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The Philippines slumped to its worst showing in the World Digital Competitiveness Ranking by the International Institute for Management Development (IMD), mainly due to a decline in talent and scientific concentration. 

The country slid two spots to 61^st place out of 67 economies, scoring 45.18 in the 2024 World Digital Competitiveness Ranking, conducted by the World Competitiveness Center.

This was the Philippines’ lowest ranking since the report started in 2017.

Among 14 Asia-Pacific economies, the Philippines ranked 13^th, ahead only of Mongolia (64^th).

Singapore ranked first in the global digital competitiveness index with 100 points, followed by Switzerland and Denmark.

The ranking measures a country’s capacity to adopt and explore digital technologies to transform government practices, business models and society in general.

It measures a country’s capacity in three key factors: knowledge or the quality of human capital, excellence of technological infrastructure and future readiness.

The Philippines ranked 64^th in the knowledge factor, 58^th in future readiness and 56^th in technology.

“The decline is mainly driven by a drop in talent and scientific concentration. There is also a downturn in the technology and regulatory frameworks,” said José Caballero, senior economist at the IMD World Competitiveness Center, in an e-mail.

The country saw the steepest drop in the technology pillar, falling five places from 51^st last year.

According to IMD, the country showed weakness in the ease of starting a business (65^th), enforcing contracts (64^th), communications technology (66^th), and secure internet servers (64^th).

However, the Philippines showed promising performance in investments in high-tech exports (2^nd) and telecommunications (9^th).

The country also slid one spot in knowledge and future readiness, amid low ranking in talent (60^th), training & education (62^nd) and scientific concentration (61^st).

According to IMD, the Philippines’ strength in the knowledge factor lies in its graduates in sciences (22^nd) and its female researchers (2^nd).

For future readiness, IMD said the country showed strength in flexibility and adaptability (19^th spot).

“In terms of future readiness, while there has been an improvement in adaptive attitudes, that is societal attitudes toward new technologies, business agility and information technology integration remain stagnant,” he added.

According to Mr. Caballero, prioritizing the development of relevant talent and the country’s R&D (research and development) capabilities are keys to improvement.

“In addition, there is room for improvement in the regulatory framework’s support for the development of new technologies, [while] strengthening the adoption and integration of new technologies across the societal, private, and public sectors is also fundamental,” he added.

Asian Institute of Management’s (AIM) Rizalino S. Navarro Policy Center for Competitiveness, IMD’s local partner institute in the report, said that the Philippines was the weakest in the knowledge component.

“[This] reflects the level of our human capital and our investments in it. We are trailing behind regional peers in terms of improvements in basic education and training,” said Jamil Paolo S. Francisco, executive director of the AIM Rizalino S. Navarro Policy Center for Competitiveness, in an e-mail.

However, he said that the decline in the ranking does not mean that no progress has been made, but simply that other economies are improving at a faster pace.

“Basic education remains the foundation for any upskilling needed to adapt to rapidly changing technologies and economic demands. We need to get that right before we can expect to reap the benefits of technological advancement,” he added.

For the country to improve its ranking, Mr. Francisco said that the country should start with getting the basics right.

“We need more sustainable investments in education and infrastructure — begin with solid foundations in basic education and skills development to leverage technological advancements,” he said.

“Additionally, creating an enabling environment in terms of regulation, access to resources, and access to markets is crucial. Modernizing rules and frameworks to match the new needs and realities of companies, consumers, and workers is essential for progress,” he added.

Sought for comment, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that the country’s declining performance in digital competitiveness can be attributed to the emergence of new technologies.

“The fast pace of digitalization globally with the emergence of new technologies such as artificial intelligence is widening the digital divide among countries, consistent with the wealth gap,” said Mr. Ricafort in a Viber message.

“As [well-off] countries digitize further, [the more they] would be far ahead than those that are worse off and far behind,” he added.

Because of this, he said that there is an urgent need for the Philippine economy to boost digitalization.

“There is an urgent need for the Philippines to digitize further… to have more competitive infrastructure and to create a favorable environment that is more conducive to more technological advances that will boost the country’s productivity,” he added.

Global tensions

The IMD report also explored the key challenges that hinder the advancement of digital competitiveness in the countries, such as geopolitical tensions.

Mr. Caballero said the geopolitical rivalry between the US and China are among the conflicts that could compromise how other countries compete at the global level.

