PH long-term growth unlikely to top 6%
The Philippine economy’s growth potential is unlikely to exceed 6 percent over the next two decades as low productivity, weak manufacturing and the concentration of workers in low-productivity sectors constrain its expansion, according to economists at the De La Salle University (DLSU).
In their latest book, “The Philippine Economy Toward 2050,” launched on Wednesday, DLSU economists said the country’s growth would gradually slow over the long term, falling to about 5.1 percent by 2040 and 3.6 percent by 2050.
This is well below the 6.5-percent to 8-percent long-term vision outlined in AmBisyon Natin 2040. The forecasts also assume no major crisis over the period, meaning an economic shock could further weigh on the country’s growth prospects.
“We stress that the Philippines will experience progress, income per capita will continue to increase and poverty will decline, though the pace and scale of change will likely fall short of the ambitious and unrealistic goals set by the government,” DLSU economists said.
Average growth from 2024 to 2050, meanwhile, is seen at 4.8 percent.
According to DLSU, the forecasts fall well below the growth rates needed to reach the Philippine government’s goal of becoming a trillion-dollar economy by 2033 or a $6.6-trillion economy by 2075.
A zero-poverty economy is also unlikely, as the rate is expected to be 7.9 percent by 2040.
“First, while the Philippines may continue to do well during the coming decades, things will not be like what the government claims. The Philippine economy will do fine and progress steadily, but this is as far as it can go,” DLSU economists said.
“Achieving a 7-percent growth rate and sustaining it is unlikely. Add a crisis into the mix, and the transition into a high-income nation will take longer. Second, the push to achieve even just a 6-percent growth rate consistently for the next 25 years is simply impossible,” they added.
Should another crisis occur, DLSU said it could reduce gross national income per capita in 2050 by $1,400 and set back economic progress by three years.
“These results show the significant long-term implications of even just a single crisis. It is important to understand that this scenario is quite likely, given the frequency of crises in the past,” they said.
“It is also possible that recovery will be slower than what we present here. This means that real wages will grow by less, poverty incidence will decrease at a slower rate, and it will take the economy more time to become a high-income nation. This moves the Philippine economy further away from the Ambisyon Natin 2040 vision,” they added.
Among the growth constraints cited by DLSU is the structure of the economy, where a large share of workers remain in agriculture and low-productivity services.
On the manufacturing side, the economists said that while manufacturing and wholesale and retail trade will have among the highest output shares, collectively accounting for close to 40 percent of gross domestic product (GDP), their shares are not expected to change significantly.
Agriculture is also a weak spot, with the sector expected to account for only 4 percent of GDP by 2050. Its contribution to economic growth is also projected to gradually decline as the number of agricultural workers falls and the sector continues to face low productivity.
