Why the Philippines is unlikely to reach upper middle-income status by 2025
MANILA, Philippines — The Philippine government had been optimistic about reaching upper middle-income status by 2025—until global uncertainties emerged.
National Economic and Development Authority (NEDA) Secretary Arsenio Balisacan recently said the country is unlikely to attain its upper middle-income status goal this year. However, he remains optimistic that with a 6% economic growth rate, the status could be achieved by 2026.
The World Bank classifies the world’s economies into four categories based on gross national income (GNI): low, lower-middle, upper-middle and high. The Philippines is currently classified as a lower middle-income country, with a GNI that falls within the World Bank’s threshold of $1,146 to $4,515.
To attain upper middle-income status, a country must have a GNI of $4,516 to $14,005. In 2024, the Philippines recorded a GNI of $4,335—close to the threshold—which initially raised hopes among economic managers of reaching the higher income status by 2025.
Asked why reaching the target status is no longer viable this year, Balisacan said they had to recalibrate expectations following several developments. One contributing factor was the series of cyclones that struck the Philippines in the last quarter of the year.
Another key factor, he noted, is the ongoing instability in the global market.
US President Donald Trump announced sweeping tariffs for most of its trade partners, including the Philippines. The Philippines is facing a 17% tariff from the US.
Trump’s tariffs have put the global economy on edge, making the world market difficult to predict.
“The uncertainty in the global economy persisted. And for this year, of course, nobody expected that uncertainty would heighten this far,” Balisacan said.
The NEDA chief said that analysts from the World Bank, the Asian Development Bank, and the International Monetary Fund (IMF) have arrived at the same conclusion: that growth prospects have been reduced.
“We are part of the global economy. Our various sectors of the economy are linked with the global supply chain, regional supply chain, slowdown of China, and all that. So we have to be realistic to adjust our predictories accordingly,” Balisacan said.
The IMF recently slashed its growth projection for the Philippines. It initially predicted that the country’’s gross domestic product (GDP) will reach 6.1% for 2025.
The country’s first-quarter economic growth report is expected to be released within the next two weeks. Balisacan said they are keeping their fingers crossed that the Philippines can still outperform the IMF’s projections—as it has in the past.
The NEDA chief said the Philippines has managed to tame inflation and keep interest rates down — factors that should help boost domestic demand.
“There are growth drivers there that we can count on, while the trade part of the economy is weakened by this global uncertainty, we can count on domestic demand. As you know, our domestic demand contributes or has been the main driver of the economy for many years,” Balisacan said.
He explained the Philippines’ growth is less dependent on global trade compared to its regional neighbors, with about a third of the economy driven by domestic demand.
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