Philippine Development Plan 2023-2028: Chapter 1 Summary

Chapter 1: A Plan for Economic and Social Transformation

AmBisyon Natin 2040

• The Philippines aims to be a prosperous, middle-class society by 2040, where no one is poor, people live long and healthy lives, are smart and innovative, and live in a high-trust society.
• Filipinos aspire for a strongly rooted, comfortable, and secure life (matatag, maginhawa, at panatag).
• Poverty incidence reduced and per capita income increased between 2015 and 2020.
• The COVID-19 pandemic has reversed some gains, revealing the fragility of achievements.

Key Lessons from the Pandemic

1. Macroeconomic Fundamentals: Maintaining robust macroeconomic fundamentals is key for rapid economic recovery and preventing socioeconomic scarring.
   • Strategies must ensure macroeconomic stability and sound fiscal management.
2. Interconnectedness: Everything and everyone is interconnected, including the health of the economy and the healthcare system.
   • Strategies must strengthen these interlinkages.
3. Government Resources: There are limits to government resources, requiring meaningful engagement with various sectors.
   • Strategies must enhance collaboration with local government units (LGUs), the private sector, and civil society.
4. Investments: Fast-track investments in early warning systems, social protection, resilience-building, R&D, and technology.

Impact of COVID-19

• In 2020, COVID-19 was declared a global pandemic, leading to lockdowns.
• The economy contracted by $-16.9$ percent in Q2 2020.
• Unemployment rate jumped to $17.6$ percent in April 2020.
• Underemployment hit a high of $21$ percent in mid-2021.
• Positive growth rebounded to $12.1$ percent in Q2 2021 and nearly 7 to 8 percent in subsequent quarters.

Government Response

• Bayanihan 1 (RA 11469) and Bayanihan 2 (RA 11494) were enacted for immediate relief.
• Initial support included cash transfers to 80 percent of Filipino families for two months.
• Support was later reduced in amount and population coverage.
• Various forms of support included employees and MSMEs.
• Lockdowns led to large financing needs, resulting in a record-high PHP1.67 trillion budget deficit.
• Debt-to-GDP ratio climbed to $60.4$ percent by the end of 2021 from $39.6$ percent in end-2019.
• Government expenditures increased for cash transfers and COVID-19 response-related costs.

Social Sector Losses

• The pandemic resulted in significant social sector losses, including learning losses and low vaccination levels.
• Estimated five percent of primary school-aged children did not enroll in 2022.
• 91 percent may not be able to read or understand short texts by age 10.
• Rebuilding requires strong prioritization of education and health.
• Poorest and most vulnerable were disproportionately affected, leading to a partial reversal of poverty reduction gains.
• Poverty incidence in 2021 increased to $18.1$ percent, up from $16.7$ percent in 2019, but lower than $23.5$ percent in 2015.

Strategies Building on Successes

• Significant reduction in poverty incidence between 2015 and 2018 due to:
  • Fast economic growth.
  • Increased human capital investments.
  • Expansion of the Pantawid Pamilyang Pilipino Program (4Ps).
• GDP grew by an average of $6.6$ percentage points over 2012–2019.
• Government spending on infrastructure increased from $2.6$ percent of GDP (2013-2016) to $4.6$ percent of GDP (2017-2019).
• Government spending on education and health increased by an average of 14 and 13 percent, respectively, over 2013–2019.
• Coverage of the 4Ps increased from 630,000 households in 2009 to 4.4 million in 2016.
• Fiscal health improved through tax reforms like the TRAIN Act.

Unfinished Business

• Rice Tariffication Law (RTL) was enacted to modernize the agricultural sector.
  • Rice yield increased from $3.9$ to $4.1$ metric tons per hectare.
• Amendments to the Foreign Investment Act (FIA), Retail Trade Liberalization Act (RTLA), and Public Service Act (PSA) ease restrictions on foreign investments.
• Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) lowers corporate income tax rate.
• Philippine Identification System or PhilSys Act (RA 11055) aims to digitalize and promote financial inclusion.
  • As of November 4, 2022, registration to PhilSys reached 74.7 million individuals.
• Universal Health Care Act (RA 11223) registers all Filipino citizens to a national health insurance program.

Emerging Global and Regional Trends

Health and Social Trends

• Continued Impact of COVID-19: The pandemic evolved into a multidimensional crisis.
• China’s Dynamic Zero-COVID Policy: Strict mobility restrictions impact tourism.
  • Outbound tourists from China were the world’s biggest spenders in 2019, comprising 20 percent of global tourism spending.
• Aging Global Population: Longer life expectancies and lower fertility contribute to global aging.
  • In 2030, one in six people worldwide will be 60 years old or over.
  • In 2050, up to two-thirds of the world’s population aged 60 years and over will be accounted for by low- and middle-income countries.
• Increasing Demand for Healthcare Workers: Demand amplified by the pandemic, especially in advanced economies with aging populations.
  • Wage differential between the Philippines and advanced economies affects access to and quality of health care in the country.
  • For instance, the base salary for nurses in the Philippines ranges from an average of PHP17,000 in private hospitals to around PHP35,000 in government hospitals; while it could rise to as much as PHP275,000 in the United States (US).

