Ramping Up Philippine Economic Growth and Inclusion: Near and Medium-Term Prospects amid the Headwinds
Arsenio M. Balisacan, PhD
National Economic and Development Authority
43rd National Conference of Employers Employers Confederation of the Philippines
Manila Ballroom, Marriott Hotel, Pasay City
24 August 2022 | 10:15 A.M.
Secretary Benny E. Laguesma,
ECOP Chairman Edgardo G. Lacson,
ECOP President Sergio Ortiz-Luis, Jr.,
Organizing Committee Chair Anton Sayo,
And other esteemed governors and members of the Employers Confederation of the Philippines,
Members of the diplomatic community and the media,
Ladies and gentlemen, Good morning.
I would first like to thank the Employers Confederation of the Philippines for inviting me to the 43rd National Conference of Employers with the theme: “Reimagining the Future of Employment: From Policies to Actions.” Gratefully, I accepted the invitation, thinking that we must indeed reimagine the future of employment in the Philippines, just as we envision it in the Marcos Administration’s plans for the medium term.
Before I discuss these plans, please let me briefly provide an overview of the current macroeconomic picture. The Philippines (indicated by the red line) is today the best-performing economy among major ASEAN members. In 2021 and the first half of 2022, our economy grew the fastest, indicating that the recovery of our high-growth trajectory in the past decade has been quite robust.
In fact, the 7.8%-GDP growth average for the year’s first half is above the 6.5%-7.5% target set by the Marcos Administration for 2022. With the further reopening of the economy, the return of face-to-face schooling, the strengthened vaccination and booster initiatives of the government, broadly improving business confidence, and the promising return of domestic and foreign tourism, we are optimistic about our prospects.
Examining the components of GDP, we find that, on the demand side, household consumption and fixed capital formation, and, on the supply side, services are the main growth drivers of our economy. The shares of these components in national output are comparatively high and still rising.
As you may have observed, consumers and businesses have adjusted their lifestyles, plans, and expectations to the New Normal. Pent-up demand for consumer goods and services, as well as travel and recreation, is driving consumer spending. At the same time, higher demand for business expansion pushes up investment as the economy recovers.
Economic activity has remained vibrant and resilient, withstanding the shocks of recent disruptions. In other words, strong and sustained domestic demand has been key to the growth of the Philippine economy; this growth is unlikely to be crippled by global headwinds. We expect these trends to continue in the near term to medium term for as long as we can manage the risks we face.
The Marcos Administration is well aware of our economy’s domestic and external risks. These include factors that could disrupt our food supply, including elevated commodity and input prices aggravated by geopolitical and trade tensions, the spread of infectious animal diseases, inclement weather, and issues in global value chains. The slowdown of major trading partners and the emergence of new public health concerns may also result in weaker demand for goods and services worldwide. The tighter fiscal space and limited absorptive capacity of implementing agencies may also result in challenges in assisting vulnerable population segments.
Still, the Administration’s Economic Team is confident that our robust economy can sail through these turbulent waters. We firmly believe that with the right policies moving forward, we can capably address current and emerging issues and sustain the growth momentum we have gathered thus far.
Amid these challenges, what is the National Economic and Development Authority’s role as the country’s premier socioeconomic planning body?
In a nutshell, the NEDA coordinates the formulation of policies, plans, and programs at various levels of governance to ensure that these are aligned and contribute to the country’s macroeconomic and development goals in the near, medium, and long term.
We advise the President, Congress, and Executive Branch policymakers about the economy and policy choices. In the pursuit of this mandate, we undertake short-term policy reviews to provide critical analyses of development issues and policy alternatives to decision-makers.
The NEDA also reviews, evaluates, and monitors infrastructure projects to help ensure that these adhere to the formulated plans, priorities, and development objectives.
And so, the private sector can count on NEDA, to push and shepherd necessary reforms, and to provide strong guidance on the economic policies that aim to promote sustained and inclusive growth in line with the long-term vision.
