Finding the missing link to innovation and growth
It might seem trivial that the Philippine economy grew by 5.5% in the second quarter, edging up from the 5.4% mark earlier this year. The Department of Economy, Planning and Development (DEPDev) celebrates our status among the fastest-growing economies in emerging Asia. Yet two pressing truths go unspoken.
First, we are still making up for lost ground from a 9.5% contraction in 2020. Second, poverty and inequality remain stubbornly high — threatening our ability to deliver meaningful investments in health, education, infrastructure, and research and development (R&D). Without investments in R&D, innovation — the lifeblood of accelerated, sustainable growth and employment — remains aspirational.
It’s tempting to compare ourselves to neighbors like China, Indonesia, Malaysia, or Thailand, but such comparisons swiftly lose meaning. These countries are already well ahead in absolute GDP and per capita GNI, having advanced beyond lower-middle-income status. This is a transition the Philippines has failed to make in nearly four decades. Since 1987, we have remained in that lower-middle-income bracket, pressed now by both geopolitical headwinds and domestic fiscal constraints, including a National Government debt exceeding P17 trillion. Consequently, growth targets for 2025-2028 have been revised down by both agencies and international financial institutions including the World Bank and the IMF.
This reality resonates across the private sector. The Development Bank of Singapore recently trimmed its 2025 growth forecast for the Philippines from 5.8% to 5.6%, citing subdued consumer and business confidence. Domestic bank BPI speaks of a “new normal” — growth well below the pre-pandemic average of 6.4% due to persistently high price levels and subdued job security. With weaker growth, our debt-to-GDP and fiscal deficit to GDP ratios would remain elevated as National Government debt may climb to P19 trillion by 2026.
With these pressures, how do we shift from insufficient growth to more sustained, inclusive, innovation-driven development? Innovation depends on talent. We must find the missing link that connects the two.
INNOVATION STARTS WITH HUMILITY
Yuval Noah Harari’s 21 Lessons for the 21st Century delivers understated provocations: “when you grow up, you might not have a job,” “change is the only constant,” and our “sense of justice may lag behind reality.” In particular, lesson 11 reminds us of war’s persistence — not through grand statements but through solemn humility. In the Philippine context, where education quality falters and talent remains largely unrecognized, humility is not self-flagellation — it is the quiet admission that precedes renewal.
THE HIDDEN COST OF LEARNING POVERTY
Consider the numbers: learning poverty among Filipino 10-year-olds hovers between 90% and 91%, meaning nine out of 10 cannot read and understand a simple text by the age of 10. While completion rates are formally high (primary at 95.9%, lower secondary at 81.7%, upper secondary at 72.6%), the data belie the stark reality that only 10% of primary graduates meet reading standards and 17% meet math proficiency.
Such learning gaps stem from reported systemic failures: overcrowded classrooms, poor instructional materials, teacher absenteeism, and educators teaching subjects outside their areas of expertise. A recent World Bank study reports that 40% of students say their teachers are frequently absent, while most teachers employ ineffective teaching practices. Entry into the teaching profession often lacks rigor; training rarely offers follow-through, practice, or incentives.
These are not abstract problems. They are quiet tragedies: latent innovation stifled, young minds left untapped, potential dimmed. The bench of talent remains shallow.
TALENT AS THE ENGINE OF INNOVATION
The IMF’s March 2025 issue of Finance & Development (F&D) frames talent as a strategic asset. Ideas do not spring from abstraction — they emerge from insight. When gifted minds go unrecognized or unsupported, the consequences ripple outward — innovations remain unrealized, cures unsought, frontiers unexplored. F&D’s editor-in-chief Gita Bhatt underscores that talent may be one of the world’s “most valuable resources that can drive innovation and growth.”
Within that issue lies the notion of the “missing equation” — the systemic failure to identify and nurture young talent, especially in science, technology, engineering, and mathematics (STEM). A Brazilian prodigy, Tabata Amaral, now 31 and already a member of parliament, credits her rise to school math competitions and similar opportunities. She is where she is because of such openings. Her words underline the payoff of simple investments.
More broadly, access to education, socioeconomic background, and social networks heavily influence who becomes an inventor. The economic cost of unleashing only part of the nation’s potential is profound. The human cost is greater still. This is a big, big challenge to the government and Congress to restore the centrality of public education and health in the budget process. It is crucial to engineer social benefits in favor of what could produce innovation for all, rather than public money for some.
Not surprisingly, the IMF cautions that while AI offers opportunity, it also threatens to narrow the space for human creativity if used without care. Harvard’s William Kerr reminds us that demographic shifts and declining productivity make retaining top talent indispensable to resilience.
FROM REALIZATION TO ACTION
Harari’s admonitions ring softly: we know the gaps, yet reform often stalls. The Philippines stands at a demographic inflection point — dependency ratios falling, working-age population rising through mid-century. If health and education are elevated to central priorities, this moment could be transformative. If not, we risk squandering it.
Yet deficits persist. We abound in schools with very few books, very limited science or digital facilities. We use broadband that is pricier than regional peers. We suffer from glaring misalignment between skills taught and labor market demands. Employers consistently cite deficits in digital literacy, cybersecurity, and data visualization yet as many as 90% of the population lacks basic ICT skills. At the same time, current projections indicate over 1 million tech jobs, including 150,000 developer roles, may go unfilled by 2028 — an unaffordable mismatch of opportunity and capability.
A BLUEPRINT OF QUIET REFORM
If innovation depends on talent — and talent flourishes under quiet but deliberate nurture — then a humble revival might look like this:
1. Spot Hidden Potential Low-profile initiatives. Math Olympiads, science fairs, literary contests — especially in underserved provinces — which can surface latent talent waiting only for recognition.
2. Sustain Basic Foundations. No sweeping reforms. Just steady investment in learning materials, functional classrooms, early childhood education, and competent teachers — understanding that decoration cannot mask absence.
3. Use AI as an Enabler, Not a Crutch. Digital tools can extend teaching reach and personalize learning if underpinned by electricity, connectivity, and trained educators who know how to wield them.
4. Align Education with Opportunity. Strengthen linkages between TESDA (Technical Education And Skills Development Authority), TVET (Technical and Vocational Education and Training), and industry. Target growth industries and nurture apprenticeships, not as showpieces, but as bridges to employment.
5. View Social Disadvantage as Untapped Potential. Learners walk in with stunting, hunger, and unstable homes. Remedial programs must go beyond charity. They are investments in national promise.
THE QUIET PATH BEYOND STUPIDITY
Harari’s critique is not about loud self-flagellation — it is about bending where we have been stubborn, recognizing the gaps we habitually ignore, and embracing repair with small, deliberate steps.
The Philippines is not devoid of potential. We have a youthful demographic, remittance-backed liquidity, and digital infrastructure ready to be tapped. We have a sound banking system. We have a strategic development plan through 2028.
The question is not “Can we?” but “Will we?” Will we treat education and talent not as passive givens, but as fragile seeds requiring guardianship?
This is no moral piece. This is a modest plea rooted in humility. Perhaps the next breakthrough, the next quietly transformative idea, the next gentle genius — worth its weight in prosperity — awaits nothing more than a small opening.
We don’t need spectacle. We need sincerity.
Diwa C. Guinigundo is the former deputy governor for the Monetary and Economics Sector, the Bangko Sentral ng Pilipinas (BSP). He served the BSP for 41 years. In 2001-2003, he was alternate executive director at the International Monetary Fund in Washington, DC. He is the senior pastor of the Fullness of Christ International Ministries in Mandaluyong.
