THE Philippines could accelerate its economic growth by sustaining improvements in investment growth, educational outcomes, life expectancy and female labor force participation in the next 10 years, according to the World Bank (WB).
In its latest report titled “Falling Long-Term Growth Prospects: Trends, Expectations, and Policies,” WB said potential growth could be raised by 0.8 percentage point a year by the end of this decade if the Philippines and other countries in East Asia and the Pacific (EAP) will implement “growth-enhancing reforms.”
“More than half of this increase [approximately 0.5 percentage point a year] would come from the boost to investment growth,” it added.
The World Bank said putting in place growth-enhancing reforms is crucial to avoiding its baseline projection for 2022-2030, which shows a further slowdown in the expansion in EAP’s potential output.
Potential GDP growth in EAP is projected to slow further to an average rate of 4.6 percent a year in 2022-30, down from 6.2 percent a year in 2011-2021.
The report noted that China accounts for much of the projected slowdown, but slowing potential growth is expected to spread to the rest of the region as well.
Part of the projected slowdown is due to the pandemic and the war in Ukraine, the effects of which are expected to be most severe and longest lasting in the countries that have suffered most from the collapse of global tourism and trade.
“Growth prospects have also deteriorated for countries that have recently suffered natural disasters, domestic policy uncertainty, and terms-of-trade shocks. In terms of the production function framework, each of the three main drivers of growth in potential output are expected to contribute to the worsening outlook, with weaker capital accumulation accounting for most of the slowdown, followed by falling growth in TFP [total factor productivity] and the supply of labor,” the report read.
In contrast, in the Philippines, the World Bank said investment is expected to pick up from depressed levels and boost growth in potential output.
The Philippines can do this by implementing a number of measures, including the broadening of its tax base to finance infrastructure projects. The World Bank said better infrastructure could foster connectivity and spur innovation in the country.
“Financing such investment will depend on country circumstances: It may need to be accomplished by broadening the tax base [Cambodia, Indonesia, Lao PDR, Malaysia, Mongolia, Papua New Guinea, and the Philippines],” it added.
Reforms to improve education quality would also raise labor force skills and promote productivity growth. “Now that schools have reopened, measures to adjust school curricula and develop rapid catch-up periods can also mitigate learning losses.”
In the longer term, countries, it said, should seek to develop more resilient and inclusive education systems that can deliver learning in the event of future crises, including through remote learning.
Image credits: Michael Edwards | Dreamstime.com