MANILA, Philippines – Ongoing efforts in Congress to amend the Philippine Constitution bode well for the country’s long-term economic growth, which could turn out higher than forecast, especially if restrictions on foreign direct investments (FDI) were removed, according to Fitch Solutions.
In a commentary, the Fitch Group subsidiary noted that lawmakers were apparently focused mainly on changing several economic provisions in the constitution to boost the Philippines’ global competitiveness.
“While it is still early days in the process, any pro-business changes to the Philippine’s business environment would pose upside risks to our long-term growth forecast for the Philippines and in particular to investment,” Fitch Solutions said.
“The potential removal of restrictions on FDIs could see overall investment pick up over the coming years,” it added.
Over the past 17 years, from 2005 to 2022, fixed capital formation in the Philippines accounted for an average of about 23 percent of gross domestic product, which could increase by “several percentage points” if favorable changes in the basic law were made.
“As such, it [amendments] would also pose upside risks to our average real GDP (gross domestic product) growth of 6.6 percent over the coming decade, 2023-2032,” Fitch Solutions said.
The company noted that the investment environment in the Philippines for foreigners has been “challenging” due to restrictive rules, which the Organization for Economic Cooperation and Development’s judged as the third-most restrictive out of the 84 countries in 2020.
In particular, this referred to the restriction that foreign firms can own only up to 40 percent of a business in the Philippines.
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