The Philippine economy: Expectations vs reality

Despite everything that happened to our country this year – the natural disasters, the scandals and conflicts, even the provocation by a foreign power in the West Philippine Sea – we have been fortunate to maintain an economy that is well-positioned to strengthen its role in the Indo-Pacific supply chain. 

Outside of the noise, the reforms under the Marcos Jr. administration and the Indo-Pacific Economic Framework have been ensuring that the Philippines continues to attract investments that in turn drive our economy. 

After all, we do have our constants: a good geostrategic location, abundant natural resources, and a young population and dynamic workforce. These inherent strengths put the Philippines in a good position to aim for a better, stronger, and more resilient economy in the years to come. 

Of course, these inherent strengths bring only potential – it is what we do with this potential that would eventually determine our success or failure. 

By the looks of it, however, the Philippines seems to be well aware of its potential and is taking the right steps to make sure this is realized. Capitalizing on our inherent strengths, our leaders are doing what they can to ensure good governance and policy stability, and to strengthen alliances with key partners like the United States and Japan (79% and 50% of respondents, respectively, according to a recent Pulse Asia survey). 

Because of this, our outlook for 2025 and beyond is optimistic. 

Foremost, while we acknowledge geopolitical developments and even the risks and challenges that they bring to our nation, we note as well that they are unique opportunities for the Philippines to establish itself as a key player in the Indo-Pacific region’s global supply chain. 

What would it take for our country to achieve this? Fostering a favorable investment climate will encourage investors to expand their presence in the Philippines. Business-friendly reforms and initiatives designed to boost investments are creating a solid foundation for growth.

A commitment to good governance and policy stability will be essential to maintain investor confidence and sustain long-term economic growth.

The Pulse Asia survey in September 2024 also found that Filipinos identify complicated rules and regulations like red tape (52%) as the biggest obstacles, followed by changing government policies and regulations (51%) and corruption in the public sector (46%). Addressing these concerns could significantly enhance investor confidence and drive economic growth.

An encouraging development is that the Philippine Economic Zone Authority (PEZA) anticipates approved investments to reach about P216 billion by the end of 2024, its highest in seven years. This means that the projections for 2025 will hover around PHP 235 billion, a 10% growth. This increase is expected to be driven by the manufacturing sector. 

President Marcos Jr. has also expressed support for the Indo-Pacific Economic Framework for Prosperity (IPEF) and guaranteed the country’s involvement in the framework to expand its economic and trade activities. Launched in 2022 by the United States, the IPEF includes Australia, Brunei Darussalam, India, Indonesia, Japan, the Republic of Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand and Vietnam, which represent around 40% of global GDP and 28% of global goods and services trade.

This initiative aims to promote resilience, inclusiveness, sustainability, and competitiveness, fostering cooperation, stability and prosperity across the region.

The Philippines is set to strengthen its role in the Indo-Pacific by fostering collaboration with like-minded countries and strategic partners.

This aligns with efforts to achieve peace, stability, inclusive growth, and sustainable development in the region. Deepening ties with key partners like the United States and Japan and enhancing the manufacturing sector will solidify its position in the global supply chain, particularly as investors seek alternatives to China. 

Even the inauguration of former and President-elect Donald Trump next month is not expected to cause significant policy shifts in the US’ economic policy as it concerns the Philippines.

With our long history of  collaboration and mutual interests, the United States remains one of the Philippines’ largest export markets and a significant source of foreign investment. At the same time, the Philippines' diversified trade and investment portfolio ensures a stable and resilient economic position, reducing dependence on any single country.

What lies ahead, then, for the Philippines in 2025? We only have high hopes.

The elections in May will provide a fresh opportunity for the people to look at their leaders and see them for their track record, background and intentions. People want to know that their leaders are not distracted by fleeting issues and instead are able to focus on what matters most – i.e., the implementation of long-lasting reforms that would have an impact on people’s economic security.

They will be seen as steady, rational and calm, and able to plot strategies on how to attract investments that would create jobs and income opportunities for more Filipinos. They will not tolerate distractions, opacity, and traditional politicking and instead be champions of transparency and accountability. 

We have enough bright minds to think about the Philippines’ inherent advantages and what it would take to optimize these so that they translate to the economic well-being of the people.

There have been laws and policies instituted to provide a policy framework for these steps. All we need is to implement these reforms and policies in a steady and consistent way – whatever political winds may bring -- such that we can ride with global developments that offer opportunities to solidify the country’s role in the Indo-Pacific. 

With that, I wish everyone a prosperous, productive, and a hopeful 2025!