The 8-Point Socioeconomic Agenda, covering both short-term and medium-term issues, sets the tone for the Administration’s priorities, policies, and programs. We are fleshing out the Agenda in the forthcoming Philippine Development Plan (PDP) 2023-2028, the country’s medium-term development blueprint.
The economic Agenda’s objective is to reinvigorate job creation and poverty reduction by steering the economy back to its high-growth trajectory.
It would also interest you to know that the Agenda includes health and education among its top-most priorities, especially in the near term. We must regain losses from the last two years and strengthen human capital even further in light of anticipated future disruptions such as automation and the effects of climate change.
Further, the President has directed relevant agencies in the Executive to prioritize efforts that would expand training and skills development and facilitate employment. We are mindful that we must provide opportunities for training of our labor force such that the competencies required by the private sector match what our schools and training institutions teach. Binding constraints to investments and job creation – in particular, our need for supporting infrastructure in energy, transportation, logistics, telecommunications, and water – will be addressed over the next six years.
Speaking further of our labor force, let me point out that the Philippines is well-positioned to take advantage of the demographic changes that our economy has been experiencing in the past two decades. These changes have implications for our labor force and our economy. Between 2000 and 2020, the working-age population has grown faster than the total population, leading to increases in its overall share. Thus, a more substantial size of our workforce is supporting economic activity and contributing to growth. Sustaining our economy’s high-growth trajectory requires that we capitalize on these demographic shifts and ensure that our labor force is well-supported by an enabling environment. The government shall equip and provide our workforce with sufficient tools and infrastructure to raise productivity and enhance innovation capacity.
We have identified one efficient method of achieving this objective. Pursuing Public-Private Partnerships (PPPs) at the local and national levels is key to upgrading the country’s infrastructure. Projects connecting leading and lagging regions will improve the competitiveness of our domestic industries and reinforce the virtuous cycle of attracting even more investments in various sectors. With PPPs, we can harness the private sector’s expertise, resources, and capacities even as the country faces fiscal constraints.
In energy, logistics, transportation, telecommunications, and water infrastructure, PPPs are key to unlocking more investments and generating more jobs in the present and future growth drivers such as manufacturing, tourism, IT-BPOs, and the creative sectors. In coordination with other agencies, the NEDA will ensure that the government will consider the private sector’s concerns with respect to the Implementing Rules and Regulations of the Amended BOT Law at the soonest possible time. In addressing the constraints to the private sector’s participation in our infrastructure drive, we will remain mindful of protecting the public interest.
Let me repeat that the objective of the Administration’s socioeconomic agenda is to reinvigorate job creation and poverty reduction.
Among our headline macroeconomic targets, we aim to reduce unemployment to 4.0%-5.0% while improving job quality, as shown by the share of wage and salaried workers rising from 48.0% in 2021 to a range of 53.0%-55.0% by 2028. As expected, higher-quality job creation will reduce poverty from 18.1% in 2021 to a single-digit level of 9% by 2028.
Rapid growth can be inclusive, given the right priorities and policies. A productive and skilled workforce supported by critical infrastructure, which is fundamental to any dynamic economy, is more likely to access the numerous job and market opportunities made available by a growing economic pie. This access is key to raising incomes quickly and sustainably, leading to rapid poverty reduction.
We have already seen that it can be done: between 2015 and 2018, the Philippines saw a 6.8-percentage point decrease in poverty, accompanied by a reduction in inequality.
As I end my presentation, let me emphasize that sustained and inclusive growth that enables the Filipino workforce to access more, better, and more resilient jobs is key to rapid poverty reduction.
The public sector is actively committed to providing the enabling investment and regulatory environment to allow the private sector to flourish and thrive as the country’s engine of growth and innovation.
We stand ready to complement and support your initiatives to expand markets, boost productivity, and collaborate on solutions to improve the welfare of every Filipino as we aim to reach our long-term development aspirations as one nation.
Thank you, and a pleasant morning to all.