Philippines and ADB

ADB supports the Philippines’ recovery from the COVID-19 pandemic through its country partnership strategy 2018–2023 — focusing on infrastructure investment, local economic development, and social investments.

Economic forecasts for the Philippines

Figures are based on the latest edition of ADB's Asian Development Outlook, which analyzes economic and development issues in Asia and the Pacific. This includes forecasting the inflation and gross domestic product growth rates of economies throughout the region.


 

Comparative economic forecasts

The latest available economic data for the Philippines compared to countries in Southeast Asia.


 

Policy Challenge—Promoting Greater Private Sector Participation

The private sector is an important engine of growth and productivity. It generates jobs, contributes to government revenues, drives innovation and improves efficiency through technology adoption. The Philippine Development Plan 2023-2028 underscores the need for greater private sector participation through stronger public–private collaboration along with the structural and regulatory reforms needed to enhance the policy environment.

Despite relatively strong GDP growth, investment in the Philippines lags behind its neighbors. While fixed investment has been over 20% of GDP since 2013, it remains lower than the 30% of GDP in neighbors such as Indonesia and Viet Nam. Similarly, foreign direct investment inflows remain lower than its neighbors, partly reflecting the country’s low global ranking as an investment destination. The Philippines ranked 52 out of 64 countries in the 2023 World Competitiveness Report by the International Institute for Management Development. It ranked 13 out of 14 countries included from the Asia and Pacific region. Infrastructure gaps remain among its key challenges, including in energy, transportation, and logistics. Poor connectivity limits access to factor and product markets, raises costs, and undermines the competitiveness of private firms.

A proactive reform agenda is making the country more attractive as an investment destination. Recent reforms have opened the country to more foreign investment and trade. Restrictions on foreign participation were eased in 2022, allowing full foreign ownership in sectors such as renewable energy, telecommunications, airports, shipping, railways, and expressways. Capitalization requirements for foreign investors in retail trade have also been lowered. The Corporate Recovery and Tax Incentives for Enterprises (CREATE) law, which reduced the corporate income tax rate from 30% to 25% (20% for MSMEs), is being refined to match incentives with investors and encourage investment in strategically important sectors. These reforms complement the country’s 2023 ratification of the Regional Comprehensive Economic Partnership.

The enhanced public–private partnership (PPP) regulatory framework will help further mobilize private investment for infrastructure development. The PPP Code of the Philippines enacted in 2023 consolidates all legal frameworks and creates a unified system for investors involved in PPPs. Private sector participation in infrastructure helps reduce pressure on public finances and encourages greater expertise in designing and managing infrastructure projects, particularly complex projects such as long-span bridges and subways. The government’s infrastructure flagship program featured 185 big-ticket projects as of March 2024 worth ₱9.1 trillion (about $163 billion), 45 to be financed through PPPs. In February 2024, the rehabilitation, operation and maintenance of the Ninoy Aquino International Airport, the country’s main gateway, was awarded to the private sector—the largest solicited PPP project in nearly 25 years.

Further measures can enhance the investment climate. The private sector is dominated by a few large conglomerates. MSMEs constitute 99.5% of all enterprises and 63% of total employment. Yet they continue to face challenges in accessing finance and navigating red tape. High administrative burdens on startups, such as numerous permits and licenses, prevent ease of entry of small players. High trade costs also restrict competition and reduce opportunities for domestic firms to access larger markets. It is critical to strengthen market competition, including efforts across government to implement competition policy and deter anti-competitive practices. The Anti-Red Tape Authority has spearheaded efforts to streamline and automate government-related procedures to reduce the regulatory burden at both national and local government levels. Continuing capacity-building measures for local government units (LGUs) to make their localities more investor-friendly are vital While LGUs are mandated to implement electronic one-stop shops for business, some face capacity constraints. About 40% of LGUs as of February 2024 have adopted the system.

Accelerating private investment in key sectors including green and resilient energy, is critical for a better business environment. Coal and oil continue to dominate the energy mix, and the Philippines remains a net importer of fossil fuels. High energy costs are often cited as a key barrier to economic competitiveness. If current trends continue, energy self- sufficiency is expected to worsen as natural gas supplies from the Malampaya gas field dwindle. The government has sought to mobilize investment in renewable power generation to meet its 50% target share in the mix by 2040 (from a 22% share in 2022). The clean energy transition will require planning to replace and decommission fossil fuel-based power plants, and explore opportunities to develop geothermal, offshore wind, and floating solar capabilities. This also requires investment in energy storage, transmission, and grid resilience to accommodate the planned increase in renewable supply. The government has established the Energy Virtual One-Stop Shop System to streamline permits for new energy investments and assisting LGUs to adopt the system

The private sector can also play a greater role in expanding digital infrastructure.. Telecommunications face critical infrastructure gaps. In 2020, only 56.1% of households had internet access at home, with access largely concentrated in the capital, Metro Manila, nearby provinces, and in central Luzon. Most regions in the Visayas and Mindanao reported less than 50% access. Structural challenges of the local telecommunication industry and the archipelagic nature of the country have left poor tower coverage, the lowest among Association of Southeast Asian Nations members. Growing domestic demand cannot be met due to an industry dominated by only a few major players. To help attract private investment, the government issued a common telecommunications tower policy in 2020, with the initial wave of operator licensing and construction already underway. There is an accompanying need for more backhaul capacity and universal coverage which the National Broadband Plan seeks to address, with significant scope for private sector participation. The Open Access in Data Transmission Bill pending in Congress removes the legislative franchise requirement for telecommunications service providers and simplifies the licensing process to promote more competition.

A more inclusive and robust financial system is also vital. Relative to its peers, the Philippines must further deepen its capital markets, strengthen competition and technology adoption in banking, increase insurance penetration, and grow its mutual and pension fund ecosystem. These changes can potentially improve access to capital and the productivity of MSMEs. It will also facilitate more investment in productivity- enhancing innovation and entrepreneurship, disaster resilience projects including in agriculture, and enhance social protection.

More resources

Asian Development Bank and the Philippines: Fact Sheet

Asian Development Bank and the Philippines: Fact Sheet

The Fact Sheets summarize ADB's partnerships with member economies, providing key facts and figures and an overview of activities and future directions.

Asian Development Outlook (ADO) April 2024

Asian Development Outlook

The Asian Development Outlook analyzes economic and development issues in developing countries in Asia.

Key Indicators for Asia and the Pacific 2023

Key Indicators

The Key Indicators for Asia and the Pacific publication presents data regarding the economic, financial, social, and environmental situations in a broad range of countries across the region.

Basic Statistics 2023

Basic Statistics

The Basic Statistics brochure presents data on selected social, economic, and SDG indicators such as population, poverty, annual growth rate of gross domestic product, inflation, and government finance for economies in Asia and the Pacific.