“Geopolitical rivalries… are fragmenting the digital landscape, influencing not only how other countries develop and use digital technologies but also their ability to compete globally,” Mr. Caballero said in a statement on Thursday.

“It is therefore likely that any new tariffs will encompass national security-related elements. That is, tensions over technology and security concerns could also intensify, leading the US to further curtail China’s access to advanced technology,” he added.

US President-elect Donald J. Trump is seeking to impose 60% or higher tariffs on all Chinese goods and a 10% universal tariff once he assumes office in January 2025.

Mr. Caballero said that the geopolitical tensions have led to increased competition for digital dominance, which resulted in the fragmentation of global digital governance.

“In turn, such fragmentation can hinder collaboration on issues like cybersecurity and data privacy, which are essential for a balanced and secure digital ecosystem,” he said.

“In addition, fragmentation, by hampering collaboration, can increase the level of digital disparities among countries,” he added. – Justine Irish D. Tabile, Reporter

Foreign investment pledges received by Philippine investment promotion agencies (IPA) surged in the third quarter, driven by investments from South Korea and Switzerland, the statistics agency reported.

Preliminary data from the Philippine Statistics Authority (PSA) showed the value of foreign commitments approved by IPAs soared by 434.4% year on year to PHP 146.75 billion in the July-to-September period from PHP 27.46 billion in the third quarter of 2023.

Despite the strong annual growth, the amount was the lowest in investment commitments since the third quarter of 2023.

Quarter on quarter, it also slid by 22.56% from PHP 189.5 billion in the second quarter.

South Korea was the top source of foreign investment pledges in the third quarter with PHP 53.72 billion (36.6%), followed by Switzerland with PHP 51.84 billion (35.3%). Investment commitments from Japan stood at PHP 15.96 billion (10.9%).

The PSA compiles investment pledges approved by the government’s six IPAs: Board of Investments (BoI), BoI-Bangsamoro Autonomous Region in Muslim Mindanao (BoI-BARMM), Clark Development Corp. (CDC), Cagayan Economic Zone Authority (CEZA), Philippine Economic Zone Authority (PEZA), and Subic Bay Metropolitan Authority (SBMA).

The BoI approved PHP 70.34 billion in foreign investment pledges, accounting for 47.93% of this quarter’s total.

PEZA approved PHP 58.38 billion worth of foreign investment pledges, which accounted for 39.78% of the total. This was followed by CDC with PHP 14.66 billion, BoI-BARMM with PHP 86.7 million, SBMA with PHP 53 million, and CEZA with PHP 3.24 million.

The Calabarzon Region accounted for 40.1% of the pledged foreign investments with PHP 58.86 billion. This was followed by the Bicol Region with PHP 51.84 billion and Central Luzon with PHP 15.2 billion.

The manufacturing industry received nearly half of approved pledges with PHP 70.57 billion, followed by electricity, gas, steam, and air-conditioning supply industry with PHP 51.92 billion and real estate activities with PHP 13.13 billion.

Foundation for Economic Freedom President Calixto V. Chikiamco said in a Viber message that the growth in foreign investment pledges could be attributed to the liberalization of investment laws, such as the amendments to the Public Service Act.

“Aside from reducing the cost of doing business with better infrastructure and less red tape, the government can further spur foreign investments by further liberalizing our restrictive anti-FDI laws, primarily the Constitution,” he said.

First Metro Investment Corp. Head of Research Cristina S. Ulang said the higher investment pledges reflect President Ferdinand R. Marcos, Jr.’s “untiring global investment promotion” for the country.

The Department of Trade and Industry reported in June that a total of USD 19 billion worth of investments pledged during Mr. Marcos’ foreign trips have been actualized or implemented.

She also noted the newly signed Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) law could help attract foreign investments.

CREATE MORE expands incentives and lowers corporate income tax on businesses registered with IPAs.

“Very sustainable given the more competitive fiscal incentives and greater emphasis for ease of doing business in the country,” Ms. Ulang said in a Viber Message to BusinessWorld.

Mr. Chikiamco said he expects more investments from South Korea once the free trade agreement (FTA) takes effect.

The Senate in September ratified the FTA between the Philippines and South Korea, which will remove Philippine tariffs on 96.5% of goods from South Korea, while Seoul will lift tariffs on around 94.8% of Philippine products.

