PIDS: Services sector boost key to economic growth
With 2026 shaping up as a pivotal year for the Philippine economy to rebound, analysts say the government should focus on boosting productivity in the services sector—the largest contributor to the labor force—to drive growth.
In a discussion paper, state-run think tank Philippine Institute for Development Studies (PIDS) said that enhancing productivity in the services sector through management quality and practices, business innovation, workforce development and technology adoption is key to both growth and equity.
This comes as the services sector remains a major contributor to employment, but is still characterized by low labor productivity and wages.
“A strategic framework that integrates key policy areas—labor market, enterprise and industry development, technology, innovation and structural reform—can help maximize the impact of public interventions towards increasing productivity in services,” PIDS said.
According to PIDS, the services sector has continued to absorb the largest share of employment relative to gross domestic product since the 1980s.
Latest data from the Philippine Statistics Authority (PSA) showed that the services sector in October 2025 accounted for 60.6 percent of total employment.
Even so, most jobs are held by low- to medium-skilled workers, with high-productivity roles falling to 18 percent in 2024 from 38 percent in 2013, while medium-productivity jobs rose to 66 percent from 42 percent.
Below-average wages
Low-productivity sectors—including retail, transport, accommodation and food services—accounted for 73.56 percent of total employment in the services sector in 2024, mostly employing low- to medium-skilled workers with below-average wages.
“Services that are not necessarily big employers, but have high forward linkages, especially to the manufacturing sector, should also be a focus of policy reforms, as productivity improvements in these subsectors have positive spillover effects on the rest of the economy,” PIDS said.
The think tank added that different government agencies can provide various types of assistance to workers and micro, small and medium enterprises.
Further, the government should use productivity metrics to guide the identification, design and implementation of specific interventions.
“It (productivity metrics) allows them to zoom in on specific issues while still being guided by the overall productivity goal,” PIDS said.
“Highlighting the extent of the problem for specific subsectors could also justify the allocation of resources towards programs with a higher potential for productivity impact in services,” it added.
