THE Philippines is close to reaching upper-middle-income status, a senior World Bank senior said, but the economy must keep growing inclusively for the goal to be met.
“The Philippines is on the verge of achieving upper-middle-income status,” World Bank Country Director Zafer Mustafaoglu told The Manila Times.
“To consolidate this, the economy needs to continue growing inclusively, as it has done over the past 15 years.”
Mustafaoglu noted that from 2009 to 2023, the average real income of the poorest 40 percent of Philippine households rose by 7.3 percent, compared to 1.9 percent for the wealthiest 20 percent.
This pro-poor growth helped reduce poverty by generating quality jobs, with wage employment growing to 64 percent of total employment from 55 percent.
“To sustain this progress, the Philippines needs to strengthen human capital through investments in health and education, push pro-competition reforms to stimulate productivity growth, and reduce trade and investment costs to better integrate with the world economy,” Mustafaoglu said.
“Moving up the semiconductor value chain, from packaging and testing, to manufacturing and upgrading business services exports to incorporate more knowledge, will be crucial,” he added.
The country is still classified as lower-middle income, a status it has held since 1987.
Gross national income (GNI) per capita rose to $4,230 in 2023, up from $3,950 in 2022, but is still within the lower-middle-income range of $1,146 to $4,515 — updated from last year’s $1,136 to $4,465.
To achieve upper-middle-income status, GNI per capita has to hit $4,516 to $14,005, higher than the previous range of $4,466 to $13,845.
Mustafaoglu said that investing in resilient and digital infrastructure would be crucial for improving connectivity and access to services, boosting production and reaching more Filipinos.
Strengthening public institutions at both the national and local level is also important in reaching upper-middle-income status, he added, which, in return, will help the Philippines attract more foreign investment and capital.
“If the Philippines succeeds at these reforms and growth enhancing interventions and maintain growth rates of at least 6 percent annually over five years, so that per capita income would increase at a rate of 4.5 percent annually, poverty rates could fall by 5.2 to 7.5 percentage points, lifting 5.9 to 8.6 million Filipinos out of poverty,” Mustafaoglu said.
He expects the country’s growth to average 6.0 percent from 2024 to 2026, fueled by strong domestic demand, a healthy job market, falling inflation and steady remittances that will boost household spending.
He added that growth would also benefit from a strong public investment program and increased private investments, thanks to recent reforms allowing more foreign investment in key sectors.
“Continued structural reforms could further boost the growth potential of the Philippines, regarding the global economic outlook, the subdued global growth, geopolitical tensions and supply chain disruptions remain as a downside risk,” he continued.
