By Justine Irish D. Tabile, Senior Reporter
THE Philippines must strengthen its productive capabilities and diversify an economy still heavily reliant on consumption and services to become more resilient to external shocks and advance toward high-income status, economists said.
Economists said manufacturing, agribusiness, renewable energy, digital services, and creative industries could attract more investment, boost exports and create higher-quality jobs, but this would require stronger workforce skills, better infrastructure and deeper integration of local firms into domestic and global supply chains.
Ateneo de Manila University economics professor Leonardo A. Lanzona said diversification alone would not ensure broad-based development if new industries failed to build local capabilities and capture more income domestically.
“Diversifying the Philippines’ growth drivers beyond consumption and services is important for sustaining growth and reaching high-income status, but I would suggest that building and diffusing productive capacities should be the primary objective, rather than diversification itself,” Mr. Lanzona told BusinessWorld via e-mail.
“If policy focuses only on shifting toward new sectors — such as manufacturing or exports — without strengthening the capabilities of workers and firms, diversification may simply produce new enclaves with weak domestic linkages, limited income capture, and continued reliance on routine tasks,” he added.
Mr. Lanzona said the Philippines should prioritize investments in skills, technology and innovation, infrastructure, productive finance, and stronger backward and forward linkages, particularly involving micro, small, and medium enterprises.
“These capabilities allow firms to move into higher-value, non-routine tasks and diffuse upgrading across the economy,” he said.
“Thus, manufacturing, sophisticated services, agribusiness, and other tradable sectors should be viewed as vehicles for capability building, with diversification emerging as an outcome of broad-based structural transformation rather than as the objective itself,” he added.
Francisco Cid L. Terosa, an associate professor and former dean of the University of Asia and the Pacific School of Economics, said broadening the country’s economic growth drivers would help shield it from geopolitical and economic shocks.
“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 in a Viber message.
Mr. Terosa said domestic and foreign investment, agribusiness, skilled labor-intensive manufacturing, renewable energy, data center hosting, and technology-driven personal and professional services could help fuel growth.
However, supporting these new sources of growth would require the effective implementation of regulatory and policy reforms.
Mr. Terosa said the country should streamline business and investment processes, fully implement investment liberalization and strengthen frameworks against red tape, corruption and unfair competition to bolster investor confidence.
He also called for the modernization of agriculture and agribusiness infrastructure, the regional dispersal of production activities, the development of energy and technology infrastructure, and the upgrading of workforce skills to meet changing industry needs.
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 in a Viber message.
“Beyond advanced manufacturing, electronics and semiconductors, agribusiness, renewable energy, tourism, and digital services, we should also develop our orange economy (creative industries, entertainment and media, design, gaming, animation, music, film, and other content-driven sectors),” he said.
The objective should not be to replace the country’s traditional strengths but to complement them with new sources of growth, Mr. Rivera said.
“This will require continued investment in skills, digital and physical infrastructure, intellectual property protection, innovation financing, and a predictable business environment,” he added.
The Philippines was recently reclassified as an upper-middle income country by the World Bank, closing in to its regional counterparts, after it posted a record gross national income (GNI) per capita of $4,850.
Earlier, Department of Economy, Planning, and Development (DepDEV) Secretary Arsenio M. Balisacan said the Philippine economy’s heavy reliance on consumption and services is a central structural challenge.
Citing the experience of successful economies, he said sustained progress requires mobilizing other sources of growth, including investment, exports, agriculture and industry.
However, the Philippines continues to trail neighboring economies such as Vietnam, Thailand, Malaysia and Indonesia in gross fixed capital formation and exports, the DepDEV chief said.
From 2016 to 2025, the country recorded $957 billion in gross fixed capital formation and $1.171 trillion in exports, Mr. Balisacan said.
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