Balisacan still confident PHL can achieve upper middle-class status this year

By Aubrey Rose A. Inosante, Reporter

THE PHILIPPINES remains on track to graduate to upper middle-income country (UMIC) status this year, despite a sharp growth slowdown in 2025, the Department of Economy, Planning, and Development (DEPDev) said.

Economy Secretary Arsenio M. Balisacan said the Philippines can still achieve UMIC status this year despite the weaker-than-expected 4.4% gross domestic product (GDP) growth last year.

“We still have to redo the numbers, but with the 4.4% growth in 2025, we should still be able to reach the average income class status,” he told a briefing on Thursday.

The Philippines is still stuck in the lower middle-income bracket, having failed to advance out of it since 1987, despite posting a higher gross national income (GNI) per capita of $4,470 in 2024.

Under the World Bank’s latest country classification, the Philippines’ GNI per capita was only $26 shy of the World Bank’s adjusted GNI per capita requirement of $4,496-$13,935 for UMIC status.

The Washington-based lender is scheduled to release its updated annual country status thresholds in July.

Last year, Mr. Balisacan said the Philippines needs to sustain 6% growth from 2025 to 2026 to ensure its GNI per capita meets the UMIC threshold.

In 2025, Philippine GDP growth sharply slowed to 4.4%, from 5.7% in 2024. This was the weakest print in five years or since 2020 when GDP contracted by 9.5% amid the pandemic. Excluding the pandemic, it was the slowest growth since the 3.9% expansion in 2011. 

Mr. Balisacan said the economy’s potential growth still stands at 6%, which makes the government confident about achieving its long-term goal of building a predominantly middle-class society under AmBisyon Natin 2040.

“Actually, the investments that we are making in human capital, particularly education and health and infrastructure, these can elevate that potential to an even higher one — 6.5% or even 7%,” Mr. Balisacan said.

Analysts said the Philippines achieving UMIC status carries symbolic weight but cautioned that it is a weak measure of real development.

“Graduation to UMIC is important symbolically but its real economic value will depend on whether it comes with deeper structural shifts that raise living standards more broadly,” John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said in a Viber message.

Even modest growth can lift per capita income if supported by stable employment, remittance inflows, and manageable inflation, Mr. Rivera added.

Jose Enrique “Sonny” A. Africa, executive director of IBON Foundation, said UMIC status is a “mere bureaucratic category” used by the World Bank to guide lending and grant-making.

“It’s an extremely poor indicator of real development because, for instance, any UMIC status the Philippines might get will be amid growing poverty, hunger, and volatile poor quality work,” he said in a Viber message.

TEMPERED TARGETS
At the same briefing, Mr. Balisacan said the Development Budget Coordination Committee (DBCC) had tweaked the macroeconomic assumptions for foreign exchange rate and export growth, after cutting growth targets.

On external trade assumptions, the DBCC kept the goods export growth at 2% this year, unchanged from the June meeting.

It raised its goods export growth projection to 3% in 2027, from the earlier forecast of 2%.

“For the exports of services, we are assuming 5% for 2026 and the same growth for 2027,” he said.

The peso forecast range was widened to P58-P60 per dollar for 2026-2027, from the earlier projection of P56-P58 per dollar for 2025 until 2028, Mr. Balisacan said.

The peso has repeatedly breached the P59-a-dollar mark several times since November and sank to a record low of P59.46 on Jan. 15.

At its December meeting, the DBCC cut its GDP growth target to 5-6% for this year, from 6-7% previously. It set a 5.5-6.5% growth goal for 2027.

“Now, obviously, the lower growth for next year… will impact revenue collections relative to what we initially expected,” Mr. Balisacan said.

The government is targeting to collect P4.824 trillion this year, about 3.19% less than the P4.983 trillion goal set in the June 2025 meeting.

For 2027, the revenue collection target was cut by 4.55% to P5.122 trillion, while the revenue target for 2028 was also reduced by 5.86% to P5.568 trillion.

Mr. Balisacan said government efforts, particularly in light of the flood control project scandal, were focused not only on expanding expenditures but also on enhancing spending quality.

“(This will make) sure that what we spend will actually end up with better services and in the case of income transfers with the intended target groups and in many cases with low-income households,” he added.