Philippines must broaden growth base to withstand shocks, economists say

MANILA, 24 AUGUST 2026 —

The Philippines must expand its productive base and diversify beyond consumption and services to withstand external shocks and reach high-income status, economists said.

“Diversifying the Philippines’ growth drivers beyond consumption and services is important for sustaining growth and reaching high-income status, but building and diffusing productive capacities should be the primary objective,” Mr. Lanzona told BusinessWorld.

He warned that shifting toward new sectors such as manufacturing or exports without strengthening worker and firm capabilities could create enclaves with weak domestic linkages and continued reliance on routine tasks.

Mr. Lanzona urged priority investments in skills, technology, innovation, infrastructure, productive finance, and stronger backward and forward linkages, particularly for micro, small and medium enterprises.

Francisco C. Terosa, associate professor and former dean of the University of Asia and the Pacific School of Economics, said broadening growth drivers would enhance resilience to external shocks and domestic instability.

“Diversifying economic growth drivers will enhance resiliency to external shocks, strengthen resistance to domestic political and economic instability, and promote efficient adaptation to rapidly changing economic and business environments,” he told BusinessWorld.

Mr. Terosa cited domestic and foreign investment, agribusiness, skilled labour-intensive manufacturing, renewable energy, data centre hosting and technology-driven services as potential growth engines.

He said effective regulatory and policy reforms were needed, including streamlining business processes, implementing investment liberalisation and combating red tape, corruption and unfair competition.

Mr. Terosa also called for modernising agriculture and agribusiness infrastructure, regionalising production, developing energy and technology infrastructure, and upgrading workforce skills.

Philippine Institute for Development Studies Senior Research Fellow John Paolo R. Rivera said a broader set of growth drivers would help the country move toward high-income status.

“Consumption and services have been important sources of resilience, and the next step is to complement these strengths with stronger investment, higher productivity and deeper participation in higher-value activities,” he told BusinessWorld.

Mr. Rivera highlighted agribusiness, renewable energy, tourism, digital services and the “orange economy”—creative industries such as entertainment, design, gaming, animation, music and film—as complementary growth areas.

The World Bank recently reclassified the Philippines as an upper-middle income country after it posted a record gross national income per capita of $4,850, up from $4,250 a year earlier.

Department of Economy, Planning, and Development Secretary Arsenio M. Balisacan said the country’s heavy reliance on consumption and services remains a structural challenge.

Citing the experience of successful economies, he said sustained progress requires mobilising other sources of growth, including investment, exports, agriculture and industry.

From 2016 to 2025, the Philippines recorded $957 billion in gross fixed capital formation and $1.17 trillion in exports, Mr. Balisacan said, but noted that the country still lags neighbours such as Vietnam, Thailand, Malaysia and Indonesia in these metrics.

For Malaysian businesses, the Philippines’ push to build productive capacity and diversify growth drivers underscores the need for supply-chain integration and skills development to remain competitive in regional production networks.

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