January 26, 2023
Honorable Richard Graham; Deputy Head of Mission to the Philippines Alistair White; Bea Martin of UBS; Sandeep Uppal of HSBC; Saif Malik of Standard Chartered; partner banks – Bank of America Securities, Goldman Sachs, HSBC, Morgan Stanley, Deutsche Bank, Standard Chartered Bank, and our gracious host, UBS; partners from the Philippine Embassy in London, British Embassy in Manila, Philippine Trade and Investment Center London, and the UK-ASEAN Business Council; ladies and gentlemen: good morning, magandang umaga po.
We find ourselves here today, almost three years since the COVID-19 pandemic brought the global economy to a standstill.
Against all odds, the Philippines emerged with an important story to tell. The Marcos administration’s economic team is eager to share with you here in London our journey from crisis response to recovery, and the promising destiny we have set for the Philippine economy.
Our strong macroeconomic fundamentals and structural reforms have enabled the Philippine economy to weather the effects of the pandemic and position itself as one of the fastest rising economies in the Asia Pacific region.
Just a few hours ago, we announced the Philippines’ fourth quarter and full-year GDP growth for 2022, and I am proud to announce that we beat our own target.
In the fourth quarter of last year, our economy grew by 7.2 percent, bringing our full-year GDP growth rate to 7.6 percent. This surpasses our own full-year target of 6.5 to 7.5 percent.
Our stellar performance reflected strong domestic demand driven by household consumption and investments.
The employment picture reflects our bustling economic activity. In November 2022, the unemployment rate dropped to a 17-year low of 4.2 percent. This is also lower than the pre-pandemic level of 4.5 percent.
More Filipinos have joined the workforce. We saw the highest labor force participation rate since 2005 at 67.5 percent, also higher than the 61.7 percent recorded in January 2020 pre-pandemic.
Foreign direct investments are soaring. The Philippines raked in record-high net foreign direct investment inflows of 12.4 billion US dollars in 2021. From January to October 2022, our net FDI inflows have reached 7.6 billion US dollars.
We are poised to beat our own revenue targets with higher economic activity and a steady flow of investments. From January to November 2022, revenue collections have already reached 3.3 trillion pesos – 18.1 percent higher than the collection the year before. This already represents 99.2 percent of our revenue target for 2022.
Our dramatic recovery was the result of deliberate, well-crafted structural reforms from one administration to the next and the resolve of the Philippine government to recalibrate policies as needed during times of crises.
This is something we continue to pay attention to today. Analysts predict a global recession this year 2023; geopolitical tensions and their rippling effects remain high; global prices of fuel, food, and other commodities are rising; and effects from the pandemic still linger.
Our top priority is to turn these risks into manageable challenges, with the right policy tools and strong commitment and willingness to act.
To address high inflation without impeding growth, we are implementing a carefully calibrated mix of monetary and fiscal policies over the near term.
These include tightening of monetary policy, improving local agricultural production, temporary relaxation of trade restrictions for needed imports, continued linkages of farmers and fishers to consumers, and providing targeted support to the vulnerable sectors.
We are also investing heavily in medium and long-term efforts to increase local food production and modernize the agriculture sector.
Given the consensus that the global economy will slow down this year, the Philippine economy is projected to decelerate to 6.0 to 7.0 percent this year. This is still one of the highest growth rates in the Asia Pacific region.
We then expect growth to quicken to 6.5 to 8.0 percent in the succeeding years from 2024 to 2028.
Our growth agenda rests on a credible policy framework. To sustain our gains, we have put together a comprehensive socioeconomic agenda to tackle immediate concerns while setting into motion deep economic and social transformation where growth opportunities for all Filipinos abound.
This agenda serves as the basis for the Philippine Development Plan 2023 to 2028, which will be discussed in further detail later.
To achieve our development targets of reducing poverty and fostering inclusive growth, strong fiscal management is of paramount importance.
Our commitment to the Medium-Term Fiscal Framework, which was affirmed by no less than the President and both Houses of Congress, will ensure that our growth path rests on strong fiscal management.
