Philippines likely to attain upper middle-income status next year

MANILA, Philippines — The Philippines will not likely attain the upper-middle income status this year due to a slower-than-expected economic growth in the first quarter, according to top official of the National Economic and Development Authority (NEDA).

However,  Socioeconomic Planning Secretary Ernesto Pernia said the delay has an upside as this gives the government more time to hammer out financing deals for the Duterte administration’s massive infrastructure program at concessional terms.

“We may achieve upper middle income status by next year because of the setback in our growth performance in the first quarter,” Pernia said.  “It’s still possible that we may achieve upper middle income status this year but I think it’s going to be surer next year,” he said.

Economic growth moderated to 5.6 percent in the first quarter as the delayed passage of the national budget held back government spending for infrastructure and crucial development programs.

The government intends to catch up on spending in the remaining months of the year. Nonetheless, banks, think tanks and investment houses have all trimmed their growth forecasts for the country this year.

Under the Philippines’ medium term development plan, the government aims to transform the country into an upper middle-income status by 2022. The World Bank puts upper middle-income economies as those that have a gross national income (GNI) per capita of between $3,896 and $12,055.
The effect of attaining  this income tier is most pronounced in obtaining financing for the Duterte administration’s ambitious Build Build Build program.

Attaining upper middle income status makes the country ineligible for official development assistance (ODA) loans at concessional rate from development partners.

The Philippines, however, will have a grace period of up to two years to obtain ODA financing at concessional terms.

This is why in line with its ongoing mid-term review Philippine Development Plan 2017-2022, NEDA will also be reviewing flagship infrastructure projects that have to immediately move through the project cycle.

The Japanese government, through the Japan International Cooperation Agency (JICA), has said it will work with the Philippines in accelerating the processing of various projects for ODA before the country graduates to upper middle class status by next year.

Post-graduation, the JICA said it can continue the provision of technical assistance to the country and may consider the provision of more assistance to the private sector in lieu of concessional loans.

JICA is currently the country’s largest ODA provider with the bulk of assistance provided to the transportation sector.

Through the country’s cooperation with the Japanese government, the Philippines enjoys concessional rates of 0.1 percent for loans at 40 years repayment period under Japan’s Special Terms of Economic Partnership.