Slowing population growth opens window for faster economic growth

As the Philippines’ population growth rate has drastically slowed down, the country now has a window of opportunity to experience faster economic growth, as the working population makes up a larger share of the total population, according to an expert.

“We have an opportunity to experience an economic growth that we have not seen before or could not have imagined,” said Jose “Oying” G. Rimon II, founding director of the William H. Gates Sr. Institute for Population and Reproductive Health at Johns Hopkins University’s Bloomberg School of Public Health. He said at the sidelines of the National Population, Health and Environment Conference.

“This will happen if we do the right policies and the right investment. The right investment must be in education and in health,” Mr. Rimon added.

According to the Philippine Statistics Authority (PSA), the country’s population growth rate (PGR) slowed to 0.8% annually between 2020 and 2024, from 1.63% in the 2015–2020 period.

Mr. Rimon said the lower population growth rate could lead to a decline in the young dependent population (aged 14 and below) and an increase in the working-age population, which could further support economic growth, a trend referred to as the demographic dividend.

According to the Philippine Statistics Authority (PSA), the share of the working-age population rose by one percentage point to 64% in 2020 from 63% in 2015, while the proportion of the young dependent population declined to 31% from 32% over the same period.

Meanwhile, the ASEAN+3 Macroeconomic Research Office (AMRO) said the Philippines recorded the third-fastest average growth in its working-age population at 2.27%, behind Malaysia (2.41%) and Laos (2.39%).

Mr. Rimon said the demographic dividend in the Philippines is expected to last for about 25 years—a period the government must maximize, as neighboring countries like China, Singapore, and Malaysia achieved significant growth during similar windows.

To maximize this window of opportunity, he said the government must invest in quality education, particularly by strengthening the country’s technical-vocational programs and specialized schools, especially those focused on technology.

He also emphasized the need for smoother internship programs for emerging talents.

To further expand the country’s universal healthcare access, Mr. Rimon said the Philippines could also check how government health insurance systems operate abroad.

To further expand the country’s universal healthcare access, Mr. Rimon said the Philippines could also study how government health insurance systems operate abroad. He added that the government must also ensure the health and well-being of the young dependent population.

Source: Business World

World Bank keeps PHL GDP forecasts unchanged

The World Bank maintained its Philippine gross domestic product (GDP) growth forecasts for this year and 2026, amid heightened uncertainty and slowing global growth.

In its latest East Asia and Pacific Economic Update released on Tuesday, the multilateral lender kept its growth outlook for the Philippines at 5.3% this year and 5.4% for 2026, unchanged from its projections in June.

These forecasts are below the government’s 5.5-6.5% target for this year, and 6-7% for next year.

The Philippines is expected to be the region’s fourth fastest-growing economy in the East Asia and Pacific this year, trailing Vietnam (6.6%), Mongolia (5.9%), and Palau (5.7%).

For 2026, the Philippines is projected to post the third-fastest growth after Vietnam (6.1%) and Mongolia (5.6%).

The country’s growth forecast is above the regional average, with East Asia and the Pacific expected to expand by 4.8% this year and 4.3% in 2026.

“East Asia and Pacific region growth remains relatively high, but it is slowing down,” World Bank East Asia and Pacific Chief Economist Aaditya Mattoo said in a virtual briefing on Tuesday.

“At the same time, domestic policy choices, especially the reliance in some countries on fiscal stimulus rather than structural reform, are likely to shape near and longer-term growth outcomes. Turning to the reasons why growth is slowing down, we identify three main factors — trade restrictions, increased economic policy uncertainty, and slowing global growth,” he said.

The US imposed a 19% tariff rate for Philippine-made goods starting Aug. 7.

Mr. Mattoo noted that most economies in the region now face higher tariffs, but the Philippines, Thailand and Vietnam are less affected since electronics and semiconductors are exempted from tariffs for now.

The World Bank noted that economies in the region have lowered tariffs exclusively on US imports and pledged to increase purchases of specific American goods, in response to higher tariff rates.

“In some cases, countries have engaged with other trading partners to pursue greater diversification of their trade. These actions may be costly but necessary in an uncertain trading environment,” it said.

The Philippine government has vowed to adopt a zero-tariff scheme on selected US goods, but the move could cost the government P27 billion to P30 billion in forgone revenues. However, negotiations with the US have yet to be finalized.

RISE OF DIGITAL INFORMALITY

Meanwhile, the Philippines is seeing a shift in informal work from agriculture to digital platforms like ride-hailing applications, the World Bank said. However, poor education may prevent workers from capitalizing on tech-driven jobs, it added.

“Now there is the new informality, which is informality of these new platform-based services, which are growing in Thailand and in the Philippines,” Mr. Mattoo said.

However, Mr. Mattoo said regulation and taxation of the informal sector can be reformed to ensure fewer people are marginalized from the economy.

“I think the Philippines is in a position to benefit (from emerging jobs due to technology) if it deals with the huge deficit in human capital,” he said.

“It is stunning that a country that punches above its weight in services, exports, still has feet of clay when it comes to basic education.”

Mr. Mattoo noted that companies in the Philippines are actively involved in the artificial intelligence (AI) economy but see a lack of skills in workers due to poor basic educational foundation.

“East Asia’s export-oriented labor-intensive growth lifted a billion people out of poverty in the last three decades, but the region now faces the twin challenges of trade protection and job automation,” he said.

Mr. Mattoo called for reforms in the business climate and education system to foster a “virtuous cycle between opportunity and capacity,” which would lead to stronger growth and better-quality jobs.

