Growth and Productivity in the Philippines : Winning the Future
To achieve the AmBisyon Natin 2040, the Philippines needs to triple its income per capita in the next two decades. The AmBisyon Natin 2040 is the government’s plan to transform the country into a prosperous middle-class society free of poverty by 2...
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| Format: | Report |
| Language: | English |
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World Bank, Washington, DC
2018
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| Online Access: | http://documents.worldbank.org/curated/en/586871537541775427/Growth-and-Productivity-in-the-Philippines-Winning-the-Future http://hdl.handle.net/10986/30450 |
| Summary: | To achieve the AmBisyon Natin 2040, the
Philippines needs to triple its income per capita in the
next two decades. The AmBisyon Natin 2040 is the
government’s plan to transform the country into a prosperous
middle-class society free of poverty by 2040. This implies
that the Philippine economy needs to grow at an annual
average of 6.5 percent in the next 22 years, faster than the
average growth of 5.3 percent since 2000—a challenge that
only the Asian Tigers and China have managed to accomplish
in the past. This report shows that sustaining high growth
can only be achieved if the Philippines succeeds in
sustaining high Total Factor Productivity (TFP) growth while
accelerating capital accumulation. To achieve the GDP per
capita target by 2040, numerous scenarios regarding the
potential mix of growth drivers were evaluated. The first
key finding is that sustaining high TFP growth will be
crucial to achieve the target. Specifically, the Philippines
needs to sustain an average annual TFP growth rate of 1.5
percent or higher in the next 22 years, more than double the
world average since 2000. Such a high rate of TFP growth
will require deep structural reforms to remove constraints
and distortions faced by the private sector. The second key
finding is that accelerating capital accumulation in the
medium term will be essential to reduce current
infrastructure and capital constraints to growth. The
Philippines can meet the capital accumulation requirement by
doubling the growth rate in the physical investment-to-GDP
ratio over the next five years through higher private and
public investment, which would require the implementation of
important reforms that are highlighted in this report. The
top three policy reform areas for sustaining high growth and
productivity, prerequisites for achieving Ambisyon Natin
2040 are: (i) improving market competition through
regulatory reforms; (ii) improving trade and investment
climate policies and regulations; (iii) reducing labor
market rigidities and costs. By creating competitive and
flexible markets, poverty alleviation is likely to
accelerate through more jobs, higher labor productivity, and
lower consumer prices. An equal playing field and a
regulatory environment that makes it easy to do business
encourage firms to enter the market, invest, grow, create
jobs, and innovate, leading to higher productivity. Market
competition coupled with flexible a labor market and
abundant labor supply allows higher productivity to reduce
product prices, which increases workers’ real income. As a
result of more and higher paid jobs, more people will move
out of poverty, helping achieve the AmBisyon Natin 2040
vision of a society free of poverty. |
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