Imperatives in enabling economic stability

By Angela Kiara S. Brillantes, Special Features and Content Writer

Developing the Philippines’ fundamental sectors, coupled with more predictable economic policies, are seen to push the country further towards steady and even faster growth, helping it to navigate through economic headwinds and uncertainties, adapt to shifts, and build a more robust, resilient, and sustainable economy.

Dr. Jesus Felipe, distinguished professor at the De Le Salle University (DLSU) Carlos L. Tiu School of Economics, stated that the country’s economic growth has set the Philippines for positive prospects, among them becoming one of the fastest-growing economies in the world.

“Economic growth is going to continue for a couple of years at around 6%-7% but it’s going to go down to around 3% in 2050. That is a sign that the economy is improving,” he said during the first fireside chat of the BusinessWorld Forecast 2025 forum last Nov. 26 at the Grand Hyatt Manila.

However, growth alone won’t cut it, and the big question now is how to sustain its growth momentum in the new few years. For the distinguished professor, the country needs to increase its potential, accelerate progress, and start changing the structure of the economy.

“[Growth in economies] is determined by factors such as activity or how much they grow. In the last few years, it has been 6%. We need to understand that it (the Philippines) has been one of the fastest-growing economies in the world today. The question is, can we grow faster? It is about increasing the potential; and with the economy we have today, it is extremely difficult, and the way to do it is by changing the structure of the economy that will allow us to grow significantly faster.”

Developing fundamental sectors

The first approach to sustaining growth momentum, according to Mr. Felipe, is focusing on agriculture, labor, and manufacturing — sectors that are fundamental for a nation to grow, at the same time yet hardly ever mentioned.

More often, agriculture is facing key challenges like labor migration. As the economy develops, workers in this field may be drawn to higher-paying jobs in other sectors. From this issue, Mr. Felipe then highlighted the importance of incentives, which can drive increased productivity in the sector.

“That’s a way to increase productivity in agriculture. What we need to do is create employment in all sectors. With that, there will be a way to increase productivity in agriculture,” the professor said.

Another point of focus in the fireside chat was the importance of the manufacturing sector in boosting the economy. Mr. Felipe stressed that the Philippines’ manufacturing sector needs to be further developed, alongside maximizing advantages such as a large labor force and its demographic location.

Manufacturing plays a crucial role in driving economic growth because of its ability to enhance productivity across sectors. And for that, many countries have leveraged this sector to create jobs, increase income, reduce poverty, and help them achieve their development plans.

Having a robust manufacturing sector would help the country to stay ahead and compete with the rest of the world. However, Mr. Felipe finds, the Philippine manufacturing sector needs to catch further up.

This echoes Dr. Felipe’s answers to the question, “What can significantly boost the Philippine economy?” in an article published on DLSU’s website. Manufacturing, he pointed out, is a key for economic development because it drives up high income per capita, fosters innovation, and provides opportunities that can help the country advance to industrialization.

“There are always opportunities out there in terms of niches. In the manufacturing sector, it is a big aggregate that, in reality, is thousands of products. And I’m familiar with manufacturing companies in the Philippines in most of the sectors, including chemicals. So, the challenge is how to multiply that experience in the next few years, in the next couple of decades, to be able to develop some niches where we may have opportunities,” the professor said.

Recognizing this, Mr. Felipe explained that other developed countries who have industrialized through manufacturing have risen above poverty. A prime example is South Korea during the 1960s, which was a pivotal time in their history. Their strategy focused on manufacturing as a key driver of economic growth, helping them transform to the economic powerhouse they are today.

“South Korea realized that the world is very large. It was producing manufacturing products, not just for the South Korean consumers but for the world,” he added.

Prioritizing industrialization

Dr. Felipe also emphasized that industrializing the country should be a top priority of the country’s policy agenda, since moving towards a more industrialized path has the potential to propel the country further forward.

“How do we become an industrial nation? How do we strengthen the niches that are going to help us?” he was quoted as saying in the aforementioned article. “To achieve higher wages and higher-capita income, it needs to create a wide base of domestic industrial companies that produce the myriad of basic products across the whole manufacturing spectrum that support national development. This is something that everybody needs to be aware of,”

Another approach in priming the country’s economic growth is through implementing timely policies that are vital for economic growth and prosperity, as he highlighted during the fireside discussion. If those policies are constantly changing, however, then it can create more uncertainties. Thus, Mr. Felipe stressed the importance of having a certain form of predictability among these policies.

“Predictability is a challenge. We’re talking about investments in sectors, whether it be agriculture, or manufacturing, or to attract investments. There has to be a certain form of predictability,” according to the professor.

Dr. Felipe also emphasized that this is particularly true for long-term investments that require significant capital in order to unlock the country’s economic potential and achieve sustainable growth.