Why Business Leaders Are Optimistic about the Philippines’ Economic Prospects in 2023

As with most of the world’s economies, the Philippine economy experienced a major downturn due to the COVID-19 pandemic. Unlike many other economies, however, the Philippines has managed to make a remarkable recovery that not only took it out of the pandemic slump but laid the seeds for long-term prosperity.

Even with the economy experiencing occasional hiccups in the last three years, local and foreign business leaders are largely optimistic about the Philippines’ economic prospects in 2023. Here are some of the reasons why they continue to bet big on the Philippines:

1.) A Rapidly Developing Infrastructure Network

Even before the pandemic, the Philippine national government had already begun implementing an ambitious multigenerational plan to bring the country’s infrastructure up to par with those of its neighbors. Power, water, transportation, and digital infrastructure have all seen major improvements since 2020, particularly in the historically underserved countryside.

The continuing improvements in digital infrastructure development have been especially crucial for the country’s 2023 economic prospects. Private sector partnerships with local developers such as Aboitiz InfraCapital have allowed for the rapid deployment of small cell sites and new communications towers across the Philippines, substantially improving the country’s digital connectivity.

These and other infrastructure developments have already lowered the cost of doing business and encouraged the proliferation of new businesses anchored in the digital economy. With these infrastructure improvements slated to continue through the rest of the decade, we are bound to see further gains in the coming years.

2.) Steady Projected Growth

The Philippine economy is set to continue its growth, albeit at a more relaxed pace compared to 2022. This growth is projected to continue for the next several years, riding on perceptions of continuity in economic policies, particularly in infrastructure development and investment incentives.

Even with conservative estimates, the Philippines is still very much set to be one of the fastest-growing Asian economies in 2023.

3.) Continued Investments in Renewable Energy

The Philippine government is currently implementing an ambitious transition to renewable energy sources, which may prove crucial in attracting more foreign direct investments. There is now significant market pressure for businesses to adopt renewable energy resources, which may give the Philippines the edge in attracting and retaining additional foreign direct investments.

The country is currently on track to derive 50 percent of its energy from renewables by 2030, primarily through hydroelectric, biomass, and geothermal power generation. The Marcos administration has also continually reiterated its commitment to renewable energy and fossil fuel options that emit less carbon such as natural gas. This commitment may give investors interested in reducing their carbon footprint a good reason to choose the Philippines.

4.) High-Quality Labor Will Remain Accessible

The Philippines’ competitive labor advantage is likely to remain strong for the next several years. Even with uncertainty sweeping some global markets, business leaders and investors in the country can still enjoy access to highly skilled English-speaking workers.

With physical and digital infrastructure continuing to improve in the Philippine countryside, access to this skilled labor pool is only going to increase in 2023.

5.) Tax Benefits for PEZA Investors Will Continue

The Philippine Economic Zone Authority (PEZA) is the main authority over most of the Philippines’ special economic zones. For years, the tax exemptions in PEZA-accredited zones and industrial parks have been a serious incentive for foreign investors, helping transform the country into a global IT, customer service, and manufacturing hub. 

There is little indication that the massive investments drawn by PEZA zones in 2022 will significantly slow down in the next few years, let alone in 2023. Combined with the Philippines’ other competitive advantages, the continuation of PEZA’s successful tax incentive policies is likely to keep investors hooked in the long term.

6.) Growing Domestic Prosperity

The Philippines is currently the world’s 13th most populated country and is currently on track to become an upper middle-income economy. While individual buying power remains modest by world standards, the aggregate size and continuously improving prosperity of the population have made it a major consumer market in its own right.

The country’s demographics are also highly favorable for businesses that produce consumer products and services, with young working-age individuals comprising a majority of the country.

This has led a growing number of businesses to bet on the long-term potential of the Philippine market. Temporary dips in the market are now seen by savvier businesses and entrepreneurs as golden opportunities to consolidate their foothold in an economy that is almost certainly going to see significant improvements in a generation.

The continued growth of the Philippine economy has given business leaders and investors globally many reasons to stay bullish about the country’s prospects. With many more infrastructure and policy improvements scheduled to take place in the coming years, the Philippines has a good shot at retaining or even expanding on the gains it has made in recent years and beyond.