January 25, 2023
9:00 AM to 10:15 AM
Good morning. I would like to thank Asia House for organizing this important dialogue in London.
With our strong macroeconomic fundamentals, more open economy, and an innovation-focused business environment, the Philippines is a prime destination for investments.
Our upbeat outlook is supported by the bright spots that have emerged over the past year amid global headwinds.
The Philippine economy has shown relentless growth. For the first three quarters of 2022, our average growth of 7.7 percent already surpassed our full-year forecast of 6.5 to 7.5 percent. This growth outperformed major Asian economies, particularly Indonesia, Singapore, and China.
This expansion was driven by growth in all major production sectors – Services, Agriculture, and Industry – despite persistently high global prices of fuel, food, and other commodities. Strong household consumption and investments continue to drive robust domestic aggregate demand.
Tomorrow, we will be announcing the full-year GDP growth for 2022, and we expect it to be a strong one.
The crowning glory of Philippine economy is its young, tech-savvy, and globally competitive workforce – the bedrock of our economy. Many locators in the Philippines can attest to their drive and talent.
Therefore, it is encouraging that the jobs market has rebounded and even outpaced the pre-pandemic levels. Unemployment rate improved to a 17-year low of 4.2 percent – even lower than the pre-pandemic level of 4.5 percent.
We also saw the highest labor force participation rate since 2005 at 67.5 percent – much higher than the 61.7 percent recorded before the pandemic in January 2020.
We have a healthy level of gross international reserves. As of end-December 2022, our GIR stood at 96 billion US dollars. This means that we have enough to pay for 7.3 months’ worth of imports – well above the IMF reserve adequacy metric and higher than selected Asian and emerging economies.
This is bolstered by remittances from Overseas Filipino Workers. Cash remittances from January to November 2022 amounted to 29.4 billion US dollars. In fact, cash remittances from the Filipino community here in the UK, which is our 5th largest source of remittances, have already reached 1.4 billion US dollars for this period.
Foreign direct investments have continued to soar. The Philippines achieved record-high net FDI inflows amounting to 12.4 billion US dollars in 2021. From January to October 2022, net FDI inflows have already reached 7.6 billion US dollars.
With bustling economic activity and robust domestic demand, we have consistently overshot our revenue targets. Revenue collections for the first eleven months of 2022 already reached 3.3 trillion pesos – 18.1 percent higher than last year’s level and equivalent to 99.2 percent of our full-year target.
These numbers indicate the resilience of the Philippine economy and its capacity to expand even further.
While analysts expect a global economic slowdown this year, we expect a slightly slower growth between 6.0 to 7.0 percent in 2023. But this is still among the highest growth predictions in the Asia Pacific region.
We then expect growth to pick up in the years after, between 6.5 to 8.0 percent from 2024 to 2028.
Despite external risks and gloomy outlook on the global economy, the Marcos administration’s economic team is thinking big and aiming high while maintaining a steady hand on fiscal policy.
We have a Medium-Term Fiscal Framework to guide us towards fiscal sustainability and long-term growth. This builds on the series of tax reforms enacted by the previous administration.
Increased fiscal space will allow us to maintain high infrastructure spending at 5 to 6 percent of GDP annually. This is a non-negotiable condition of our economic strategy.
To support investment-led growth, the government has established an enabling policy environment that incentivizes high-value investments, enhances ease of doing business, and widens the space for private sector participation in large-scale projects.
We have amended our tax laws. The Corporate Recovery and Tax Incentives for Enterprises or CREATE law significantly cut corporate income tax rates and reformed our fiscal incentives system to stimulate high-growth industries, including activities consistent with the Fourth Industrial Revolution and our sustainability goals.
Meanwhile, the recent economic liberalization laws welcome international investors to bring their capital to the Philippines.
The Retail Trade Liberalization Act was amended to simplify foreign retailers’ requirements by lowering the minimum paid-up capital from 2.5 million US dollars to half a million US dollars.
Meanwhile, the amendments to the Foreign Investments Act provide flexibility and transparency in reviewing the Foreign Investment Negative List. The law liberalizes the practice of professions, making it easier for foreign investors that require foreign talent to do business in the country.
Lastly, we have amended the almost one-hundred year-old Public Service Act to allow foreign investors to fully participate in previously protected sectors such as toll roads, telecommunications, airports, expressways, and shipping.
In addition, we have opened up the renewable energy sector to full foreign ownership. This presents a huge opportunity for the vibrant RE industry here in the UK.
Furthermore, the Department of Finance has established a sustainable finance ecosystem to synergize investments from the public and private sector. This is set to yield green and social projects that will have lasting impact on the environment and our communities.
The Sustainable Finance Roadmap and Guiding Principles are the key documents that the Department of Finance, through the Interagency Task Force on Sustainable Finance or what we call Green Force, developed to pursue this endeavor. This serves as a taxonomy of sorts for the sustainable finance ecosystem in the Philippines.
This is aligned with the ASEAN Standards for Green Bonds, European Union Taxonomy, and so on. The Sustainable Finance Roadmap can facilitate catalytic investments to support the country’s Nationally Determined Contribution implementation and raising ambitions.
The Republic of the Philippines has also successfully tapped the international capital markets with its offerings of Sustainability Bonds. The recent issuances in March 2022, October 2022, and just this January 2023 secured strong demand from investors. This highlights the growing investor-investee confidence in our commitment to achieving sustainable development and mitigating climate change.
This is just a taste of what the Philippines has to offer. I look forward to exchanging views with the British business community this morning and exploring the many opportunities that the Philippines has in store.
Thank you!