The Framework serves as our game plan to bring down the debt-to-GDP ratio to less than 60 percent by 2025, reduce the deficit-to-GDP ratio to 3.0 percent by 2028, and maintain high investments in infrastructure at 5 to 6 percent of GDP annually.
Our lofty economic goals are supported by structural reforms that remove barriers to foreign investments, further open economic sectors to foreign equity, improve the ease of doing business, and allow for modern, transformative industries to take root and grow.
The economic liberalization measures we have enacted now open up key sectors to international participation.
The amendments to the Retail Trade Liberalization Act, for example, have simplified foreign retailers’ requirements, as it lowered the minimum paid-up capital from 2.5 million US dollars to just 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 also liberalizes the practice of professions, making it easier for foreign investors that require foreign talent to do business in the Philippines.
We have also amended our almost century-old Public Service Act. This opened up public services such as telecommunications, toll roads, shipping, and expressways to 100 percent foreign ownership.
The Corporate Recovery and Tax Incentives for Enterprises or CREATE Act introduced the largest fiscal stimulus for businesses to date by cutting corporate income tax rates comparable with our ASEAN neighbors. The law also introduces an enhanced incentives package that is performanced-based, time-bound, targeted, and transparent.
The Strategic Investment Priority Plan serves as the primary basis for determining priority industries, projects, and activities that can be granted fiscal incentives under the new Act.
The highest tier of activities, which represents those that are qualified for longer income tax holidays, prioritizes emerging technologies such as artificial intelligence, nanotechnology, biotechnology, advanced digital production technologies, and innovation support facilities including space-related infrastructure.
We are encouraging more public-private partnerships to support the Build, Better, More infrastructure program of the Marcos Jr. administration. This will further boost investments on top of our goal to spend at least 5 to 6 percent of our GDP on infrastructure annually.
The recent amendments to the implementing rules and regulations of the Build-Operate-Transfer law will allow the government to leverage PPPs to boost the competitiveness of domestic industries and attract a diverse range of investment opportunities.
In pursuit of a just and clean energy transition, we have opened up the renewable energy sector to full foreign ownership, particularly in the exploration, development, and utilization of solar, wind, hydro, and tidal energy.
We have the Philippine Energy Plan 2020 to 2040 to guide us towards a clean energy future. Under the plan, we target to increase the share of renewable energy in the power generation mix to 35 percent by 2030 and 50 percent by 2040.
In the second phase of the ASEAN Plan of Action on Energy Cooperation, the Department of Energy will focus on cross-cutting issues such as decarbonization, energy transition, and digitalization of the energy sector.
Targets include developing a common gas market; optimizing the role of clean coal technology; reducing energy intensity by 32 percent by 2025; increasing the component of renewable energy share to 23 percent in total primary energy supply and share in installed power generation capacity to 35 percent by 2025.
With our more open economy and business-friendly environment, we invite the British investing community to explore venture opportunities in the fields of telecommunications, airports, toll roads, agribusiness, renewable energy, and shipping.
Now, the Marcos Jr. administration is determined to zoom forward and take the Philippine economy further than it has ever been. Our goal of inclusive, sustained, and shared prosperity calls for a more ambitious instrument for investments.
We shared with global business leaders during the recent World Economic Forum in Davos that we have taken the first steps toward launching the Maharlika Investment Fund – the country’s first-ever sovereign wealth fund that will serve as an investment vehicle for funds from both public and private sectors in the Philippines and abroad.
The Maharlika Investment Fund is one tool among many in our efforts to diversify the country’s financial portfolio, which includes our existing institutions pursuing investment activities. It will be utilized for infrastructure development and other commercially viable programs and projects that promote economic growth, create jobs, and increase incomes.
The Fund will be an important instrument to generate consistent and stable investment returns – all to build a more prosperous economy for future generations.
Our strong economic base is a fertile ground for your investments. I invite you to join us in this transformative journey and become a part of the Philippine growth story. Thank you.