However, the FTA is still undergoing the ratification process at the Korean National Assembly.

Mr. Chikiamco said the government needs to forge more free trade deals with the European Union, Canada, and the United Arab Emirates.

“Short of any negative geopolitical event, this momentum of increased foreign investments will probably be sustained,” he added.

PSA data also showed investment pledges of foreign and Filipino nationals surged by 542% to PHPb 541.29 billion in the third quarter. Of this, Filipino nationals pledged PHP 394.54 billion in investments.

PSA data on foreign investment commitments, which may materialize in the near future, differ from actual foreign direct investments tracked by the Bangko Sentral ng Pilipinas for the balance of payments. The central bank’s monitoring goes beyond the projects and includes other items such as reinvested earnings and lending to Philippine units via their debt instruments. — Aubrey Rose A. Inosante

Lower interest rates and easing inflation will fuel double-digit credit growth in the Philippines through 2025, S&P Global Ratings said.

“Credit growth could improve. Higher economic growth, along with lower inflation and interest rates, will support credit demand,” S&P Global Primary Credit Analyst Nikita Anand said in a report.

“We forecast credit growth of 10%-12% in 2024 and 2025, compared with 8% in 2023,” she added.

Latest data from the Bangko Sentral ng Pilipinas (BSP) showed that bank lending grew by 11% in September, its fastest pace in nearly two years.

S&P said this outlook is driven by expectations that interest rates will normalize over the next year.

“We forecast policy rates could decrease to 5.5% in 2024 and 4.25% in 2025 as inflation stays moderate. This should also help contain asset quality risks emanating from a higher share of consumer lending.”

Since August, the central bank has reduced borrowing costs by 50 basis points (bps), bringing the key rate to 6%.

The Monetary Board’s final policy review for the year is set for Dec. 19.

BSP Governor Eli M. Remolona, Jr. earlier signaled the possibility of a 25-bp rate cut next month, which would bring the benchmark to 5.75% by yearend if realized.

Mr. Remolona also earlier said the BSP can deliver up to 100 bps worth of rate cuts for next year, though not necessarily every quarter or every meeting.

Philippine headline inflation averaged 3.3% in the first 10 months, within the BSP’s 2-4% target.

The BSP expects inflation to average 3.1% this year and 3.2% in 2025, both well within the target band.

Meanwhile, S&P Global said that economic growth will also support lending demand.

The credit rater sees Philippine gross domestic product (GDP) expanding by 5.7% this year and 6.2% in 2025.

The economy grew by a weaker-than-expected 5.2% in the third quarter, the weakest growth in five quarters. In the first nine months, GDP growth averaged 5.8%.

Banking sector outlook

Meanwhile, S&P Global said that the country’s banking system remains resilient.

“Banks maintain good buffers. Philippine banks are well positioned for growth with a sound capital position (15.7% Tier-1 ratio)… They have also maintained adequate provisioning, although we believe some write-back of pandemic-related provisions is likely amid a buoyant economic backdrop,” it said.

Under S&P’s Banking Industry Country Risk Assessment (BICRA), the Philippines is categorized under group 5.

The BICRA aims to “evaluate and compare the relative strength of global banking systems.”

BICRA scores are on a scale from one to 10, with group 1 representing the lowest-risk banking systems and group 10 being the highest risk.

Credit losses are also seen to “stay flattish,” S&P Global said.

“We expect the sector’s credit costs to stay at 0.5%-0.6% of gross loans over the next two years. The rising share of higher-risk (and higher-yielding) consumer loans is likely to lead to a manageable deterioration in the nonperforming loan ratio.”

“Large corporates, which form the bulk of the sector’s loan portfolio, should remain resilient. Banks with higher exposure to unsecured loans could see elevated credit costs as the portfolio matures,” it added.

On the other hand, it expects banks’ profitability to decline as margin expansion weakens.

“Earnings could moderate over the next two years. The sector’s return on average assets could normalize to the long-term average of 1.2%-1.4% over the next two years, after peaking at about 1.5% in 2023.”

“This is because net interest margins will decline in line with policy rates. A moderating cost-to-income ratio and increasing share of retail loans could push profitability above our forecast.”

S&P Global also flagged risks such as disruptions in the property market.

