PHL income may triple by ’40 on higher productivity By Justine Xyrah Garcia
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ARGENTINA’S SENATE BACKS PRESIDENT MILEI’S CONTENTIOUS LABOR OVERHAUL AFTER PROTESTS
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EMOGRAPHIC tailwinds that powered the Philippines’s rapid expansion over the past decade will no longer be enough to sustain growth, with the Organisation for Economic Co-operation and Development (OECD) warning that the country must sharply accelerate productivity over the next 15 years to meet its long-term income ambition. In its 2026 economic survey released on Thursday, the Parisbased body said annual productivity growth will need to rise to 5.2 percent between 2025 and 2040, up from 4.5 percent in the prepan-
demic period, to keep the 2040 income objective within reach. The target stems from AmBisyon Natin 2040, the development blueprint adopted in 2016 that seeks to approximately triple the country’s per capita income. Achieving that ambition would require average gross domestic product (GDP) growth of about 6 percent annually from 2025 to 2040, well above the 4.8 percent average recorded between 2011 and 2024. The composition of growth is changing, however. The contribution of population growth to GDP expansion is projected to decline from about 2 percentage points in
2011 to 2019 to just 0.8 percentage point over 2025 to 2040, as the demographic dividend gradually fades. With weaker demographic support, productivity gains will need to account for a much larger share of overall expansion. “To achieve a boost to productivity growth of this scale, an ambitious package of structural reforms will be needed centered on stronger competition. Stronger competition can boost cost efficiency, innovation, adoption of new technologies and, consequently, productivity,” OECD Secretary-General Mathias Cormann said at the survey launch.
The OECD pointed to network industries—particularly electricity and telecommunications—as key constraints on productivity. In the power sector, despite formal unbundling of generation, transmission and distribution, vertical integration persists, limiting effective competition. Cormann said requiring distribution companies to divest of generation assets and exit retail supply activities would help strengthen market discipline. Industrial electricity prices in the Philippines stand near USD 0.15 per kilowatt-hour, about 50 percent higher than rates in Indonesia and Vietnam, according to the survey. See “Income,” A2
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OECD: VAT EXEMPTIONS, TAX HOLIDAYS MUST GO www.businessmirror.com.ph
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Friday, February 13, 2026 Vol. 21 No. 124
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By Reine Juvierre S. Alberto @reine_alberto
HE Philippines could generate more revenues by gradually removing major value-added tax (VAT) exemptions, phasing out income tax holidays and adopting an emissions trading system (ETS), according to the Organisation for Economic Cooperation and Development (OECD). At the launch of the OECD Economic Survey and Action Plan of the Philippines, OECD Secretary General Mathias Cormann said the country has significant opportunities to optimize and mobilize tax revenues, specifically the VAT, to address rising spending pressures. “Current arrangements [in VAT] are more inefficient than they need to be and more inefficient than they are in some peer countries in the region,” Cormann said. According to OECD’s findings, the Philippines collects only about 45 percent of its potential VAT revenues—one of the lowest among Southeast Asian peers. Fully closing the gap between actual and potential revenue collection, OECD said, would yield an additional VAT revenue of about 6.5 percent of GDP. “Reducing the VAT policy gap through base-broadening measures would likely be more growth-friendly than raising tax
rates,” it added. The OECD said replacing VAT exemptions for private education, private healthcare and senior citizens with targeted social transfers and adopting compliance risk management tools to accelerate VAT refunds could raise revenue by about 1.2 percent of GDP. These exemptions, it said, could be replaced by targeted social transfers that deliver support more efficiently to low-income households. Meanwhile, the OECD warned that income-based tax holidays risk granting generous and untargeted benefits to highly profitable firms without necessarily stimulating real economic activity. The OECD suggested that the Philippines gradually phase out corporate income tax holidays and shift toward cost-based incentives to realign incentives with efficiency and fiscal discipline, potentially boosting revenues by about 0.3 percent of GDP. See “OECD,” A2
