Double-digit growth to achieve ideal economic development status goals may be difficult, but not impossible if, at the very least, the Philippines can substantially attract more than $9 billion in FDIs annually, increase manufacturing by at least 20 percent of GDP, and cut poverty to single digits.
Department of Economy, Planning and Development (DepDev) Secretary Arsenio Balisacan told media in a press chat last Thursday he wasn’t too glad about the Philippine economy’s growth rate because “with six percent, we will be overtaken by a race to grow faster.”
Actually, just two months earlier, Finance Secretary Ralph G. Recto had been crowing about the Philippine economy’s resilience which, he said, was among the fastest growing in the ASEAN — at 5.4 percent in the first quarter — despite rising global volatilities.
Good, but not good enough, because at the rate we’re going, we’ll never be able to hit the aspired goal, as spelled out in the government’s Ambisyon Natin roadmap of being elevated to high-income status with a “prosperous middle-class where no one is poor.”
Blaming the Covid-19 pandemic for setting back the country’s growth by at least three years, Balisacan said the roadmap is not feasible if the growth rate remains the way it is, that is, at a single-digit rate over the next decade or so.
He said the ideal goal could still be realized if the economy grows by double-digits.
Can the country, indeed, achieve double-digit growth in the next decade or so? What can be done to achieve such growth?
While the country has maintained a respectable 6-percent average GDP growth over the past decade, achieving double-digit expansion within the next 10 years or so will require bold reforms, strategic investments, decisive governance — in short, a lot of really hard work that would include addressing the country’s key structural weaknesses while capitalizing on its strengths.
For one thing, there’s too much reliance on remittances (at least 10 percent of GDP) and services, while manufacturing lags at just 18 percent of GDP (compared to Vietnam’s 25 percent, for instance).
To accelerate growth, the country must expand high-value manufacturing (electronics, EVs, semiconductors), develop more special economic zones (SEZs), even as workers are upskilled to make them suitable for the high-value industries the government should incentivize the creation of.
Reforms in Philippine education should include an emphasis on STEM (science, engineering, technology and mathematics) coupled with a rigorous vocational training program.
Efforts to attain the goals must include digital infrastructure expansion and training workers geared towards AI, renewable energy, advanced manufacturing, and new technologies and processes that would give the Philippines a competitive edge.
A sector that needs to be urgently modernized is agriculture. Currently employing some 22 percent of Filipino workers but contributing only some nine percent to GDP, the government should consolidate land reform to boost productivity, promote mechanization in agriculture, and push for more high-value agribusiness exports (e.g., processed coconut products).
Philippine energy costs, among the highest in ASEAN, must be addressed through the expansion of renewable energy (solar, wind, hydro, geothermal, and biomass) and exploring the feasibility of using nuclear power in the form of small modular reactors perhaps.
Other major obstacles stunting the country’s potential for attaining high-income status are the political instability, climate vulnerabilities, and global economic showdowns preventing the inflow of FDIs and cutting export demand.
In short, double-digit growth to achieve the government’s set economic development status may be difficult but not totally impossible, if at the very least the Philippines can substantially attract more than $9 billion in FDIs annually, increase manufacturing by at least 20 percent of GDP, and cut poverty to single digits.
The succeeding years will be decisive. With political will and the right policies and programs in place, the Philippines could begin to realize its long-delayed economic potential.
Failing bold drastic action, the economy will likely remain stuck at 6 to 7 percent growth — still respectable but hardly sufficient to transform the country into Asia’s next breakout star.