Economic Trends

• Headwinds in Global Economic Recovery: The world economy is still struggling to get back on track.
  • The International Monetary Fund (IMF) forecast global growth in 2022 at $3.2$ percent and $2.7$ percent in 2023.
  • Almost half of over 70 economies monitored by the IMF are expected to face a technical recession.
  • International supply chains are still recovering from the pandemic.
• Rising Global Debt: Many countries accumulated debt to finance countercyclical fiscal and social protection responses to COVID-19.
  • Total global debt rose by 30 ppts of world GDP in 2020 alone.

Geopolitical Trends

• Ongoing International Tensions: Geopolitical, environmental, and food security risks conflate the pandemic-related challenges.
  • The Russia–Ukraine conflict created ripple effects on the global economy.
  • Russia and Ukraine are important international suppliers of food and key commodities.
  • An escalation of the conflicts in the South China Sea would be devastating to the global economy.
  • Any potential maritime conflict poses a huge threat, as the world’s coastal regions contribute about USD1.5 trillion to the global economy each year.
  • This number is expected to double by 2030 to USD3 trillion based on estimates by the World Trade Organization (WTO).
• Shifts in Asian Investments and Manufacturing: Many foreign investors are recalibrating their investment portfolios in China, often with a view to relocate to Southeast Asia.
  • Geopolitical tensions and China’s stringent anti-COVID-19 policies are accelerating this shift.
  • In October 2022, the US imposed sweeping restrictions on technology exports to China.
  • The Philippines provided investment incentives that attracted at least nine multinational enterprises to relocate their respective manufacturing facilities from China since 2019.

Environmental Trends

• Dramatic Shift in Weather Patterns: Temperature records are now routinely being set every three years since 1981.
  • Economic losses from weather-related disasters increased sevenfold from the 1970s to the 2010s.
• International Collective Action to Respond to Climate Change: In the 2021 Glasgow Climate Pact during COP26, almost 200 countries committed to making the 2020s a decade of climate action and support.
  • Industrial countries have pledged USD100 billion annually for developing countries.
  • During the COP27 held in November 2022 in Egypt, several European countries agreed to establish a loss and damage fund.

Technology and Regulations

• Rapid Digitalization Across the Globe: COVID-19 has served as a catalyst for fueling a wave of digitalization in government and in the private sector.
• Technology and Intellectual Property: Technology and intellectual property are among the key areas increasingly featured in international trade and investment discussions.
  • The Regional Comprehensive Economic Partnership Agreement (RCEP) supports ICT-enabled trade facilitation measures and promotes free cross-border flow of data.

Global Megatrends for 2030

• Disruptive technologies promise improvements in connectivity and innovation in how connectivity is formed and used.
• Changing consumption patterns, as a result of the rising urban middle-class population in Asia, can result in the flow of infrastructure investments to the region.
• Investments in digital capacity through the Internet of Things (IoT), artificial intelligence, mobile internet, and Big Data analytics are encouraged.
• Electric vehicles can shift demand from fuel to batteries, while autonomous vehicles have the potential to improve road competitiveness and transport logistics.
• Renewable energy is becoming increasingly attractive and attainable, so energy-related shipping for coal and oil is also estimated to decrease by 50 and 25 ppts, respectively.

Overview of the Philippine Development Plan 2023-2028

• The Philippine Development Plan (PDP) 2023–2028 is a plan for deep economic and social transformation to reinvigorate job creation and accelerate poverty reduction by steering the economy back on a high-growth path.
• The PDP 2023–2028 is based on President Ferdinand R. Marcos Jr.’s 8-point socioeconomic agenda.

Underlying Theme: Transformation

• The PDP 2023–2028 takes on the underlying theme of transforming the economic and social sectors and institutions for a prosperous, inclusive, and resilient society.
  1. Digitalization: Digital transformation of government will result in more efficient and faster service delivery to the people, more transparency, and fewer opportunities for corruption at various levels.
  2. Servicification: Servicification as a strategy means pursuing policies that will build ecosystems around economic clusters identified as potential sources of high growth, to attract more investments and expand its demand for higher productivity jobs.
  3. Dynamic Innovation Ecosystem: Innovation will translate knowledge and ideas into new products, and/or new and better processes. This requires an ecosystem involving knowledge and R&D institutions, product and process design, marketing, and entrepreneurs.
  4. Enhanced Connectivity: Digital connectivity is only one form, as physical connectivity through infrastructure and transport is similarly important to link markets to each other; connect urban centers to rural areas; and facilitate the movement of people, whether for employment, business and marketing transactions, or even socialization and recreation.
  5. Greater collaboration between local and national government: The PDP seeks to bring local governments in as equal partners in the development agenda of the country. As frontline service providers, LGU performance can spell the difference between regional development and regional stagnation.
  6. Partnership with the private sector: There are multiple areas to expand the role of the private sector to deliver more benefits to the public. The government’s role is to provide calibrated incentives to priority industries and foster an enabling business environment to allow job-generating businesses and industries to grow.

