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The competitiveness of PH has improved.

The Philippines advanced four places in the International Institute for Management Development (IMDannual )’s global competitiveness report, owing to the country’s better economic performance.

The Philippines was ranked 48th out of 63 economies in IMD’s World Competitiveness Yearbook for 2022, up from 52nd out of 64 economies in 2021. This is the Philippines’ highest position in two years, or since 2020 when they were ranked 45th.

However, the country fell behind its neighbors for the fifth year in a row, ranking 13th out of 14 Asia-Pacific economies in the index.

IMD used 333 variables organized into four categories to rank each country’s competitiveness: economic performance, government efficiency, business efficiency, and infrastructure.

“The Philippines’ Economic Performance has improved, with the country now ranking 53rd, up from 57th in 2021,” according to the Asian Institute of Management’s Rizalino S. Navarro Policy Center for Competitiveness. Since 1997, the center has been the IMD’s Philippine partner institute in the publication of the competitiveness yearbook.

The economy gradually reopened after stringent lockdowns, resulting in a 5.7 percent increase in GDP in 2021. GDP increased by 8.3% in the first quarter of 2022.

While the Philippines’ infrastructure score has improved two spots to 57th, it remains the lowest among the competitiveness categories, particularly in terms of health and education facilities.

However, due to a drop in public finance to 51st from 45th in 2021, the Philippines fell to 48th in terms of government efficiency from 45th in 2021. This was mostly due to the government’s increased expenditure and borrowing to fund its coronavirus disease 2019 (COVID-19) pandemic response, which exacerbated the budget deficit and outstanding debt.

As of end-April, the budget deficit was P311.9 billion, while outstanding debt had reached a new high of P12.76 trillion.

The Philippines also saw a reduction in corporate efficiency, falling to 39th rank from 37th last year, as productivity and efficiency fell six places to 56th. Overall productivity dropped from 10th in 2021 to 57th this year, according to IMD, reflecting the detrimental impact of the COVID-19 pandemic.

The Philippines will face new challenges this year, according to IMD, including implementing effective ways to speed recovery from the epidemic while improving fiscal discipline and decreasing poverty.

In addition, the government must foster “innovation governance” and ensure a peaceful transition of power following elections, as well as construct “future-ready” health and education institutions. According to the IMD, it must also invest in sustainable infrastructure and reduce climate change vulnerability.

Senior Economist Cid L. Terosa of the University of Asia and the Pacific (UA&P) told BusinessWorld in an e-mail interview that the country’s improved rating sends a favorable signal to potential investors.

“The Philippines’ ranking improved as a result of its improving economic performance and infrastructure. Increased real GDP growth, higher gross capital formation, visible macroeconomic stability, and increased job creation catapulted the Philippines to a higher ranking,” he said.

Calixto V. Chikiamco, President of the Foundation for Economic Freedom (FEF), credited the higher position to the government’s superior handling of the epidemic, budgetary management, solid foreign exchange reserves, and the continued attractiveness of its workforce in a mobile phone message.

In a text message, President of the European Chamber of Commerce of the Philippines (ECCP) Lars Wittig said that businessmen pay close attention to these international benchmarks because they provide “a snapshot of the country’s economic health that guides business and investment decisions.”

“The ECCP believes that the government’s recent achievements will have a significant impact on global competitiveness and economic development. This includes changes to the Public Service Act (PSA), the Foreign Investment Act (FIA), and the Retail Trade Liberalization Act (RTLA), all of which will make the Philippines a more appealing trade and investment destination,” he added.

The continuing economic recovery, according to Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort in a Viber message, encouraged commercial activity.

“The country’s better rating could be due to the economy’s continued reopening toward greater normalcy following some hard lockdowns and other restrictions last year.” As a result of the increased economic/business activity in the country, many businesses/industries were able to reopen, function at higher capacity, hire more personnel, and book more sales and profits, resulting in better economic recovery prospects, according to Mr. Ricafort.

According to Mr. Terosa of UA&P, President-elect Ferdinand “Bongbong” R. Marcos, Jr.’s incoming administration can improve the country’s competitiveness by addressing corruption, sustaining infrastructure development, lowering unemployment, stabilizing inflation, and reducing poverty, among other things.

On June 30, Mr. Marcos will take the oath of office.

Mr. Wittig of the ECCP believes that the new Marcos administration should build on past administrations’ achievements in order to enhance the country’s competitiveness ranking.

“It’s critical to build on the accomplishments of previous administrations in order to soften socioeconomic shocks and accelerate recovery, as well as to maintain widespread implementation of the national vaccination program,” Mr. Wittig added.

“More sustainability-related reforms, investments in human resources (education, nutrition, and wellness), as well as institutional reforms on good governance and transparency, should be front and center of policy goals in order to improve the country’s ranking moving forward,” he added.

ONE OF THE MOST COMPETITIVE
The competitiveness index was topped by Denmark, followed by Switzerland, Singapore, Sweden, and Hong Kong. The Netherlands, Taiwan, Finland, Norway, and the United States rounded out the top ten.

Singapore ranked first among Asia-Pacific economies in terms of competitiveness, followed by Hong Kong, Taiwan, China, and Australia.

According to Christos Cabolis, head economist of the IMD World Competitiveness Center, many economies are currently experiencing inflationary pressure.

“Other global challenges affecting country competitiveness include variants of COVID-19 appearing at different intensities around the world in relation to the number of infected people; differing national policies to address COVID (the ‘zero-tolerance COVID’ policy versus the moving on from COVID’ policy); and Russia’s invasion of Ukraine,” Mr. Cabolis said.

The countries featured in the 2022 World Competitiveness Ranking differed from those in the 2021 report after Bahrain was included, but Russia and Ukraine were left out due to the ongoing conflict.

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