Balisacan urges shift from household spending, service sector reliance

MANILA, Philippines – The Philippines must move away from household consumption and the services sector as key growth drivers, Socioeconomic Planning Secretary Arsenio Balisacan said on Monday, calling them a “central structural challenge” that limits economic productivity.

Balisacan said the nation must diversify its economic mix to build resilience against external shocks, and as the Philippines continues to lag behind regional peers.

“The experience of successful economies shows that sustained progress requires mobilizing other sources of growth, notably investment, exports, agriculture and industry,” he told lawmakers at a congressional briefing. “We must therefore broaden the source of growth by strengthening investment and exports, while revitalizing agriculture and industry.”

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Household consumption grew by 2.8 percent in the second quarter this year, while the services sector expanded by 4.5 percent in the same period, according to Philippine Statistics Authority data.

“Consumption remains the principal driver of economic growth, while the contributions of fixed investment, exports, net of imports, have been relatively limited,” Balisacan said. “Similarly, services account for most of the expansion, while agriculture and industry have contributed much less.”

He said expanding growth drivers is the key to boosting the economy, which grew 2.3 percent in the second quarter, slumping on governance and corruption concerns and the Middle East conflict that has throttled oil exports.

Spending on state infrastructure projects alone is not enough to lift the economy.

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“We must also improve project selection, appraisal, procurement, implementation, and maintenance to ensure that public resources deliver high-quality infrastructure on time and at reasonable cost,” Balisacan said.

These structural weaknesses in the economy stem from multiple sources, he added, saying the constraints have limited the Philippines’ appeal to foreign investors and stalled industries from shifting to higher-value activities up the chain.

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“The weaknesses we have discussed do not arise from a single source… these include infrastructure and human capital gaps, regulatory and administrative burdens, limited access to finance and technology, weak competition in key sectors, and continuing governance concerns,” he said.

“Together, these constraints raise the cost of doing business, discourage investment in innovation, and limit the ability of firms and workers to move into more productive and higher-value activities,” he added. /mr