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Philippines’ move to upper middle-income level unlikely by 2025

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People cross the street in Caloocan City, April 29, 2024. — PHILIPPINE STAR/ MIGUEL DE GUZMAN

THE PHILIPPINES is unlikely to achieve the government’s goal of becoming an upper middle-income country by 2025, analysts said.

Analysts said Philippine gross domestic product (GDP) needs to expand by at least 6% annually in the near term to ensure a significant growth in Filipino incomes.

“The Philippines can still become an upper middle-income country if it grows by 6-6.5% every year for the next two to three years,” University of Asia and the Pacific Senior Economist Cid L. Terosa said in an e-mail.

The Marcos administration is aiming to achieve upper-middle income status for the country by 2025, but this may take longer as the World Bank raised the income classification levels again.

To become an upper middle-income country, the Philippines now needs to have an estimated gross national income (GNI) per capita of $4,516 to $14,005. This is higher than the previous range of $4,466 to $13,845.

According to the World Bank’s latest income classification data, the Philippines remained a lower middle-income country with a GNI per capita of $4,230 in 2023, higher than $3,950 in 2022.

The World Bank now classifies a country as lower middle-income if the GNI per capita level is at $1,146 to $4,515. This is higher than the $1,136 to $4,465 level set last year.

The World Bank computes a country’s GNI through the Atlas method, which serves as the basis of its income classifications — low, lower-middle, upper-middle and high. GNI refers to the total amount of money earned by its residents both inside and outside its borders.

“Upper middle-income status is just a number but there are strong reasons to doubt if the Philippines will achieve even that in 2025,” IBON Foundation Executive Director Jose Enrique A. Africa said citing the economy’s slowing growth over the past year.

“This continues a general slowdown that actually started in 2017 and was momentarily camouflaged by the pandemic lockdowns, contraction and rebound,” he said in a Viber chat message.

Last week, National Economic and Development Authority Secretary Arsenio M. Balisacan said the country can reach the upper middle-income status by late 2025 or early 2026.

The Philippines has been classified as a lower middle-income country since 1987.

“In a way, the administration has implicitly recognized that it won’t reach upper middle-income as scheduled when it lowered the growth target in April,” Filomeno S. Sta. Ana III, executive director and co-founder of Action for Economic Reforms, said in a Viber chat message.

Economic managers are targeting 6-7% GDP growth this year.

Earlier, the World Bank has said that it may take up to three years before the Philippines can reach the upper middle-income level.

“To do this, the government should raise productivity and increase the number and quality of jobs. In this regard, the country should prioritize infrastructure, institutional integrity and efficiency, education, and technology,” Mr. Terosa said.

Mr. Sta. Ana said the government should focus on addressing constraints to economic growth, such as elevated inflation, tight fiscal space, and high power rates.

“(The) administration’s time is eaten up by too much politicking, which has also distorted economic policy making,” he said.

For Mr. Africa, reaching upper middle-income status does not guarantee the country’s situation will improve.

“The Philippines cannot but eventually reach upper middle-income status — population growth alone will ensure that this will happen sooner or later. But this is just an aggregate number and won’t mean that chronic poverty for the poorest, bloating disguised joblessness or worsening inequity have been resolved. That aggregate number of GNI or GDP per capita will hide all sorts of development sins,” he said.

Other lower middle-income economies in Southeast Asia include Cambodia, Laos, Myanmar and Vietnam.

Indonesia, Malaysia and Thailand are classified as upper middle-income countries, while Singapore is considered a high-income economy. — Beatriz Marie D. Cruz

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