 5.5 percent annually until 2026.

With a gross national income (GNI) per capita of $4,230 in 2023, the Philippines is currently classified by the World Bank as a lower-middle income country.

Under the World Bank’s classification, lower-middle income countries are those with a GNI per capita of $1,146 to $4,515, while the threshold for the upper-middle income country grouping is at $4,516 to $14,005.

For the Philippines to become a high-income nation, Tsang said the county’s GNI per capita needs to increase by 231 percent.

By 2050, he said the growth in the Philippines’ GNI per capita has to be maintained at a rate of above 4.54 percent per year on average.

“Whether the Philippines can achieve this high-income country target will depend on how well the country adjusts to the long-term structural challenges and implements a comprehensive strategy for upgrading the productivity and enhancing the country’s competitiveness,” he said.

To promote investment growth, he said the government needs to fast-track infrastructure development, prioritize the implementation of high-impact projects and attract technology-driven investments.

Special Assistant to the President for Investment and Economic Affairs Frederick Go told reporters that while the uncertainty in relation to the United States’ imposition of reciprocal tariffs on trade partners dampened investor sentiment in the first quarter, the uncertainty is not expected to last forever.

Data from the Philippine Statistics Authority showed that investments from both foreign and Filipino sources approved by investment promotion agencies fell by 43.7 percent in the first quarter to P181.93 billion from P323.27 billion in the same period last year.

“At some point, it becomes clearer and clearer,” Go said, noting the recent move of the US to lower the tariffs imposed on Chinese goods to 30 percent from 145 percent.

“So you can see the uncertainty is clearing. And you know, with all these uncertainties, you need time, right? And it’s happening,” Go said.

Apart from promoting investment growth, Tsang said there is also a need to improve human capital and productivity by upskilling and reskilling the workforce to meet the demands of a digital and AI-driven economy.

“In particular, the government should collaborate closely with industry and training providers to ensure that training matches the demands of industries,” Go said.