“A sharp correction in asset prices would hurt asset quality given banks’ sizable exposure to the residential and commercial real estate markets. Real estate loans form about 21% of sector loans; two-thirds are commercial real estate loans,” it said.

The exposure of Philippine banks and trust entities to the property sector declined to 19.92% at end-June, the latest central bank data showed.

This was its lowest ratio in four and a half years or since the 19.84% seen as of December 2019.

“Notably, office vacancy rates have stayed sustainably elevated in Metro Manila. While a fallout in the property sector is not our base case, it is a key downside risk amid higher interest rates and challenging global credit conditions,” S&P added. – Luisa Maria Jacinta C. Jocson, Reporter

The World Bank on Wednesday said it has approved $750 million in financing that will help the Philippines accelerate digital transformation efforts and strengthen its digital economy.

“Digitalization is a transformative force that can drive productivity-led growth and enhance the efficiency of critical services such as transport, healthcare, education, energy, and agriculture in the Philippines,” World Bank Country Director for the Philippines, Malaysia, and Brunei Zafer Mustafaoğlu said in a statement on Wednesday.

The second Digital Transformation Development Policy Loan is aimed at helping the Philippine government lower barriers to entry and investment in the broadband sector, as well as promote competition and improve connectivity.

The loan will support government agencies’ efforts to boost efficiency and transparency through digital technologies, as well as measures to expand financial inclusion by promoting secure digital financial services and payments infrastructure.

It also aims to boost trust in the e-commerce sector, as well as expand logistics and improve the Philippines’ competitiveness in the digital sector.

“By leveraging digital platforms, the country can bridge gaps in service delivery, make sure that individuals and firms have access to affordable financial services and digital solutions that meet their needs, and build resilience against future crises and shocks,” Mr. Mustafaoğlu said.

According to the loan document, the project aims to raise the number of households connected to fixed broadband services to 35% in 2026 from 25.6% in 2023.

“A key priority will be to remove the connectivity limitations faced by the 72% of Filipino households that, according to 2023 figures, still have no fixed broadband,” the World Bank said.

The project also aims to increase the number of people using digitally enabled government services through a unified e-government portal or mobile application to 30 million in December 2026 from a zero base in 2022.

It also hopes to increase the number of agencies connected to the web-based portal National Asset Registry System (NARS) to at least five out of 22 agencies by December 2026.

The project also seeks to lower the fraud rates involving the use of digital financial services to 8.24 basis points, and the volume of digital payments over retail payment transactions to 56% in 2026.

“Financial inclusion and digitally enabled services are vital for the growth of micro, small, and medium enterprises, which employ over 60% of the total workforce in the country,” Mr. Mustafaoğlu said.

“Greater access to digital financial services enables such businesses to adopt innovative technologies and automation, thereby boosting their competitiveness and contribution to the economy.”

By 2026, the project seeks to boost the number of e-commerce enterprises to 3.5 million and the share of women-owned businesses that make online transactions to 5.5%.

The project complements ongoing investments in addressing connectivity gaps in remote areas, including through the Philippines Digital Infrastructure Project, which was approved by the World Bank Board on Oct. 10.

Data from the Philippine Statistics Authority showed the digital economy’s share to the country’s gross domestic product (GDP) went down to 8.4% last year from 8.6% in 2022, making it the lowest share to GDP since 2018. — Aubrey Rose A. Inosante

The Philippines was among countries with the highest levels of mathematics anxiety among 15-year-old students, according to an international learning assessment by the Organization for Economic Co-operation and Development (OECD), which flagged growing negative feelings towards the subject from 2012 to 2022.

Experts said the growing mathematics anxiety among Filipino students threatens the country’s manufacturing ambitions, which will rely heavily on engineers.

Results of the fifth edition of the 2022 Programme for International Student Assessment (PISA) also showed the Philippines was among 10 economies with the lowest levels of self-efficacy among students aged 15 years old. 

In a report released on Wednesday, OECD said most education systems that had the lowest levels of self-efficacy also show the highest levels of mathematics anxiety.

These countries include three Southeast Asian countries — Cambodia, the Philippines and Malaysia, and seven Latin American countries — Argentina, Brazil, Chile, Costa Rica, the Dominican Republic, Guatemala and Mexico.

On average, 65% of students among OECD countries worry about getting poor marks in mathematics, 55% feel anxious about failing in mathematics, and 40% of students reported feeling nervous, helpless or anxious while solving mathematics problems or doing homework. 

