[In This Economy] The Philippines is upper-middle income at last. But what does it mean?

You may have seen the headlines: on July 1, the World Bank announced that the Philippines is now officially an upper-middle income country (UMIC). This came after the Philippines got stuck in the lower middle income club since 1987, or nearly four decades.

I noted before in this column that the government has been promising this milestone since at least 2017, during the time of former president Rodrigo Duterte. Now that it finally arrived, the government wasted no time basking in it.

The Department of Economy, Planning, and Development (DEPDev) called it a “historic economic milestone,” crediting sustained growth and long-term reforms. President Ferdinand Marcos Jr., speaking from an official visit in Canada, called it a “vote of confidence in our country’s future” that will attract more investments, adding it was “worth celebrating.”

Some celebration is in order. But as with all economic statistics, we need to be clear about what this new label means, and what it does not.

First, the basics. Every July, the World Bank sorts economies into four income groups based on their gross national income (GNI) per capita, converted to US dollars using a three-year average of exchange rates. In 2025, our GNI per capita reached $4,850, which is above the new upper middle income cutoff of $4,636.

Recall that we missed the cutoff by a hair’s breadth last year: our GNI per capita of $4,470 fell $26 short (a mere 0.6%). This year we finally cleared it by $214, or 4.6%.

Decades in the making

Many people think that this UMIC status is attributable to a specific event. But it’s not as if the economy suddenly became prosperous overnight. Better to think of it as the culmination of decades of growth, especially since the 2000s to the 2010s when growth took off in earnest.

That’s not true of everyone who crossed the line this year. The World Bank noted that Sri Lanka returned to upper middle income status on the back of its rebound from the 2022 crisis. Micronesia got in via construction and agriculture. Jordan crossed partly because a rebasing of its national accounts made its measured economy 10% larger. Togo moved up to lower middle income status after a statistical adjustment of its population estimates. Sometimes, crossing the UMIC line says more about how statistics are measured, rather than real growth.

Note, too, that the new classification reflects income data as of 2025 only. It’s silent on the woes of 2026, including slower growth (following the dearth of government disbursements in the wake of the flood control scandal), a rapid spike of inflation owing to the US–Iran war, and battered investor confidence. We earned this promotion last year, so to speak, not this year.

What the label hides

Importantly, GNI per capita is a crude average. Ours works out to roughly P23,000 per person per month, and it doesn’t take into account how income is actually divided in our society. A country can climb income categories while leaving millions behind. (To be fair, recent growth has been relatively pro-poor, with poverty falling markedly. The UMIC label itself tells us nothing about that.)

On social media, many people reacted by saying that they don’t feel at all the new UMIC status. That’s understandable. GNI per capita speaks of the entire economy’s performance, and not the financial situation of any specific Filipino.

Past studies, including one by the World Bank, also show that real wages (i.e., inflation-adjusted wages) in the Philippines have been quite stagnant relative to the economy’s rapid growth in the past two decades. This is a puzzle since higher productivity is usually accompanied by rising real wages. Economists are still trying to wrap their heads around this.

Government officials’ statements also invite confusion. Finance Secretary Frederick Go said the new status essentially means Filipinos have increased their per capita wealth. Not quite: GNI measures income, a flow, not wealth, which is a stock of assets accumulated over time. How much a worker earns in a month is not her net worth. That’s taught in Econ 101.

There’s also a certain irony in the President’s “vote of confidence” framing. The Philippines was once among Asia’s more prosperous economies, and arguably we could have reached upper-middle income status decades earlier had his father’s dictatorship not driven the economy into its worst postwar collapse in 1984 and 1985—an event that permanently pulled down the country’s trajectory.

Because of the COVID-19 and the botched response of the Duterte administration, the Philippines’ economic trajectory was further lowered. Now, we need double-digit growth to go back to the old trajectory by 2028 (quite impossible).

Vietnam, which crossed the same threshold this year, fared much more impressively. Its GNI per capita of $4,970 beat the cutoff by 7.2%, and its export-led growth is both more impressive and more robust than ours. We got to the finish line together, but Vietnam is running way faster. In the first quarter of 2026, Vietnam also grew by 7.83% (something they already consider “slow”), while we grew at a measly 2.8%.

Finally, the upgrade has costs. As a new upper-middle income country, we can expect to gradually lose access to preferential rates on concessional loans and official development assistance. We don’t know by how much exactly. But over time, expect that borrowing to build will get more expensive precisely when we need to invest more. That spells trouble for our country’s fiscal health. Already, the debt-to-GDP ratio is at 65% and rising.

So yes, this milestone is real, and it took decades of work by millions of Filipinos, not any single administration. But it could have come earlier, and it could have been stronger. The right question is not whether to celebrate, but whether we can sustain the growth that got us here. Given the economy’s troubles this year, that is far from guaranteed.

The next step is to cross over to high income status. In ASEAN, only Singapore and Brunei have earned that distinction. If we don’t do our homework and fix our domestic affairs and policies, most of us will likely not see the day when the Philippines makes that final giant leap. I dread to think how many decades that will take; hopefully not another four decades. – Rappler.com

Jan Carlo “JC” Punongbayan, PhD is an associate professor at the University of the Philippines School of Economics (UPSE). His professional experience includes the Securities and Exchange Commission, the World Bank Office in Manila, the Far Eastern University Public Policy Center, and the National Economic and Development Authority. JC writes a weekly economics column for Rappler.com. He is also co-founder of UsapangEcon.com and co-host of Usapang Econ Podcast.

His first book, False Nostalgia: The Marcos “Golden Age” Myths and How to Debunk Them, was published by Ateneo de Manila University Press in February 2023. His second book, Twin Plagues: How Duterte and Covid-19 Wrecked the Philippine Economy, will be published by Penguin Random House SEA in June 2026.  Follow him on Instagram (@jcpunongbayan).

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