Philippine Economic Growth: A New Era of Inclusive Prosperity?

The Philippines is experiencing an economic resurgence that could redefine its fight against poverty and set the stage for lasting prosperity. With GDP growth averaging 6.4 percent annually in the 2010s and 6 percent from 2021 to 2024, the country has outpaced its historical norms, emerging as one of Asia’s fastest-growing economies. This sustained expansion, coupled with a notable reduction in poverty, signals a shift toward more inclusive development—a stark contrast to decades of sluggish progress. Yet, as the nation stands at this crossroads, questions linger about whether this momentum can be maintained amid internal challenges and global uncertainties.

A Turnaround in Economic Fortunes

For much of the late 20th century, the Philippines lagged behind its Southeast Asian neighbors. While countries like Malaysia, Thailand, Indonesia, and Singapore saw per-capita income rise four to sevenfold between 1970 and 2010, the Philippines managed only a twofold increase. China’s income per capita surged nearly twentyfold in the same period, and even India tripled its own. This underwhelming performance translated into limited progress in reducing poverty and improving living standards, particularly in rural areas where economic opportunities remained scarce.

Recent years, however, paint a different picture. Following a sharp contraction in 2020 due to the COVID-19 pandemic, the Philippine economy has rebounded with vigor. The average annual growth over the past 15 years stands at 5.3 percent, a significant improvement over the anemic 3.2 percent recorded between the 1980s and 2000s. This acceleration has positioned the Philippines among the region’s most dynamic emerging economies, despite persistent headwinds such as inflationary pressures and geopolitical tensions.

Inclusive Growth: A Game-Changer for Poverty Reduction

What sets this recent growth apart is its inclusivity. According to data from the Philippine Statistics Authority’s Family Income and Expenditure Survey, poverty rates have declined significantly between 2015 and 2023. Income growth among poorer households has outpaced that of wealthier ones, a trend that suggests economic benefits are trickling down to those who need them most. Furthermore, regions with historically lower income levels are seeing faster income growth, indicating that opportunities are no longer confined to Metro Manila and its surrounding areas.

The World Bank’s forthcoming 2025 report on Philippine growth and employment underscores this progress, noting that the pace of poverty reduction in recent years is unprecedented in the country’s modern history. Unlike earlier periods of economic expansion, which often failed to translate into tangible improvements for the poor, the current trajectory appears to be both progressive and geographically widespread. This mirrors the experiences of neighboring countries like Indonesia, Thailand, and Vietnam, where inclusive growth has been a powerful driver of socioeconomic transformation.

Labor Market Dynamics: Beyond Jobless Growth

A key factor behind this inclusive growth is the transformation of the labor market. Far from the “jobless growth” that characterized earlier decades, the Philippine economy has generated an average of 645,000 new jobs annually over the past decade—slightly outpacing the 630,000 new entrants to the labor force each year. As a result, unemployment has steadily declined, dropping from 7.4 percent in 2010 to 5.1 percent in 2019 and further to 3.8 percent in 2024. Underemployment, a persistent issue for workers seeking more hours or better opportunities, has also decreased from 18.8 percent in 2010 to 11.9 percent in 2024.

Perhaps more telling is the shift in job quality. The proportion of wage and salary workers—often an indicator of stable, better-paying employment—has risen from 54 percent of total employment in 2010 to 64 percent in 2019, maintaining that level even after a temporary dip during the pandemic. This movement of workers into more secure and remunerative roles reflects a labor market that is adapting to the needs of a growing economy, offering a lifeline to millions of Filipinos previously trapped in precarious or informal work.

Challenges in Sustaining Momentum

Despite these gains, the Philippines still trails many of its neighbors in reducing poverty and achieving broader socioeconomic transformation. Historical comparisons are sobering: from the 1980s to the 2000s, the country not only experienced sporadic income growth but also lagged behind peers like Indonesia and Vietnam in translating economic gains into poverty reduction. Even when growth rates were comparable, the impact on living standards was often less pronounced in the Philippines, highlighting structural inefficiencies and policy gaps.

Sustaining the current momentum will require addressing several entrenched challenges. Income inequality, while narrowing, remains a concern, particularly in rural and remote areas where access to education, healthcare, and infrastructure is limited. Additionally, the economy’s reliance on specific sectors—such as remittances from overseas Filipino workers and business process outsourcing—exposes it to external shocks. Global economic slowdowns or shifts in labor demand could disrupt the steady job creation that has underpinned recent progress.

The Road Ahead: Investment and Innovation

To maintain its trajectory, the Philippines must prioritize coordinated action across government, private sector, and civil society. Creating a supportive investment climate is essential, as is making bold, forward-looking investments in connectivity and human capital. Infrastructure projects that link rural and urban areas can help spread economic opportunities more evenly, while education and training programs tailored to emerging technologies can prepare the workforce for a rapidly evolving labor market.

The rise of disruptive technologies—such as artificial intelligence and automation—presents both opportunities and risks. On one hand, these innovations could drive productivity and create new industries; on the other, they risk displacing workers in traditional sectors if adequate reskilling programs are not in place. Policymakers will need to strike a delicate balance, ensuring that technological advancements complement rather than undermine the inclusive growth agenda.

Regional Context and Lessons

The Philippine experience offers valuable lessons for other emerging economies in Asia and beyond. Inclusive growth, as demonstrated by neighboring countries, is not merely a byproduct of economic expansion but a deliberate outcome of policies that prioritize equitable distribution of benefits. The Philippines’ recent success in reducing poverty through labor market improvements and geographic spread of opportunities underscores the importance of quality over quantity in economic growth.

Yet, the country cannot afford complacency. While it has made significant strides, it remains in a race against time to close the gap with its more developed neighbors. Singapore, for instance, has transformed itself into a global economic hub within a single generation through strategic investments and governance reforms. The Philippines, with its young and dynamic population, has the potential to follow a similar path—but only if it can sustain the political will and policy coherence needed to address systemic challenges.

A Glimpse of Hope in Manila’s Streets

Back on the bustling streets of Manila, where toy vendors like those captured in recent images blow bubbles to attract customers at local markets, there is a palpable sense of optimism. These small-scale entrepreneurs, often operating on the margins of the formal economy, stand to benefit from the broader economic upswing—if the benefits of growth continue to reach them. Their resilience mirrors that of a nation determined to rewrite its economic story, one where prosperity is not just a privilege for the few but a promise for the many.

As the Philippines navigates this critical juncture, the question remains: can it sustain this inclusive growth long enough to achieve lasting transformation? The answer will depend on the choices made today—choices that could shape the lives of millions for generations to come.