“These shares were even higher in Brazil, Brunei Darussalam, El Salvador, Indonesia, Malaysia, the Philippines and Thailand,” OECD said, as it noted a sharp rise in mathematics anxiety from 2012 to 2022 in most PISA-participating countries and economies.

In an earlier edition of PISA, 16% of Filipino students attained at least Level 2 proficiency in mathematics, significantly lower than the 69% average across OECD countries.

Almost no Filipino students were top performers in mathematics, meaning that they attained Level 5 or 6 in the PISA mathematics test.

In the latest report, OECD said low math performers or those who perform below Level 2 showed higher levels of mathematics anxiety than skilled students or those who perform at Level 3 or above.

“This suggests that while anxiety is an obstacle to lifelong learning for all learners, it is even more so for those who also struggle with basic skills,” it said.

“Skilled students who have a solid foundation and strong mathematical skills will be able to build on those and be less likely to experience high levels of anxiety about mathematics,” it added.

In the assessment, 39.4% of Filipino participants said they ask questions when they do not understand the math material being taught, lower than the 46.8% global average.

The number of Filipino students who try to connect new material to what they have learned in previous mathematics lessons hit 39.4%, which was also below the global average of 45.6%.

In the assessment, 50.7% of Filipino participants said they ask questions more than half of the time when they do not understand the mathematics material.

About 80% of Filipino students said they wanted to do well in mathematics, slightly lower than the 89.3% global average.

The results also showed that 38.8% of Filipino students said they “do not agree that some people are just not good at mathematics, no matter how hard they study,” higher than the 34.5% average.

“There is no clear association between mathematics performance and knowing what job students want to do in the future,” OECD said. “However, a difference emerges in terms of the type of job students want to do based on their performance.”

It said more skilled performers than low performers expect to do highly paid jobs, noting that the Philippines presented the “widest gap” with 79% of its skilled performers and 32% of its low performers wanting to become managers or professionals.

On average, 48% of skilled performers and 25% of low performers among OECD countries wanted to become a manager or professional.

“Mathematics is crucial for manufacturing since this sector is conducive to scale economies that can be achieved through learning by doing and problem solving, skills that are honed in mathematics,” said Leonardo A. Lanzona, an economics professor at the Ateneo de Manila University. 

“I think the anxiety stems from a lack of preparation and an inability to relate the mathematical problems to their daily life, making mathematics a purely conceptual subject,” he said in a Facebook Messenger chat.

The OECD said the link between anxiety and mathematics can be detrimental to lifelong learning, adding that students who develop negative feelings towards mathematics may be less likely to opt for further education that includes the subject.

“They may avoid reskilling opportunities that involve mathematics as well,” it said.

The OECD said reducing students’ mathematics anxiety is a key policy challenge in improving students’ readiness for life-long learning.

“All major economic sectors will be adversely affected by these results in the long term,” said Emy Ruth S. Gianan, who teaches economics at the Polytechnic University of the Philippines.

In particular, growing mathematics anxiety among students threatens prospects for sectors that demand more technology-driven innovations including agriculture, manufacturing and services sectors, she noted.

The OECD said compared to 2012, students in most PISA-participating countries and economies reported higher levels of mathematics anxiety.

More students also reported feeling helpless doing mathematics problems or homework on average across OECD countries than in 2012.

“On the contrary, there was only a slight increase in students worrying about their marks and no change in the share of students worrying that it would be difficult for them in mathematics classes,” OECD said. “This result is worrying.”

Students are developing increasingly negative attitudes about learning mathematics. This may impact not only their performance but their readiness for lifelong learning. This finding also suggests that young people’s well-being has deteriorated, and policies are needed to support students’ mental health.

Among countries, South Korea showed the biggest improvement, showing an 11-percentage-point drop in shares of students reporting that they felt nervous doing mathematics problems. It was followed by Singapore and Thailand.

In the assessment, 78.3% of 15-year-old students said they “love learning new things in school,” above the global average of 50.1%.

About 70% of students said they wanted schoolwork that is challenging, higher than the 46.9% global average.

The OECD said governments and schools should craft “tailored support” early on to build confidence among students and enable them to develop resilience and adaptability, “which are crucial for academic success and personal well-being.”