The World Bank also called for reforms and investments in human capital and digital infrastructure, greater competition in services, and policies to ensure a match between job opportunities and people’s skills.

It noted that rapid advances in AI, robotics, and digital platforms require greater agility from firms, workers, and policymakers.

Meanwhile, Mr. Mattoo also flagged the Philippines’ slow industrialization compared with regional peers such as Vietnam, citing the country’s continued reliance on trade tariffs.

“Trade taxes are the simplest way of limiting revenue especially in countries with low administrative capacity,” he said, as it diverting resources away from sectors where the country holds an advantage.

The Philippine government lowered the rice import tariff to 15% from 35% in July 2024 to curb inflation. Agriculture groups have since called for the restoration of the original rate, citing adverse effects on local farmers and an estimated P4.3-billion revenue loss for the government.

“I think non-discriminatory instruments like value-added taxes, better and more effective income taxes and perhaps even the more controversial wealth taxes might be the more effective way of meeting revenue needs,” Mr. Mattoo said.

Finance Secretary Ralph G. Recto has downplayed the urgency of a wealth tax, but said he would support the measure if passed by Congress.

EAP Economic Update_October2025.pdf

Download PDF • 5.37MB

Source: Business World

IMF cuts Philippines growth forecast amid challenges

Philippine economic growth is expected to moderate this year and in 2026 amid ongoing trade uncertainties and geopolitical tensions across the globe, the International Monetary Fund (IMF) said.

The IMF trimmed its Philippine growth forecast to 5.4% for this year, slightly lower than its 5.5% projection in July.

If realized, gross domestic product (GDP) growth will be at the low end of the National Government’s 5.5-6.5% target band this year.

For 2026, the IMF also cut its growth forecast to 5.7% from 5.9% previously. However, this is below the government’s 6-7% target for next year.

The IMF said the economy is expected to remain resilient, but downside risks warrant “close attention.”

“Risks to the growth outlook are tilted to the downside. The main external risks stem from prolonged global trade policy uncertainty, geopolitical tensions, and disruptive financial market corrections,” IMF Mission Head Elif Arbatli Saxegaard said at a briefing after the conclusion of the 2025 Article IV Consultation with the Philippines on Wednesday.

“On the domestic front, more frequent and intense climate shocks would cause notable macroeconomic losses. On the upside, accelerated implementation of structural and governance reforms would support investor confidence and the fiscal multiplier and raise potential growth. Risks around inflation are broadly balanced.”

Ms. Saxegaard said the growth outlook was revised to reflect the weaker-than-expected growth in the first half.

For the first half, GDP growth averaged 5.4%, slower than the 6.2% a year ago.

Ms. Saxegaard said growth will be affected by the higher tariffs imposed by the US on Philippine goods. The US began imposing a 19% tariff on goods from the Philippines on Aug. 7.

“It will weigh on exports and investment,” she said.

She also noted growth will be “supported by monetary easing and recent legislative measures to promote private investment.”

Meanwhile, the IMF sees inflation averaging 1.6% this year, before picking up to 2.6% next year.

“The pickup in inflation is expected to be driven by (the) food and transport crisis,” Ms. Saxegaard said. “And that reflects essentially the decline in negative base effects that have been dragging down inflation this year. So, as those base effects recede, we expect a pickup.”

She said core inflation is expected to “remain muted” at 2.5% in 2026.

“The BSP (Bangko Sentral ng Pilipinas) has room for a slightly more accommodative stance to help bring inflation back to the target faster and reduce economic slack amid elevated downside risks to growth,” Ms. Saxegaard said. “Policy will need to remain data dependent amidst prevailing uncertainties around the output gap and the neutral rate, and two-sided risks to inflation.”

On Aug. 28, the central bank slashed its key interest rate by 25 basis points (bps) for a third consecutive time to 5%. It has cut the benchmark by a total of 150 bps since August last year.

CORRUPTION

Asked about recent corruption scandals involving some government projects, Ms. Saxegaard said the IMF will continue to monitor the developments.

“It’s not yet clear whether and how these allegations will impact investor and private sector confidence, as well as their perceptions and behavior,” she said.

The IMF welcomed recent reforms to reduce infrastructure gaps and promote foreign direct investment, but effective implementation is key.

“Enhancing fiscal governance and the rule of law and reducing corruption vulnerabilities are critical for inclusive and sustainable growth,” Ms. Saxegaard said.

The IMF urged the Philippine government to continue implementing gradual fiscal consolidation “to replenish fiscal buffers and support external balance.”

“The authorities should consider implementing concrete and durable tax measures to limit the need for restraint in priority spending which tends to have a larger impact on growth and disproportionately impacts the vulnerable,” she said.

Ms. Saxegaard suggested several tax measures including monitoring the cost of tax incentives and improving the efficiency of the value-added tax (VAT).

“On the tax administration side, better or enhanced use of data analytics and compliance risk management would, in our view, help support revenue mobilization,” she said. “On tax policy options, there are several measures that would have positive benefits. We do think that also monitoring the cost of tax incentives would be desirable as well as enhancing the efficiency of the VAT.”

Meanwhile, Ms. Saxegaard said that risks to the country’s financial system remain moderate as the banking sector has strong capital and liquidity buffers.

“Nonetheless, vulnerabilities in the real estate sector, strong bank interconnectedness with complex conglomerate structures, and fast-growing consumer credit warrant close monitoring,” she added.

The IMF Staff Report will be released between November and early December this year.

Source: Business World