PH remains on track to becoming an upper-middle-income economy

The Philippines remains on track to becoming an upper middle-income economy by 2023, according to the National Economic and Development Authority (NEDA).

The World Bank defines an upper-middle-income economy as a country with an annual gross national income (GNI) per capita of $4,096 to $12,695.  GNI used to be known as the gross national product (GNP), which combines the GDP and the inflows from abroad.

"With continued recovery and reform efforts, the country is getting back on track on its way from a lower middle-income country with a gross national income per capita of US$3,430 in 2020 to an upper middle-income country (per capita income range of US$4,096–US$12,695) in the short term," the World Bank said.

The Philippine Statistics Authority estimated the country's GNI per capita at P182,438, or about $3,500 in 2021. The country’s GNI per capita fell in the last two years amid the pandemic.

Other upper middle-income countries in Asia include Malaysia, Thailand and China.

NEDA director-general Karl Kendrick T. Chua said the country would likely attain this economic status by 2023, following the robust 8.3-percent expansion in the first quarter of 2022.

“It’s likely, especially since we broadened the economy’s potential with all the reforms that we have done,” Secretary Chua said. “We were hit by a pandemic like the rest of the world, but we are seeing one of the biggest bounce backs in the entire world.”

The gross domestic product (GDP) grew by 8.3 percent year-on-year in the first quarter of 2022, which was within the government’s target range of 7 percent to 9 percent for the year.

Chua said the economy should grow by at least 6.6 percent in the next three quarters to achieve the full-year target.

“That’s doable. The bulk of the growth is going to come from domestic demand and we have to ensure a strong domestic rebound, which we are seeing,” he said, adding that recent economic liberalization measures will help attract more investments," he said.

The World Bank said the Philippines has been one of the most dynamic economies in the East Asia Pacific region prior to the pandemic, with average annual growth of 6.4 percent between 2010-2019.

With increasing urbanization, a growing middle class, and a large and young population, the Philippines’ economic dynamism is rooted in strong consumer demand supported by a vibrant labor market and robust remittances, it said.

"Business activities are buoyant with notable performance in the services sector including business process outsourcing, real estate, tourism, and finance and insurance industries," the World Bank said.

The World Bank said, however, that the COVID-19 pandemic and community quarantine measures imposed in the country had severely impacted economic growth and poverty reduction. 

Growth contracted significantly in 2020, driven by heavy declines in consumption and investment growth, and exacerbated by the slowdown in tourism and remittances. Similarly, the previous trend in real wages, which is expected to have a positive impact on household incomes—particularly those from the lower income groups—has been severely hampered by the impact of the COVID-19, with negative consequences also for poverty reduction in the Philippines.

The economy started to recover with a 5.6 percent year-on-year expansion in 2021, buoyed by public investment and a recovery in the external environment.  

The World Bank expects the Philipine economy to further rebound, drawing strength from the recovering domestic environment with declining COVID-19 cases and wider economic reopening.