Economists urge Philippines to diversify growth drivers beyond consumption and services
Economists say the Philippines must broaden its growth drivers beyond consumption and services to become more resilient to external shocks and reach high-income status. They call for investment in manufacturing, agribusiness, renewable energy and digital services, alongside stronger workforce skills
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. 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. “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.”
Mr. Lanzona said the Philippines should prioritise 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.”
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. Mr. Terosa said domestic and foreign investment, agribusiness, skilled labour-intensive manufacturing, renewable energy, data centre hosting, and technology-driven personal and professional services could help fuel growth, but supporting these new sources would require the effective implementation of regulatory and policy reforms.
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. “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).”
The Philippines was recently reclassified as an upper-middle income country by the World Bank after it posted a record gross national income per capita of US$4,850. Earlier, Department of Economy, Planning, and Development Secretary Arsenio M. Balisacan said the Philippine economy’s heavy reliance on consumption and services is a central structural challenge. From 2016 to 2025, the country recorded $957 billion in gross fixed capital formation and $1.171 trillion in exports, trailing neighbouring economies such as Vietnam, Thailand, Malaysia and Indonesia, he said.
