THE Philippines has finally climbed into the World Bank’s upper middle-income club. But for millions of Filipinos still grappling with high prices and the search for better-paying jobs, one question remains: What’s actually different?
After nearly four decades, the country crossed the World Bank’s income threshold after posting a gross national income (GNI) per capita of $4,850 in 2025, surpassing the lender’s benchmark for upper middle-income economies.
The upgrade ends the Philippines’ 39-year stay as a lower middle-income country and places it alongside neighbors such as Indonesia, Thailand, and Vietnam in the World Bank’s income classification.
For now, not much. The country’s new status does not automatically raise incomes or ease the cost of living.
Rather, it recognizes that the Philippine economy has reached a higher stage of development-and that the government’s challenge has become even bigger: creating better jobs, making growth more inclusive, and sustaining reforms needed to remain in the category.
Socioeconomic Planning Secretary Arsenio M. Balisacan said Filipinos should treat the World Bank’s decision as ‘a milestone’ rather than the country’s destination.
‘It is a milestone,’ Balisacan said in a recent interview. ‘The intention is to sustain the momentum, get growth going, recovering the higher growth path that existed even before the Covid.’
Getting there, however, will require addressing longstanding constraints-from governance and policy reforms to infrastructure, energy security, and climate resilience-while ensuring more Filipinos benefit from economic growth.
Growth that people can feel
For many Filipinos, the country’s new income classification appears difficult to reconcile with everyday realities.
An Octa Research survey found that about 35 percent, or an estimated 9.2 million households, considered themselves poor in the first quarter of 2026.
The findings come as the Philippine economy slowed to 2.8 percent in the first quarter, while inflation remained elevated at 6.4 percent in June, squeezing household budgets despite the country’s upgraded status.
Balisacan said the disconnect stems from how the World Bank measures income.
‘The growth and the level of income that we are talking about is an average. It doesn’t tell you how that economic pie is distributed across members of society,’ he explained.
He noted that while the Philippines has made progress in reducing poverty, unemployment, and inequality over the past 15 years, those gains have not erased the need to create more productive and better-paying jobs.
‘The big challenge for us really is improving the quality of jobs that are available so that our earnings will be much higher and our people will not have to migrate outside the country to have a decent job,’ he said.
Ultimately, he said, Filipinos should judge the country’s progress not by its World Bank classification but by whether they experience better healthcare, education, transport, connectivity, and other opportunities that improve their quality of life.
Economists largely share that view. Ateneo de Manila University (ADMU) conomist Leonardo A. Lanzona said the country’s new classification does not immediately translate into higher purchasing power.
‘Nothing changes in their wallets today,’ he said.
Instead, he said, the designation signals stronger macroeconomic performance and could improve investor confidence if accompanied by reforms that generate quality employment.
Economist Maria Ella C. Oplas of De La Salle University (DLSU) likewise said the country’s success should not be measured solely by faster economic growth but by whether development becomes more inclusive.
‘Economic growth is good, but the more important thing is economic development-how income is distributed to the population and felt by the people,’ she said.
Higher stakes
If the new classification brings prestige, it also raises expectations.
Graduating into the UMIC category means the Philippines will gradually rely less on concessional financing from multilateral institutions and more on commercial borrowing, private investments, and domestic sources of funding.
Former Socioeconomic Planning Secretary Dante B. Canlas said that shift places greater importance on maintaining sound fiscal management.
Private lenders, he said, will continue to evaluate the country’s budget deficit and debt position regardless of its new income classification.
‘The National Government must endeavor to strengthen its fiscal position, starting with a responsible deficit-reduction program,’ Canlas said.
Oplas also cautioned against viewing broader financing options as an excuse to accumulate more debt.
‘If accompanied by weak governance and poor fiscal discipline, this could indeed increase debt risks,’ she said.
Latest data from the Bureau of the Treasury (BTr) showed the national government’s outstanding debt climbed to a record P18.55 trillion as of end-May.
Domestic borrowings accounted for 67.37 percent of the total debt stock, while external obligations made up the remaining 32.63 percent.
Better governance needed
Former Bangko Sentral ng Pilipinas Deputy Governor Diwa C. Guinigundo said preserving the country’s new status ultimately depends on maintaining investor confidence through sound institutions, credible policies, and continued fiscal reforms.
‘Unless we do that, it is very difficult to restore public and business confidence in our capacity to grow and our capacity to sustain this reclassification,’ he said.
Balisacan echoed that assessment. Asked what could derail the country’s progress, he pointed not to external shocks but to domestic weaknesses.
‘The threat to us, if there is any, that could slow down our progression is more internal to the country. It’s the institutions and the governance not quickly adjusting to the challenges of the times,’ he said.
He argued that strengthening accountability and improving policy implementation are essential if the Philippines hopes to sustain growth and eventually move toward high-income status.
‘We need to continue the momentum and even be more ambitious and speed up,’ he said.