It also called for strong teacher-student relationships, which contribute to reducing student anxiety and improving academic outcomes.

“Education systems should focus on equipping students with critical digital literacy skills to help them discern the quality of information and promote responsible online behavior,” it added. – Kyle Aristophere T. Atienza, Reporter

The Marcos government will have a difficult time convincing Congress to pass new tax measures amid high living costs, analysts said, after the Department of Finance (DOF) chief hinted at pushing new taxes.

Philip Arnold “Randy” P. Tuaño, dean of the Ateneo School of Government, said lawmakers are unlikely to approve new tax measures that would affect the general public after the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act was signed into law.

“This may create an unfavorable impression that the administration is aligning themselves to large businesses and foreign investors to the detriment of the middle and lower income classes,” he said in a Facebook Messenger chat.

President Ferdinand R. Marcos, Jr. on Monday signed into law CREATE MORE, which lowers the corporate income tax (CIT) rate and provides more incentives for businesses registered with investment promotion agencies.

Mr. Tuaño noted there was public backlash over the Tax Reform for Acceleration and Inclusion (TRAIN) Act, the first part of the Duterte administration’s comprehensive tax reform package.

It restructured and reduced the rates of personal income tax but imposed higher taxes on tobacco products, petroleum products, automobiles, several nonessential services, sweetened beverages and mineral products.

“In the previous tax reforms under TRAIN, the perception was that by reducing personal and corporate income taxation but increasing excise and value-added taxes, the government was favoring enterprises and higher income groups, and this could also happen again,” Mr. Tuaño said.

“Historically, reforms like the expanded value-added tax law faced backlash due to perceived burdens on everyday consumers, fueling public resistance to any additional tax increases.”

The implementation of CREATE MORE is expected to lead to about PHP 5.9 billion in revenue losses from 2025 to 2028, the Palace said.

Asked how the government could offset these losses, Finance Secretary Ralph G. Recto said: “We have other revenue measures which we’re pursuing. I just discussed also with the Speaker and the Senate President some financial taxes that we are reconsidering.”

“We just plan accordingly. If there’s a revenue loss here, then we look for another bill that will gain the revenue,” he said  on the sidelines of the signing ceremony for CREATE MORE on Monday.

Jonathan L. Ravelas, senior adviser at professional service firm Reyes Tacandong & Co., said Mr. Recto’s response was to ensure that “whatever erosion in revenue due to CREATE MORE, there is a source to plug it.”

“They have a potential tax in mind to pass. These could have been some of the measures that were not implemented by the previous administration,” he added in a Viber message.

Mr. Ravelas also cited the proposed tax on junk food and sweetened beverages, which then Finance Secretary Benjamin E. Diokno said could add about PHP 70 billion to state coffers while addressing diseases related to poor diet.

The proposed excise tax on single-use plastics, which was already approved on third and final reading at the House of Representatives, is a priority legislation of the Legislative-Executive Development Advisory Council.

But Environment Secretary Maria Antonia Yulo-Loyzaga last month told BusinessWorld on the sidelines of a Palace briefing that the bill could only advance in Congress if the country comes up with cheaper alternatives to plastic.

Another fiscal measure on the LEDAC’s priority list is the proposed rationalization of the mining fiscal regime.

The proposed motor vehicle road user’s charge has not been included in the list, which was last updated in June.

Meanwhile, Mr. Recto’s latest remark on pursuing new “financial taxes” — a shift from his previous statements that the government would not introduce new taxes — could mean that the government was struggling to find new revenue sources.

“The fact they are looking for alternatives indicates there is a shortcoming that needs to be filled,” John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said in a Facebook Messenger chat.

In the face of inequalities, the government should consider taxes on wealth or certain luxury items, which would not affect lower-income households, he said. The government may also consider higher taxes on high-emission industries to incentivize “cleaner business practices while generating new revenues.”

Mr. Rivera said the government should also boost non-tax revenues by improving tax compliance, streamlining collections and expanding public-private partnerships for infrastructure and development projects.

Hansley A. Juliano, who teaches politics at the Ateneo, said the absence of a strong opposition would enable the Marcos administration to push new tax proposals in Congress.

“Considering there’s really no opposition figure reaching the Senate Magic 12 at the moment, administration allies clearly find it easy to get ahead with these kinds of possibly unpopular policies,” he said in a Facebook Messenger chat.

