THE PHILIPPINES must improve labor conditions and infrastructure, attract more investments, and diversify its growth drivers as global uncertainties due to trade war concerns threaten the economic landscape.
“The Philippine economy today stands at a crossroads. We find ourselves at this juncture, and significantly, when various developments and trends affect all economies, large and small… We live in a time of profound transformation, where influential megatrends disrupt the global landscape, posing risks but presenting opportunities to economies such as the Philippines. These forces are interconnected, complex, and dynamic, pushing nations to adapt, innovate, and position themselves strategically,” Department of Economy, Planning, and Development Secretary Arsenio M. Balisacan said in his keynote speech at the BusinessWorld Economic Forum 2025 on Thursday.
“Sustaining economic progress and reaching higher potential growth requires broadening the foundations of our economy beyond our traditional reliance on consumption and services. 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.”
Mr. Balisacan said heightened uncertainty due to the Trump administration’s trade policies, and rising protectionism among economic giants threaten the global economic landscape.
“Such uncertainty creates significant planning challenges for businesses and investors, who may now be more inclined to adopt a ‘wait-and-see’ position for the foreseeable future.”
Still, despite global headwinds, the Philippines’ strong growth momentum and reforms have bolstered investor confidence, he said, citing development gains in areas including incomes, jobs, and poverty reduction, as well as sound macroeconomic fundamentals, the official said.
“Sustaining growth and building resilience require deliberate actions to reinforce the economy’s growth pillars moving forward… The disruptions caused by the megatrends provide us with a strategic window of opportunity to pivot toward a new growth model, one where the economy finds strength and durability not in one or two pillars but across a broad spectrum of sectors powered by innovation, technological diffusion, and an enabling governance,” Mr. Balisacan said.
Strengthening the country’s regions as part of its economic diversification will also help the Philippines protect itself from external disruptions, he added.
“An equally important strategy is raising the productivity of our economic sectors through the adoption of modern, value-creating innovative technologies and future-proofing the economy through transformative and forward-looking policy reforms,” Mr. Balisacan said.
“Committing to efficient program governance — to more effective and impactful spending — given the limited fiscal space is key to better outcomes such as productivity growth, competitiveness, and inclusion. This imperative is not simply about catching up but seizing a strategic moment. With foresight that draws from the lessons of the past and through our collective resolve, we can build a more competitive, inclusive, and future-ready Philippine economy.”
PRODUCTIVITY GAINSASEAN+3 Macroeconomic Research Office (AMRO) Senior Economist Andrew Tsang said in a separate speech at the same event that boosting the Philippines’ economic productivity is key to achieving a higher income status.
The gross national income (GNI) per capita of the Philippines needs to increase by 231% to become a high-income country by 2050, he said.
“Achieving this will require an average [GNI] growth rate of over 4.5% per year over the next 35 years. In principle, this is possible for the Philippines to achieve the high-income country status,” Mr. Tsang said, but added that sustaining consistent growth could be difficult.
“The critical question is, can the Philippines avoid the middle-income trap, particularly with the heightened global uncertainties and challenges from the emergence of innovative technologies? … However, the Philippines can achieve this high-income country target, which will depend on how well the country addresses the long-term structural challenges and implements a comprehensive strategy for upgrading the productivity and enhancing the country’s competitiveness.”
The Philippines is currently classified as a lower-middle-income country as its GNI per capita was $4,230 in 2023, up from $3,950 in 2022.
According to the World Bank’s classification, an economy is considered lower middle-income if the GNI per capita level is between $1,146 and $4,515, while upper middle-income countries are those that have a GNI per capita of $4,516 to $14,005. High-income status can be achieved if a country has a GNI per capita of more than $14,005.
Mr. Tsang said they believe the Philippines can get upper middle-income country (UMIC) status by 2026, in line with the government’s target. The country’s GNI per capita needs to increase by 6.8% from the 2023 level to achieve this status, he said.
World Bank Group Lead Economist and Program Leader for the Prosperity Unit for Brunei, Malaysia and the Philippines Gonzalo Varela earlier said the Philippines is more likely to achieve UMIC status by 2027.
Mr. Balisacan has said the economy needs to grow by 6% until next year to achieve their targeted UMIC status.
For its part, AMRO expects Philippine gross domestic product growth to be a bit below 6% this year due to the potential impact of the Trump administration’s tariff policies, Mr. Tsang said.
“But in any case, we are still quite optimistic to the country’s economy because the direct and indirect impact of the tariff on the Philippines would not be that big. But the indirect impact depends on the final version of the tariff.”
The Philippine economy expanded by 5.4% in the first quarter, slightly faster than the 5.3% growth in the prior three-month period but slower than the 5.9% pace in the same quarter last year. This was well below the government’s 6-8% growth target band for 2025.
The weak growth came as gross capital formation growth was dampened by businesses’ anticipation of global trade uncertainties.
Miguel G. Belmonte, president and chief executive officer of BusinessWorld Publishing Corp., said that while the Philippines has, as an “emergent economy,” achieved consistent growth even during challenging times, it must “elevate itself from resilience to relevance.”
“Embracing a whole-of-society approach is clearly the best way forward for our government to navigate the challenges that lie ahead. While it lays the groundwork, the private sector drives momentum and serves as primary engines of economic growth, job creation, and innovation in the country,” Mr. Belmonte said.
“We simply cannot afford to be left behind in the frantic race towards a sustainable future.” — Aubrey Rose A. Inosante
