‘Demographic sweet spot’ expected to add at least 1 ppt to PHL growth
The “demographic sweet spot” that the Philippines is currently in has the potential to supercharge growth over the next three decades by at least a percentage point (ppt) each year, the government’s chief economic planner said.
National Economic and Development Authority Secretary Arsenio M. Balisacan said the so-called sweet spot refers to the large cohort of young working-age people participating in the economy. Young workers typically spend more as they establish their households, as opposed to older workers, whose years making major purchases are behind them and are focused on saving for retirement.
Citing a study by the United Nations Population Fund, Mr. Balisacan, speaking at the Philippine Economic Society Annual Meeting on Tuesday, said that the rising support ratio, which refers to the growth in labor force population relative to total population, could potentially add 0.4 to 0.7 percentage points to economic growth until the 2040s.
“The increased overall productivity would add another 0.1 to 0.7 percentage points to growth in the longer term. In total, this so-called demographic sweet spot could contribute at least a percentage point increase to the country’s growth potential or prospects for the next two to three decades,” he said.
The young workforce and increased productivity from capital accumulation and human development is what constitutes the demographic dividend, Mr. Balisacan said.
He said that this “demographic window of opportunity” has started, as the working age population is now growing faster than the overall population.
“For labor to be productive, it must be complemented with capital investment. So that’s why we are very aggressive in telling the world that there are opportunities in the Philippines,” he added.
As early as the 2030s, Mr. Balisacan said the opportunities from the demographic window can be reaped “if we take care of the youth today. Ten years later, they are out there in the labor market.”
He said, however, that there is a need to address the scarring effects of the pandemic, including recovering learning losses.
“We have to find solutions to the lingering effects of the pandemic if we want to improve our labor productivity and return to a high growth path for the economy, and to fully realize the opportunities from the country’s demographic transition,” he said.
“We cannot afford to miss out once again. While our East Asian counterparts are able to take advantage of this window of opportunity, despite the improvements that we have observed in terms of raising or growth prospects, lingering structural issues have resulted in mixed outcomes for welfare,” he added.
He said the rate of poverty reduction could have been faster if these issues were addressed.
“The COVID-19 pandemic had a much higher impact on poverty in the Philippines than on its Asian counterparts. Our low labor productivity has also limited wage growth, resulting in the weak response of poverty reduction to growth. Between 2012 and 2021, we had one of the lowest average wages in the region. The purchasing power afforded by these wages is threatened by transitory challenges such as inflation,” he added.
Source: Business World