The Philippines should seize the opportunity to further develop its digital economy as it is key to job creation and long-term economic growth, according to AMRO.
The ASEAN+3 Macroeconomic Research Office or AMRO in a new blog post said it is essential that the country shifts to a more technology-driven economy as it will generate needed jobs while also improving productivity and competitiveness in the longer term.
The digital economy in the Philippines contributed 9.4% to GDP in 2022, an increase of 11% from the previous year. The sector employed about 6 million people in 2022 or 13% of the total employment. As of end-2022, digital payments accounted for 42.1% of the total volume of payments. The digital banking landscape continues to expand and now comprises six digital banks and 285 fintech companies.
This signals that the country is on the right track in the formulation of policies that promote digitalization, said Andrew Tsang, AMRO’s country economist for the Philippines, in his blog post.
However, the government needs to resolve some challenges for digitalization endeavors to be successful. Tsang said actions and measures that can be undertaken include upgrading labor skills and updating regulations, and enhancing cyber security against digital threats and vulnerabilities.
“Despite significant progress, there is room for the country’s digital infrastructure development to catch up with its ASEAN peers,” said Tsang.
He noted that the country lags behind its regional peers in key areas of digital development such as digital transformation and trade, digital government and digital security.
Among the challenges the country needs to overcome is the absence of reliable and high-speed internet connections in most rural and remote areas as this could hinder digital inclusion and economic development, Tsang said.
It is also important for the Philippines to upgrade its soft infrastructure for economic digitalization. “For example, the digital skill gaps among the labor force, people’s resistance to digital transformation, and regulatory gaps and loopholes would need to be addressed effectively,” said Tsang.
Moreover, there is a need to develop and implement appropriate regulations in a timely manner. The economist noted how it is hard for the country’s regulatory framework to catch up with the relentless development of technology, such as artificial intelligence, block chain, the Internet of Things, and big data.
“Appropriate regulations on the use of digitalization would need to be put in place to safeguard consumers from digital threats and vulnerabilities,” he said.
Citing cyber security and anti-virus provider Kaspersky, Tsang said the Philippines was the second most attacked nation in cyberspace in 2022. The country’s largest telecommunication company recorded 16 billion cyber attacks in 2023, nearly 90 times higher than in 2022. The country also ranked 45th among 175 countries in terms of national-level preparedness to prevent cyber threats in the 2023 National Cyber Security Index of the e-Governance Academy, he said.
“To ensure a smooth digitalization process, the authorities should prioritize its investment in infrastructure development, enhance digital skills of the workforce, and strengthen the regulatory framework,” Tsang concluded
