Does new upper-middle income status reflect PH reality?

MANILA, Philippines — The Philippines has finally crossed into upper-middle income status—after nearly four decades as a lower-middle-income economy.

Yet for many Filipinos still grappling with poverty or the high cost of living, the milestone raises an obvious question: Does it actually reflect the reality on the ground?

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For some economists, the answer is a nuanced yes. For another, however, it is ultimately “meaningless.”

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On July 1, the World Bank reclassified the Philippines as an upper-middle-income country (UMIC) after its gross national income (GNI) per capita reached $4,850 in 2025, up from $4,470 a year earlier. This year, the threshold was between $4,636 and $14,375.

READ: PH attains ‘upper middle income’ rank – World Bank

GNI per capita measures the average income earned by a country’s residents and businesses both at home and abroad. The World Bank computes the figure using its Atlas method for fiscal year 2027.

It is not based on a survey of selected Filipinos but is adjusted annually to account for exchange rate movements, inflation, economic and population growth, revisions to national accounts, and other statistical updates.

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Notably, the latest classification is based on last year’s economic performance and, therefore, does not yet reflect the impact of the ongoing oil crisis.

Accurate but …

John Paolo Rivera, senior research fellow at the Philippine Institute for Development Studies, acknowledged that while the country’s UMIC status is accurate, many Filipinos have yet to experience the same level of progress.

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READ: PSEi climbs above 6,100 on World Bank upgrade

“We reached the threshold because the economy has expanded over the years, supported by sustained growth, resilient household consumption, OFW remittances, the recovery of tourism and other service sectors, and continued economic activity,” Rivera said.

The World Bank likewise attributed the reclassification to “broad-based expansion,” noting that the economy grew by an average of 5.8 percent annually over the past five years.

“It is true that inflation, poverty, and other development challenges remain important policy concerns. But they do not determine a country’s income classification,” he explained.

Jonathan Ravelas, senior adviser at Reyes Tacandong & Co., echoed this view: “UMIC status reflects our economic progress at the national level, but it does not automatically mean that every Filipino is now better off.”

“Many families still struggle with high prices, low incomes, and limited opportunities. In that sense, the challenge moving forward is to ensure that the benefits of growth become more inclusive,” he added.

Long-term effects

The upgrade could improve the Philippines’ appeal to foreign investors, boost its creditworthiness, and increase investor interest in Philippine fixed-income assets.

“In the short term, the impact is mainly reputational as it signals that the economy has become more resilient,” Rivera said.

“But in the long term, it can help attract more investments, create better jobs, and support higher productivity. The government should capitalize on this by pursuing reforms that improve the investment climate, infrastructure, and human capital,” he added.

On the other hand, it also means the Philippines could gradually lose access to some Official Development Assistance and concessional loans.

However, economists at Chinabank said this is unlikely to happen immediately, as eligibility for many concessional financing facilities is generally phased out only when a country’s GNI per capita exceeds about $7,000.

Over time, the country could also become ineligible for some preferential tariff schemes and certain scholarships or subsidized training programs abroad.

“The government must use this opportunity to accelerate infrastructure, attract more investments, improve education and skills development, and create better-paying jobs so that economic growth translates into higher living standards for ordinary Filipinos,” Ravelas said.

‘Meaningless’

For Sonny Africa, economist and executive director of think tank Ibon Foundation, the much-celebrated reclassification is “meaningless” to most Filipinos.

“PH getting so-called upper-middle income status amid its first ‘trilyonaryo’ while some 15 million Filipino families are poor and another seven million lower-middle class says it all,” Africa said in a Facebook post on Thursday.

“All it does is confirm how much needs to be done to fix worsening inequality in the country,” he added.

Citing data from Social Weather Stations, he said poverty has increased under the Marcos administration, from 12.2 million self-rated poor families (48 percent of total) in June 2022 to 14.5 million (52 percent) in March 2026.

“So when the government hypes ‘upper middle income’ status, it’s propaganda—not progress,” he said.

The Trade Union Congress of the Philippines, meanwhile, called on the government to increase the salaries of all minimum wage earners.

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“There is no genuine growth if only the wealthiest are getting richer as the middle class and poorest of the poor are even getting poorer,” it said in a statement on Thursday.

“We cannot celebrate being an upper-middle-income country while millions of Filipino workers continue to live on low wages. Even lower-middle-income workers are being squeezed by heavy taxes and poor-quality public services,” it added. —WITH A REPORT FROM GILLIAN VILLANUEVA