AGGRESSIVE reforms, including the elimination of tax incentives, further liberalization and higher coal taxes are needed if the Philippines is to sustain economic growth and meet its goal of becoming a high-income country by 2040, the Organization for Economic Cooperation and Development (OECD) said.
The country has been one of the fastest-growing economies over the last 15 years, the OECD noted in its first Economic Survey of the Philippines. Momentum, however, has weakened, with growth slowing to 4.4 percent in 2025 amid higher United States tariffs and a flood control project scandal, but a recovery to 5.1 percent this year and further to 5.8 percent in 2027 was forecast.
“Maintaining high growth amid global trade headwinds and a fading demographic dividend requires strengthening competition, while maintaining prudent macroeconomic management, expanding social protection and adapting to climate change,” the OECD said in the report.
Among others, it called for the phaseout of value-added tax exemptions for private health care, education and senior citizens, which together with targeted cash and services transfers are expected to improve the tax system and revenue collections.
Moving against corruption in public investments will also improve spending and the business and investment climate, the OECD said.
Competition also needs to be fostered via further lowering of trade barriers and foreign ownership caps, which would help boost productivity, while social protection and job creation will have to be enhanced via measures such as shifting the funding of universal health care to taxation from social security contributions.
Lastly, given growing climate risks, investments in resilient infrastructure, early warning systems and greater home insurance coverage were proposed. In Metro Manila, in particular, the OECD called for water pricing reforms to address land subsidence, and the OECD also called for an increase in the coal excise tax and possibly basing all energy excise taxes on CO2 content.
The 137-page report was welcomed by Finance Secretary Frederick Go, who said the country’s inclusion in the OECD survey along with neighboring Thailand, Indonesia, Malaysia and Vietnam reflected growing global confidence in the country’s “sound policies.”
The report, he claimed, “aligns closely with our policy direction. The government is now, more than ever, committed to such reforms.”
In a statement accompanying the report, OECD Secretary-General Mathias Cormann said “ambitious reforms to strengthen competition and formal job creation are needed to sustain income growth and raise living standards.”
“In parallel, stronger efforts on climate change adaptation would reduce the economic, social and financial risks from extreme weather,” he added.
The OECD’s 2026 and 2027 growth forecasts were unchanged from December, when it slashed the outlook for 2025 to 4.7 percent from 5.6 percent and that for this year from 6.0 percent.
Both fall within the government’s downwardly revised 5.0- to 6.0-percent target for 2026 and 5.5-6.5 percent for 2027.
In the economic survey, the OECD also projected 2.6-percent inflation in 2026 and 3.0 percent next year, within the 2.0- to 4.0-percent target.
Following last year’s corruption scandal, investments are expected to recover as public spending normalizes and borrowing costs fall, but the organization also warned that global trade tensions would affect foreign demand and exports.
Risks are tilted to the downside, the OECD said, given a “more persistent-than-expected weakness in public investment related to tighter corruption controls and weaker investor confidence” possibly affecting domestic demand this year.
“On the upside, the recent easing of foreign investment rules and enhanced fiscal incentives offer a chance to offset headwinds from exports with higher capital inflows,” it added.