March 28, 2025
MANILA – Rapid and sustainable economic growth is crucial for the Philippines to win the war on poverty and achieve lasting prosperity within a generation. However, this growth must be inclusive, ensuring that all citizens and communities share in its benefits, directly or indirectly.
The good news is that the Philippine economy has grown faster than its historical norm in recent years. GDP expanded by an average of 6.4 percent annually in the 2010s and 6 percent per year from 2021 to 2024, following the sharp contraction caused by the COVID-19 pandemic in 2020. Even with the downturn in 2020, the average annual growth over the past 15 years was 5.3 percent. This contrasts sharply with the anemic 3.2 percent average yearly growth recorded between the 1980s and 2000s.
To better appreciate the country’s economic narrative, it is helpful to consider regional comparisons. Between 1970 and 2010, China’s income per capita increased nearly twentyfold, while India’s tripled. In the same period, Southeast Asian neighbors like Malaysia, Thailand, Indonesia, and particularly Singapore experienced four to sevenfold income increases. In contrast, the Philippines saw only a modest twofold rise in per-capita income.
Unsurprisingly, this weak economic performance mirrored the country’s limited progress in improving living standards and reducing poverty and hunger, especially in rural areas.
However, the recent years of relatively strong growth present a stark contrast and a new opportunity. At its current pace, the Philippine economy ranks among the fastest-growing emerging economies in Asia despite internal and external headwinds.
In its forthcoming 2025 report on Philippine growth and employment, the World Bank highlights that recent growth has accompanied a poverty reduction pace not seen in earlier periods. Nationally representative data from the Philippine Statistics Authority’s Family Income and Expenditure Survey show a significant drop in poverty between 2015 and 2023. Notably, income growth among poorer households (lower deciles) outpaced wealthier ones (upper deciles), indicating that growth has been both inclusive and progressive.
Moreover, income growth has been higher in regions that started with lower income levels, suggesting that economic opportunities are becoming more geographically widespread—no longer concentrated solely in Metro Manila and its neighboring regions. This geographic spread of opportunity is a hallmark of inclusive growth.
The combination of sustained income growth and inclusivity has proven to be a powerful driver of poverty reduction. This combination has enabled neighboring countries to reduce poverty dramatically in recent decades—clearly, the quality of growth matters.
This observation is particularly noteworthy given that, from the 1980s to the 2000s, the Philippines not only experienced sporadic and limited income growth but also lagged behind its neighbors—such as Indonesia, Thailand, and Vietnam—in reducing poverty, even after accounting for differences in growth rates (Balisacan, 2007). Put differently, the country was comparatively weak in translating economic growth into poverty reduction.
What has made growth more pro-poor and inclusive in recent years compared to previous decades? Among the many contributing factors, one stands out: labor market dynamics. Far from being “jobless growth,” the economic expansion (excluding the pandemic year of 2020) brought about both the creation of new jobs within sectors and the movement of workers to better-paying wage and salary jobs.
Over the past decade, the economy generated an average of 645,000 additional jobs annually—significantly outpacing the number of new entrants (630,000 on average) to the labor force. Consequently, unemployment steadily declined from 7.4 percent in 2010 to 5.1 percent in 2019 and 3.8 percent in 2024. Underemployment—workers seeking more hours or additional jobs—also fell from 18.8 percent in 2010 to 13.8 percent in 2019 and down to 11.9 percent in 2024. Wage and salary workers rose from 54 percent of total employment in 2010 to 64 percent in 2019, staying broadly at that level after recovering from a dip in the aftermath of the COVID-19 pandemic. This metric serves as a strong indicator of improving job quality.
Although progress has been made, the country still trails its neighbors in reducing poverty and advancing broader socioeconomic transformation. The key challenge is sustaining momentum for quality job creation and inclusivity. This requires coordinated action by the government, private sector, and civil society to foster a supportive investment climate and make bold, forward-looking investments in connectivity and human capital—fit for an era of disruptive technologies and rapidly evolving labor markets.
Views are the author’s and do not necessarily represent those of the institutions with which he is affiliated.