PHL upper middle-income status by 2026 seen requiring 6% growth

The Philippines needs to sustain 6% growth until next year to achieve upper middle-income status by 2026, according to National Economic and Development Authority (NEDA) Secretary Arsenio M. Balisacan.

“I think the upper middle-income status is challenging, but I think if we get 6% this year, 6% next year, we should achieve that upper middle-income status next year,” Mr. Balisacan told reporters during a briefing last week.

The Marcos administration is hoping to be reclassified as an upper middle-income economy this year or by 2026.

Growth of 6% matches the lower end of the government’s 6-8% growth target band for 2025-2028. It would exceed the 5.7% gross domestic product (GDP) posted in 2024, and the 5.5% in 2023.

The World Bank classifies countries by their gross national income (GNI). The four categories are low income, lower middle income, upper middle income and high income.

The Philippines is currently a lower middle-income country with GNI per capita of $4,230 in 2023, up from $3,950 in 2022.

Upper middle-income status is expected to require GNI per capita of between $4,516-$14,005.

Reinielle Matt M. Erece, economist at Oikonomia Advisory and Research, Inc. said upper middle-income status by next year is “still possible.”

“But it became more difficult as the economy takes a hit from heightened geopolitical risks especially in trade, remittances, and foreign investment,” he said.

US President Donald J. Trump on April 9 paused his new reciprocal tariffs for 90 days, although the baseline 10% tariff on almost all US imports remains in effect.

The Philippines faced a 17% reciprocal tariff, the second lowest in Southeast Asia.

Mr. Erece said Philippine GDP must expand by 6-7% annually, though he expects growth to be at the lower end of the target.

Peter Lee U, dean of the University of Asia and the Pacific’s School of Economics, said should the tariffs cause a global recession, it could prevent the Philippines from moving up the income category.

Such a recession can “cause our GDP/gross national product to shrink and our GNI per capita to fall. It’s anybody’s guess whether that will happen. Also, if a global economic slowdown happens, it may take until 2026 before we feel the full effect,” he said via Viber.

JP Morgan estimates a 60% probability of the world economy going into recession by year’s end, up from 40% in March.

Jose Enrique A. Africa, executive director at think tank IBON Foundation said even if Mr. Trump backtracks on the tariffs, inflation is expected to slow growth this year and the next.

“The reputational damage to the US has been done and countries will start adjusting to a world of even more uncertain supply chains, fiscal austerity to accommodate security spending from the vacuum being left by the US, and more volatile finances from a shaken dollar,” he said via Viber.

“These make it unlikely for the Philippines to rise to upper middle income this year — the only question really being how long this reclassification is going to be delayed,” he added.

Before the tariff announcement, World Bank Country Director for the Philippines, Malaysia, and Brunei Zafer Mustafaoğlu said in February that the Philippines is likely to reach upper middle-income status by 2026.

However, Mr. Balisacan said instead of the fixation on income status, the more significant indicators are employment, poverty, literacy and hunger and living standards, rather than GDP or GNI.

Mr. Africa said the Marcos administration instead should prepare to cushion the economic disruption on the vulnerable members of society.

“It should expand public education, health, housing and social protection services, and give redoubled support to domestic food production to moderate prices. The backsliding on the sustainable development goals… risks getting even worse,” he said.

Source: Business World

Moody's now expects PH to miss GDP target

Moody's Analytics trimmed its economic growth forecasts for the Philippines to below 6% for this year and 2026, reflecting the impact of uncertainties arising from the United States’ tariff policies.

However, Moody’s Analytics economist Sarah Tan said the Philippines still stands out as one of the fastest-growing economies in Southeast Asia.

Moody’s Analytics projects Philippine gross domestic product (GDP) to grow by 5.9% this year, slightly slower than its 6% baseline forecast in November.

For 2026, it also trimmed its Philippine GDP growth projection to 5.8% from 6.1% previously.

If realized, these forecasts would both fall short of the government’s 6-8% target for 2025 and 2026.

“While the expected growth is shy of the government’s target, it will mark the strongest expansion in three years,” Ms. Tan said in a webinar on Wednesday.

“Private consumption and investment will be the key driver of growth in the Philippines, supported by a stable inflation and easing monetary policy.”

Household spending typically accounts for about three-fourths of the Philippine economy.

On the other hand, Ms. Tan said the growth outlook was downgraded to account for the impact of recent US tariff policies.

Moody’s Analytics Head of Japan and Frontier Market Economics Stefan Angrick said the previous forecasts were produced in November before US President Donald J. Trump was elected president.

Since taking office in January, Mr. Trump has imposed a 20% levy on all Chinese imports; 25% tariffs on imports from Canada and Mexico, as well as duties of 25% on all steel and aluminum imports.

“Anything that happens outside the region, trade friction will depress growth elsewhere in the world. That will then feed into aggregate demand and depress growth in the Asia-Pacific region indirectly,” Mr. Angrick said.

