By Luisa Maria Jacinta C. Jocson, Senior Reporter
THE PHILIPPINES is more more likely to achieve upper middle-income status by 2027, a 12 months later than the federal government’s goal, given the present growth prospects, the World Bank said.
“The more likely scenario is that it is going to take a few years. It won’t be 2026. It’s more likely that it could be 2027,” World Bank Group Lead Economist and Program Leader for the Prosperity Unit for Brunei, Malaysia and the Philippines Gonzalo Varela told reporters on the sidelines of an event on Monday.
“The reasonable scenario is we expect a few years. It will take the Philippines a few years to pass that upper middle-income threshold.”
The Marcos administration is targeting to attain upper middle-income status by 2026.
Based on the most recent data from the World Bank, the Philippines is currently classified as a lower middle-income country as its gross national income (GNI) per capita was $4,230 in 2023. Nonetheless, this was higher than its GNI per capita of $3,950 in 2022.
In accordance with the World Bank’s classification, an economy is taken into account lower middle-income if the GNI per capita level is between $1,146 and $4,515, while upper middle-income countries are people who have a GNI per capita of $4,516 to $14,005. The World Bank typically releases its income classification data every July.
For his part, Department of Economy, Planning, and Development (DEPDev) Secretary Arsenio M. Balisacan said the country remains to be heading in the right direction to satisfy its goal of reaching the upper income class by next 12 months.
“Barring major external shocks, and assuming a good global trade environment, we’re well-positioned to attain upper middle-income status by 2026,” he said in a speech through the event.
“Nonetheless, we remain conscious about the uncertainties that confront the worldwide economy — starting from systemic risks in economic institutions and technological disruption to environmental challenges.”
Nonetheless, Mr. Varela said the Philippines would only have the opportunity to graduate to the upper middle-income level next 12 months whether it is capable of deliver an “outstanding growth performance.”
“With our forecast that’s just out, it is going to not be 2026. Does that mean that it can’t be 2026? No, it could possibly if you happen to deliver much faster growth… we imagine that it’s more likely for it to be 2027,” he added.
The World Bank slashed gross domestic product (GDP) growth forecasts for the Philippines this 12 months and next 12 months amid uncertainty and the looming global slowdown. Philippine GDP is now expected to expand by 5.3% this 12 months and by 5.4% in 2026, well below the federal government’s 6-8% goal for each years.
Mr. Varela said the Philippines needs to make sure sustained growth of per capita income.
“Given the rates of growth that we’ve got been seeing and given the conditions of the domestic economy and the worldwide economy, under reasonable scenarios, we predict that in the subsequent couple of years, this is possible for the Philippines to attain,” he added.
The Philippines will even must implement key reforms to hurdle its current income class and sustain the expansion needed to stay within the upper middle-income level.
Mr. Varela cited the amended Public Service Act, which allows full foreign ownership in key public services like telecommunications, airlines and railways.
“On paper, it has been passed. But there are quite a lot of actions that have to be taken in order that its full implementation happens. That’s something that’s going to create a whole lot of opportunities for investment and for productivity growth.”
He also noted reforms that can simplify regulations to make it easier for foreign players to enter the country.
“For a foreign firm, it takes 106 days for a foreign firm to be registered within the Philippines. That’s substantially greater than what we see in the remainder of the world. In Singapore, it takes about 10 to fifteen days,” Mr. Varela added.
He noted these reforms will help the Philippine economy growing “past the brink.”
IMPACT OF US TARIFFS
Meanwhile, Mr. Varela also cited the impact of the tariff policies on the country’s growth outlook.
“The Philippines is a small open economy. As a small open economy, what happens in the remainder of the world matters for the Philippines,” he said.
“A rise in global uncertainty goes to be detrimental for the Philippines’ growth prospects. It should likely affect exports, and it is going to affect investment. Investment is heavily affected by policy uncertainty.”
America slapped a 17% reciprocal tariff on the Philippines in early April but paused this policy for 90 days. Nonetheless, the baseline 10% tariff stays in effect.
As global uncertainty weighs on investment, Mr. Varela said doubling down on domestic reforms will help support growth.
“That’s why I used to be mentioning streamlining regulations, so that you just reduce the prices of foreign and domestic investment within the Philippines. It’s something that’s going to assist offset that.”
These reforms also needs to make logistics cheaper, which is crucial for the Philippines, being an archipelagic country.
“Reforms that open up the domestic trade, domestic transport sectors. These are reforms which might be going to assist the economy continue to grow, even with global uncertainty increasing,” he added.
Once the country transitions to the subsequent income level, Mr. Varela said there might be many opportunities it could possibly capitalize on.
“For instance, after graduation, (though) not immediately, after three consecutive years of keeping that level of income above the brink of upper middle-income, there are some developed countries that reduce concessions on trade,” he said.
The Philippines being a beneficiary of the EU Generalized Scheme of Preferences Plus (GSP+) is also affected after it graduates.
“Because of this the federal government of the Philippines has been working with the European Union in negotiating a free trade agreement,” Mr. Varela said.
“That way, the thought there may be that when you lose GSP+, you may move into an agreement by which you’ve got an FTA.”
Meanwhile, DEPDev Undersecretary Joseph J. Capuno noted that the transition to an upper middle-income level will entail a “shift in access to resources.”
“As countries move up the income ladder, eligibility for concessional financing and access to traditional official development assistance begin to diminish,” he said at the identical event.
“With this, latest priorities arise — necessitating stronger domestic institutions, heightened international cooperation, more sophisticated mechanisms for managing debt and raising revenue, provision of modern solutions, and a renewed give attention to effective financing for development.”
Mr. Capuno said there may be a must adopt latest frameworks for sustainable development and establish more and stronger partnerships.
“Improving coordination amongst development partners can higher harmonize support to the country. This implies working together to design strategies that support transitions of middle-income countries (MIC) to a better income threshold.”
The federal government will implement reforms in its Medium-Term Fiscal Framework 2022-2028 because it prepares to transition to an upper middle-income economy, Mr. Capuno said.
This can “rebuild fiscal space and improve credit rankings, emphasizing the federal government’s commitment to fiscal consolidation and debt sustainability.”
“We also underscore the importance of technical and financial assistance that international organizations and financial institutions can extend to MICs to help within the formulation of sound revenue and tax policies and strengthen capability for tax collection and revenue generation,” he said.
COUNTRY PARTNERSHIP
Meanwhile, the World Bank is currently within the means of preparing its latest country partnership framework for the Philippines.
“The Philippines stays a vital country for the World Bank. Our partnership with the Philippines is amazingly vital… that partnership goes to show 80 this 12 months,” Mr. Varela said.
The framework, which can cover 2025 to 2031, is ready to be finalized and released by the tip of June.
“We’re considering of around three essential outcomes that must do with improving quality and access to human capital. That has a component related to education, but additionally a component related to nutrition and health,” Mr. Varela said.
Meanwhile, the second consequence is said to job creation within the private sector, while a 3rd consequence involves resilient communities.
“We predict the Philippines to change into an upper middle-income economy inside the timeframe of that framework,” Mr. Varela added.
