To achieve the AmBisyon Natin 2040, the Philippines needs to triple its income per capita in the next two decades.

The AmBisyon Natin 2040 is the government’s plan to transform the country into a prosperous middle-class society free of poverty by 2040.

This implies that the Philippine economy needs to grow at an annual average of 6.5 percent in the next 22 years, faster than the average growth of 5.3 percent since 2000 — a challenge that only the so-called Asian tigers and China have managed to accomplish in the past.

This report shows that sustaining high growth can only be achieved if the Philippines succeeds in sustaining high total factor productivity (TFP) growth while accelerating capital accumulation.

To achieve the GDP per capita target by 2040, numerous scenarios regarding the potential mix of growth drivers were evaluated. The first key finding is that sustaining high TFP growth will be crucial to achieve the target. Specifically, the Philippines needs to sustain an average annual TFP growth rate of 1.5 percent or higher in the next 22 years, more than double the world average since 2000.

Such a high rate of TFP growth will require deep structural reforms to remove constraints and distortions faced by the private sector. The second key finding is that accelerating capital accumulation in the medium term will be essential to reduce current infrastructure and capital constraints to growth.

The Philippines can meet the capital accumulation requirement by doubling the growth rate in the physical investment-to-GDP ratio over the next five years through higher private and public investment, which would require the implementation of important reforms that are highlighted in this report.