Overarching Goal

• The overarching goal of the PDP 2023–2028 is to achieve economic and social transformation for a prosperous, inclusive, and resilient society.
• The strategies are organized corresponding to the following objectives:
  • Develop and protect capabilities of individuals and families.
  • Transform production sectors to generate more quality jobs and produce competitive products.
  • Foster an enabling environment encompassing institutions, physical and natural environment, which promotes a prosperous, inclusive and resilient society.

Key Strategies

Develop and Protect Capabilities of Individuals and Families

• Good health will be promoted by building a community-based health ecosystem and promoting healthy choices.
• Opportunities for transformative lifelong learning will be expanded by improving education quality and involving third-party institutions in learning outcomes evaluation.
• Livable communities established for human and social development will be planned and upgraded to offer equitable, inclusive, and resilient opportunities.

Reduce Vulnerabilities and Protect Purchasing Power

• Social protection (SP) systems will be made more efficient with improved targeting and digitalized processes.
• Food security and proper nutrition will be ensured through improved productivity of agri-food systems.
• Social protection systems will be strengthened to reduce risks and mitigate the impact of shocks.

Increase Income-Earning Ability

• Training modules and curricula will be continuously updated to match emerging in-demand occupations.
• Employment facilitation services will be enhanced to include career development support and an active labor market information system.
• Everyone will have access to opportunities to increase their income-earning abilities through anti-discrimination laws.

Transform Production Sectors

• Agriculture and agribusiness will be modernized through farm clustering, technology adoption, and better market access.
• Industry will be revitalized by expanding domestic production, promoting servicification and adopting Industry 4.0.
• Services sector will be reinvigorated by promoting tourism, culture, creative sector and IT-BPM.
• Establishing a dynamic innovation ecosystem will translate knowledge and ideas into new products and processes.
• Trade and investments will be promoted to improve competitiveness and generate more jobs.
• Businesses will be assured of a healthy regulatory environment and a level playing field.

Ensure Macroeconomic Stability

• The health of the financial sector will be enhanced to improve its role as intermediator between savers and investors.
• Sound fiscal management, including a conducive tax regime, will be fostered.

Expand and Upgrade Infrastructure

• Investments in infrastructure can help reduce the cost of electricity, ensure water security, and lower the cost of logistics.

Ensure Peace and Security

• Lasting peace and security enable a stable environment, and an efficient justice system fosters a high-trust society and a favorable business climate.

Practice Good Governance

• Good governance entails bolstering public accountability and integrity, and deepening participatory governance.

Accelerate Climate Action

• Enhance the adaptive capacity of communities and ecosystems that are most vulnerable to natural hazards and climate change.

Headline Targets

• Maintain high levels of economic growth, rising from 6.0 to 7.0 percent in 2023 to 6.5 to 8 percent from 2024 to 2028.
• The Philippines aims to continue its progress among the innovation achievers of the region by rising in rank in the Global Innovation Index (GII) from a baseline of being 59th out of 132 countries in 2022.
• Reduce poverty incidence to 9 percent by 2028.
• Keep food and overall prices low and stable.
• Ensure fiscal discipline by gradually bringing down the national government deficit to GDP ratio from 6.5 percent to 3.0 percent in 2028.
• Outstanding government debt to GDP ratio will also be gradually reduced from 63.7 percent in September 2022 to 51.1 percent by end-2028.

Table 1. Headline Indicators

Conclusion

• The transformation objectives for each part of the PDP will require strong collective action using a whole-of-government, whole-of-society approach.
• Through partnerships and collaborations, the targets of AmBisyon Natin 2040 remain within reach.

Document Organization

• Part I: Objectives, context, and overall strategy of PDP 2023–2028.
• Part II: Strategies for developing the potential of Filipinos through human and social investments.
• Part III: Ways to transform sectors in agriculture, industry, and services through market expansion, value addition, and inter-sectoral linkages.
• Part IV: Strategies that will create an enabling environment through good governance, macroeconomic fundamentals, infrastructure development, peace, security, and justice, and climate action.
• Part V: Reviews the implementation and monitoring of the Plan.