BEYOND the inflation spikes and slowing growth triggered by the prolonged Middle East conflict lies a harsher economic reckoning: the Philippines’s long-fading ambition of becoming a high-income economy by 2040 may now be effectively out of reach.
This comes as Department of Economy, Planning, and Development (DepDev) Secretary Arsenio M. Balisacan admitted earlier this week that the government is recalibrating the AmBisyon Natin 2040 roadmap, the country’s long-term development blueprint, after a series of shocks and disruptions derailed the original growth trajectory.
For analysts, the recalibration reflects how repeated economic shocks have steadily pushed the Philippines farther from its original 2040 timetable.
Ateneo de Manila University (ADMU) economist Leonardo A. Lanzona explained that an honest assessment would show that the 2040 target is effectively gone, with even Balisacan acknowledging that achieving high-income status within the original timetable is ‘not feasible.’
Last year, the socioeconomic planning chief said economic growth of 6 percent or lower would not be enough to become a high income country in 15 years. (See: https://businessmirror.com.ph/2025/08/01/with-growth-of-6-or-less-phl-cant-meet-ambisyon-to-be-high-income-country-by-2040/).
‘The Iran shock and US tariff headwinds now layer fresh downside risk on top of the pandemic-era output gap that was never fully recovered. ‘Fallen behind’ understates it-the trajectory has been permanently reset,’ Lanzona told the BusinessMirror.
Foundation for Economic Freedom (FEF) President Calixto V. Chikiamco agreed, saying several ‘negative geopolitical and other external factors’ are now undermining the assumptions behind the plan.
Chikiamco said the prolonged oil crisis could continue weighing on the economy even if the Middle East conflict eases, while rapid advances in artificial intelligence also pose risks to several industries in the country, including its multi-billion business process outsourcing (BPO) industry.
‘The country is also vulnerable to climate change and a severe El Niño this year, together with high fertilizer prices, may cause significant damage to our agricultural sector,’ he also told the BusinessMirror. Under AmBisyon Natin 2040, the government aims to triple the country’s per capita income. This means having a per capita income of at least $11,000 through a sustained 6.5-percent annual gross domestic product (GDP) growth.
It also seeks to transform the Philippines into a predominantly middle-class society where poverty is eradicated and economic growth translates into a better quality of life for ordinary Filipinos.
Redefining middle classData from the 2016 AmBisyon Natin survey showed that nearly eight in 10 Filipinos (which translates to 79.2 percent) aspired for a ‘simple and comfortable life,’ while only a small fraction envisioned living like the rich.
For most Filipinos, this meant earning enough to meet daily needs, owning a medium-sized home and a vehicle, sending children to college, and being able to travel occasionally within the country.
The survey also showed strong aspirations for mobility and convenience, with a majority preferring to own a vehicle rather than rely solely on public transportation. Philippine Institute for Development Studies (PIDS) Senior Research Fellow John Paolo R. Rivera said the country’s 2040 aspirations may need to evolve beyond the traditional notion of middle-class prosperity anchored mainly on income growth and consumer ownership.
‘Key question is not just whether households earn more but whether they can sustain a decent quality of life,’ Rivera told the BusinessMirror.
The United Nations (UN) defines quality of life as a broad and multidimensional concept that goes beyond income and employment, encompassing access to food, healthcare, housing, infrastructure, social protection, public safety, environmental security, and even human rights.
Rivera said a truly middle-class society should be defined not only by higher incomes, but by economic security, quality education, accessible healthcare, affordable housing, and protection from ‘shocks.’
‘The vision remains achievable if the country uses this recalibration as an opportunity to address long-standing structural constraints rather than simply adjust the timeline,’ he added.
Deeper reforms
Meanwhile, Chikiamco said the Philippines must first address weak agricultural productivity, warning that persistently high food prices could undermine efforts to industrialize by raising wages and production costs.
‘This means that the country should move away from small scale agriculture toward promoting agribusiness. It should promote farm consolidation and remove the land retention limits of 5 hectares under the agrarian reform law,’ he explained.
Under AmBisyon Natin 2040, the government identified eight priority sectors for investment, including housing and urban development, manufacturing, connectivity, education, tourism, agriculture, health and wellness, and financial services, as part of efforts to build competitive industries that can deliver affordable goods and services.
Rivera said the recalibrated roadmap should also prioritize human capital, food and energy security, digital and physical infrastructure, innovation, and institutional strengthening.
‘Sectors with strong productivity and employment potential such as advanced manufacturing, agribusiness, tourism, and modern services should be at the center,’ he also said.
Capabilities audit
For Lanzona, however, the traditional sector-listing approach is no longer enough because it identifies priority industries without determining the specific constraints preventing them from advancing.
He said this leads to broad and unfocused allocation of resources, where industries are included in development plans but do not necessarily receive the targeted support needed at their current stage of development.
Lanzona instead pushed for a ‘capabilities audit,’ or a more detailed assessment of where industries currently stand, what bottlenecks they face, and what specific interventions they need to move up the value chain.
‘Without knowing where each industry actually stands in its upgrading trajectory, the milestones one attaches to the vision are arbitrary and the political economy critique applies with full force, because undifferentiated or unclear sector support is far easier to capture by incumbent political interests than stage-specific capability targets,’ Lanzona added.
Latest World Bank data showed that the Philippines remains classified as a lower middle-income economy, with a gross national income (GNI) per capita of $4,470 in 2024-just $26 below the lower bound of the UMIC range, currently set at $4,496 to $13,935.
The bank revises its income classifications annually, with updated thresholds and country rankings typically released on July, based on the previous year’s GNI per capita data.