LOVE AT FURST SIGHT A pet lover bonds with one of the rescued animals during the Philippine Animal Welfare Society’s (PAWS) “FURST DATE: Valentine’s Fundraising Event” at the PAWS Animal Rehabilitation Center in Quezon City on Thursday, February 12, 2026. The initiative sought to generate financial and emotional support for hundreds of animals under PAWS’ care, offering an alternative way to mark Valentine’s Day through compassion and adoption advocacy. Relatedly, the Eternal Paw Crematory has a full-page Supplement on page A3. NONOY LACZA
DESPITE LOW NPL RATIO, BANKS SEEN TO REMAIN CAUTIOUS Prophet of Boom: PHL to hit UMIC status this Sept By Andrea San Juan
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@andreasanjuan
HE easing of bad loans ratio could reflect better borrower repayment capacity and improved credit risk management practices despite slower economic growth. Latest data from the Bangko Sentral ng Pilipinas (BSP) showed that while the Philippine banking system saw its bad loans rise to P526.680 billion as of end-December 2025, the ratio eased to 3.08 percent—the lowest in five years. According to the data from the central bank, gross non-performing loans (NPLs) went up by 5.24 percent from P500.434
billion a year earlier. Nonetheless, the December figure was 3.34 percent lower than the P544.863 billion recorded as of endNovember 2025. Jonathan L. Ravelas, senior adviser at Reyes Tacandong & Co., said the decline in the NPL ratio reflects “both real improvement and caution.” Ravelas explained that asset quality has “genuinely strengthened” as borrowers’ repayment capacity improved and banks tightened underwriting. At the same time, “slower loan growth also played a role—fewer new loans mean fewer potential problem accounts entering the system.” See “NPL,” A2
By Justine Xyrah Garcia
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ESPITE last year’s economic slowdown and widespread job losses, the so-called “Prophet of Boom” believes the Philippines remains on track to achieve upper middle-income country (UMIC) status within the year. University of Asia and the Pacific (UA&P) economist Bernardo M. Villegas said the country could cross the World Bank’s income threshold for UMIC classification as early as September 2026. “We’ve been moving towards $4,500 very closely...It’s just a little more,” Villegas told reporters in a chance interview.
He said that even with gross domestic product (GDP) growth slowing to 4.4 percent last year—1.2 percentage points lower than the previous year—the expansion was still enough to push gross national income (GNI) per capita closer to the required benchmark. The Philippines remains classified as a lower middle-income country, with GNI per capita at $4,470. The World Bank sets the UMIC threshold at $4,496 to $13,935, while economies with GNI per capita above $13,935 are considered high income. Villegas acknowledged the possibility of a global slowdown this year due to shifting economic poli-
cies in the United States; however, he said the Philippines would not be significantly affected. “Global, there will be a slowdown definitely...because of the tariffs being imposed in all the exporting countries. But we’re not really affected, because we’re an exporting country,” he said. He also played down concerns about a potential depreciation of the peso to as weak as P60 against the US dollar, saying the Bangko Sentral ng Pilipinas is “very skillful in controlling that.”
Corruption won’t derail growth
MEANWHILE, Villegas also said corruption would no longer signifi-
cantly dampen investor sentiment this year, citing what he described as a renewed emphasis on infrastructure implementation. “I think the corruption problem is not going to be obstructing anymore. In the first quarter, the government will demonstrate that they can actually implement the infrastructure projects,” he said. He expects full-year economic growth to reach 5.6 percent, with inflation averaging between 2 percent and 3 percent. “Foreign direct investors are not really being discouraged by the corruption...FDIs, as long as they have the right partners, they can live with corruption,” he added.
PESO EXCHANGE RATES n US 58.3930 n JAPAN 0.3811 n UK 79.5955 n HK 7.4693 n CHINA 8.4498 n SINGAPORE 46.2885 n AUSTRALIA 41.6109 n EU 69.3242 n KOREA 0.0404 n SAUDI ARABIA 15.5706 Source: BSP (February 12, 2026)