The main driver of long-run economic growth is total factor productivity. Among the basic sectors, namely, agriculture, industry, and services, inclusiveness of economic growth depends most importantly on agriculture. This study provides growth projections for the Philippine agriculture based on growth in productivity differentiated by basic sector, using a computable general equilibrium model.
Scenario analysis finds that the current policy thrust for agriculture of subsidizing capital cost slightly accelerates growth of agriculture, but slows down overall growth by reducing capital formation. Meanwhile, maintaining productivity growth for industry-service at trend, notwithstanding weak growth of agriculture, suffices to reach government plan targets. Productivity growth of agriculture impacts strongly on agriculture itself, but not on the industry-services sectors; conversely, productivity growth in the latter strongly impacts on itself and the gross domestic product, but not on agriculture. The study suggests that policies emphasize the acceleration of productivity growth in the long run across all sectors, but especially in agriculture. Currently, forward and backward linkages of agriculture matter little to economic growth, increasing growth interactions across the basic sectors.