The Philippines will hold midterm elections next year, with 55 people vying for 12 Senate seats. Filipinos will also elect district representatives and other local officials in an election seen to be a referendum of the administration’s performance in the previous years.

As the midterm elections approach, fiscal difficulties will “present opportunities for candidates to project themselves against a variety of scapegoats and in support of alternatives,” Anthony Lawrence Borja, a political science professor at the De La Salle University, said.

Jose Enrique A. Africa, executive director of think tank IBON Foundation, said the government “desperately needs new taxes to expand urgent social and economic services as well to contain bloated government debt.”

“The government needs to take the long view of what is needed for strategic economic development and transformation and then plan major revenue measures accordingly,” he added.

Leonardo A. Lanzona, who teaches economics at the Ateneo, said the government will “continue to rely on indirect taxes which corporations will only pass to their consumers,” amid fears higher taxes will discourage investments.

“In the end, fiscal consolidation is not achieved, and an economic crisis ensues,” he said. – Kyle Aristophere T. Atienza, Reporter

Tourist arrivals in the Philippines are projected to hit 9.7 million by 2028, Fitch Solutions unit BMI said.

In a report, BMI said the Philippines’ tourist arrival growth is expected to average 14.8% annually to reach 9.7 million in 2028.

This year, it noted the Philippine tourism sector remains in a post-pandemic recovery phase.

Department of Tourism (DoT) data showed tourist arrivals in the January-to-October period jumped by 10% to 4.5 million from 4.1 million a year ago. BMI said this figure represents just 66.5% of tourist arrivals in the comparable period in 2019.

“With 10 months of tourist arrival data published for 2024, we maintain our view that arrivals over the year will fall short of a full pandemic recovery,” it said.

BMI projects tourist arrivals to go up by an annual 19.5% to six million this year, but still representing only 73% of the 8.2 million arrivals in 2019.

The DoT is targeting 7.7 million tourist arrivals this year.

“Our 2025 forecast for the Philippines’ tourist arrivals is growth of 38.4% year on year to 8.3 million arrivals which will mark a full recovery as they reach 101.1% of the 2019 arrivals,” BMI said.

Tourism Congress of the Philippines President James M. Montenegro said it is crucial to open up the country to more Chinese and Indian tourists to drive the tourism sector’s recovery.

“If we’re able to issue more Chinese visas, then we will hit the seven million arrivals easily. If we open up our borders to the Indian market, then we can even hit maybe 10 million,” he said in a phone call with BusinessWorld.

He also noted that the lack of Chinese tourist arrivals was the main issue for the tourism sector’s struggles this year.

In 2019, China was the second-biggest source of foreign tourists for the Philippines, accounting for 1.74 million out of the total arrivals of 8.26 million.

“For 2025, if we don’t fix our restrictions on China and to India, it will still be Korea, Japan, and the US. Australia is an upcoming market and there are the European markets,” Mr. Montenegro said.

The Philippines has failed to capitalize on the rebound in Chinese tourists to Southeast Asia, unlike Thailand, Singapore and Malaysia, which offer visa-free entry to Chinese tourists. Thailand is targeting 36.7 million foreign arrivals this year, with Chinese tourists accounting for nearly six million.

The Philippine government has tightened visa requirements for Chinese tourists amid heightened tensions in disputed territories in the South China Sea. Airlines have also reduced direct flights to China amid weak tourist demand.

Philippine Institute for Development Studies Senior Research Fellow John Paolo R. Rivera said the Philippines has faced challenges such as limited flight capacity and infrastructure bottlenecks in key tourism areas.

“Global economic uncertainties, dampened revenge travel, high oil prices and higher airfares have affected discretionary travel budgets, which may also have impacted international arrivals,” he said.

Mr. Rivera said South Korea, the US and Japan are expected to remain major source markets due to their “strong historic ties” to the country.

“The Chinese market, while slower to recover due to recent travel patterns and their domestic economic factors, could rebound by 2025 as consumer confidence grows and visa restrictions are relaxed to some extent,” he said.

Mr. Rivera also said Southeast Asian neighbors like Thailand, Indonesia and Vietnam have seen faster tourism recovery from the pandemic due to more aggressive marketing campaigns and more established tourism products, services and infrastructure. — Aubrey Rose A. Inosante