PHL urged to step up pace of reforms before society ages

THE PHILIPPINES must pick up the pace of reforms to achieve high-income status before the rapidly ageing population erodes the economy’s growth potential, the Philippine Institute for Development Studies (PIDS) said.

“The Philippines is expected to become an ageing society in 2030 but has yet to transition to the upper middle-income category and may be far from being a high-income one,” it said in a report.

“This means that existing economic, human resource, and system constraints will persist at least in the medium term,” it added.

The government had set a goal of becoming a high-income economy in the AmBisyon Nation 2040 plan.

The World Bank currently classifies the Philippines as a lower middle-income country with gross national income per capita of $4,470, just $26 below the upper middle-income bracket of $4,496-$13,935.

The Philippine Statistics Authority reported the total fertility rate at a record low of 1.7 children per woman in the 2023-2025 period. Demographers consider a fertility rate of below 2.1 to indicate that the population is not renewing itself, suggesting a falling share of young, working-age people.

“To help address the gaps and seize some opportunities, systemic reform (is needed). Efforts to significantly improve productivity in an inclusive manner are crucial,” it said.

“These entail substantial investment in human capital, industry and infrastructure which can only be realized in the long term,” it added.

Over the short- and medium-term, however, the think tank urged the government to invest in human capital, care infrastructure, and industry.

“The government and other stakeholders must invest in building and upgrading public care facilities for children, older persons, and persons with disabilities in underserved regions,” it said. 

“There is a need to prioritize rural areas and low-income communities to close the urban-rural divide in access to early childhood care, elderly long-term care, disability rehabilitation services and other care facilities,” it added.

The government was also advised to expand investment in public care facilities, specialized health services, and care professionals for ageing and disability.

“The government will have to be more strategic in its approaches given its limited resources and explore innovative ways of financing care infrastructure investments such as public-private partnership (PPP) arrangements,” it said.

“Existing mandated allocations like the Gender and Development Fund, Special Education Fund, and Local Development Fund can be used more strategically to raise funds for local government investment in care programs and facilities,” it added.

PIDS also recommended reviewing the mandatory retirement age of 65 to encourage longer workforce participation.

“The mandatory retirement age of 65 must be reviewed (because) it may be preventing older, but otherwise healthy and capable, persons from being gainfully employed,” it said.

“The idea is to make the retirement age less strict or optional and to encourage people to work longer for them to gain better capacity to meet their basic needs in old age,” it added.

The think tank further cited the need for a comprehensive care framework, pointing to the nearly finalized National Care Economy Policy Framework.

“It is vital that the final version contains strategies that are implementable and with funding, that it has clear scope and boundaries and is coherent with national development objectives,” it added. — Justine Irish D. Tabile