EXPLAINER: What the Philippines' upper-middle-income status means for Filipinos

EXPLAINER: The Philippines is now an upper-middle-income country. What does it mean?

The Philippines has joined the ranks of upper-middle-income-countries (UMIC), a milestone for which the country has aspired for even before the COVID-19 pandemic, after the World Bank upgraded its income classification based on higher gross national income per capita.

The World Bank classifies countries into four groups, with upper middle income being the second-highest below high income, and above lower middle and low income. Classifications are based on gross national income (GNI) per capita.

Every July 1, the Development Data Group of the World Bank updates classfications based on the GNI estimates from the previous calendar year. For this year, the Philippines was among the five that moved from lower-middle to upper-middle income, including Jordan, Micronesia, Sri Lanka, and Vietnam.

How did the Philippines qualify?

For the latest period, the Philippines recorded a GNI per capita of $4,850, exceeding the upper-middle-income threshold of $4,636 for the fiscal year.

The GNI is calculated by dividing the country’s total national income by its population. This takes into account income earned by residents from overseas, while excluding income generated by foreign residents in the Philippines.

The World Bank uses GNI per capita, which it calculates through its Atlas method, to compare economies and classify countries into income groups.

“The Philippines achieved its reclassification through broad-based expansion. GDP grew at an average of 5.8% per year over five years, reflecting gains across all major industries, not a single sector boom, but an economy-wide shift,” the World Bank said.

Although growth has recently moderated, the GNI still rose enough to cross the upper-middle-income threshold.

The economy grew by an average of 4.4% in 2025, below the administration’s target range of 5.5% to 6.5%, marking the third straight year of falling short of the aim. Growth hit 5.6% in 2024, below the 6.0%–6.5% goal; and 5.5% in 2023, lower than the 6.0%–7.0% target.

For this year, the target has been revised downward to 3.5% to 4.5%, reflecting the impact of the conflict in the Middle East and the drag in government spending following the scandal involving flood control projects.

The economy grew by 2.8% in the first quarter, slower than the 3% growth in the fourth quarter of 2025, and the 5.4% in the first three months of 2025. This is the slowest footing since the 3.8% contraction during the COVID-19 pandemic lockdowns in the first quarter of 2021.

Does this mean Filipinos are wealthier?

The latest classification applies to the country as a whole, based on its average and not to individual households. This reflects the overall size and average income of the economy, and not the financial situation of every citizen.

“We acknowledge that income disparities persist, and many continue to face economic difficulties. Our priority is to ensure that growth becomes more inclusive, and that its benefits reach all Filipinos,” Department of Economy, Planning, and Development (DepDev) Secretary Arsenio Balisacan said in a statement.

What changes for Filipinos?

The new classification does not automatically mean higher salaries, lower prices, slower inflation, or a change in taxes. It is instead an international benchmark used by institutions to guide lending and development programs.

According to the DepDev, the upgraded status is expected to boost the country’s credit profile, lift investor sentiment, and open doors to higher-quality investments that create better employment for Filipinos.

“We welcome this recognition of our progress and we commit to deepen reforms to sustain our economic development,” Balisacan said.

Are there downsides?

As countries move up in classification, they may gradually lose access to forms of concessional financing, development assistance, and aid programs that generally cater to poorer economies. With this, the country may shiift more toward borrowing at market-based rates.

“While some concesional Official Development Assistance (ODA) may decline over time… the gains from stronger fundamentals and improved market access are expected to outweight these adjustments,” the DepDev said. –NB, GMA News