“For (Asia-Pacific) overall, we expect GDP growth this year to come in just north of 3.5%, which is down from about 4% last year.”

The region is more exposed to these risks as it is dependent on free trade and is subsequently more vulnerable to a slowdown in global trade, Mr. Angrick said.

However, he noted that some parts of Southeast Asia do not heavily export to the US.

“The direct exposure to changes in the US tariff regime is more moderate,” he added.

Ms. Tan said the Philippines’ reliance on exports is “pretty small” compared with its neighbors.

“The impact of Trump policies on the Philippine economy is not as large as what we’re seeing in other countries, maybe like in Thailand or Indonesia,” she said.

“But the reciprocal tariffs or any tariffs that come from the US will definitely hurt the Philippine exporters, only because the US is the largest export destination for the Philippines.”

Mr. Trump has also threatened to impose reciprocal tariffs on countries that tax US imports as early as April.

“It is unlikely to leave a huge dent on the macroeconomy, but it will definitely hurt these exporters and manufacturers,” Ms. Tan added.

The US is the top destination for Philippine-made goods. Last year, Philippine exports to the US were valued at $12.12 billion or nearly 17% of total export sales.

EASING INFLATION

Meanwhile, Moody’s Analytics expects headline inflation to remain within the central bank’s 2-4% target until 2026.

“This year, we are expecting inflation to ease further and interest rates to go down even more and so that will boost private spending and investment,” Ms. Tan said.

Moody’s Analytics sees inflation averaging 2.8% this year and 3% in 2026.

The Bangko Sentral ng Pilipinas’ (BSP) baseline forecast for inflation is at 3.5% for both 2025 to 2026. Accounting for risks, inflation could hit 3.7% in 2026.

Moody’s Analytics Chief APAC Economist Steve Cochrane said central banks in the region will be able to further support their economy by reducing interest rates.

“It may be a very slow process, but there will be some continued normalization of rates going forward,” he added.

The BSP last month opted to keep its key rate steady at 5.75% amid global trade uncertainties.

However, BSP Governor Eli M. Remolona, Jr. has said they are still on an easing cycle, signaling the possibility of a 25-basis-point (bp) cut at the Monetary Board’s meeting on April 10.

Ms. Tan said they expect the BSP to cut by 50 bps to 5.25% by the end of 2025.

“As US tariffs could slow global demand and the pace of interest rate normalization, the Philippine central bank will be more cautious about monetary easing to avoid significant weakening of the peso,” she said.

STRUCTURAL REFORMS

Meanwhile, the International Monetary Fund (IMF) separately said that Southeast Asia, including the Philippines, could stand to benefit from the “ambitious” reform packages.

“Countries such as Indonesia, Malaysia, the Philippines, Thailand, and Vietnam — the five largest emerging markets out of 10 economies in the Association of Southeast Asian Nations (ASEAN) — could increase long-term real economic output,” IMF economist Anne-Charlotte Paret Onorato said in a blog.

On average, the IMF said growth in these economies could increase by 1.5% to 2% after two years and even as high as by 3% after four years if “comprehensive and simultaneous economy-wide reform packages” are implemented.

These reforms not only support faster potential growth but also help economies attain higher income levels, it said.

“Wide-ranging reforms can build resilience to shocks in the face of uncertainties and help the private sector drive growth,” it said, but noted these reforms often entail “substantial political economy challenges.”

The main structural areas these economies must address include trade openness, the IMF said.

“While the six main ASEAN economies are generally more open than the average emerging market in the Group of 20, these countries still have more barriers to trade  —and are relatively harder to trade with,” Ms. Onorato said.

“Improving logistics and trade facilitation to make cross-border transactions faster, cheaper, and less uncertain would help the five largest ASEAN emerging market countries boost economic growth.”

The multilateral institution also called for the need to address the “lagging services trade.”

The Philippines’ trade in services fell by 19.8% to $14.58 billion in 2024 from $18.18 billion in 2023, latest data from the central bank showed.

This as service exports rose by just 7.5% year on year to $51.98 billion from $48.33 billion compared with imports, which jumped by 24% to $37.4 billion from $30.15 billion.

This could help “maximize pro-competitive gains and technological spillovers, while creating high quality jobs,” the IMF said.

“In fact, the transition to a more services-based economy by emerging markets does not mean that the scope for catching-up with advanced economies’ income levels would be diminished — however, making the most of it requires facilitating the transition to highly productive services.”

The IMF noted the need for high-quality education and more apt job-matching to enhance productivity.

ASEAN economies must also improve investment attractiveness and further boost financial inclusion, it added.

“On human development, it is striking that all major ASEAN emerging market countries enjoy a demographic advantage relative to benchmarks,” Ms. Onorato said.

“In other words, they generally have relatively more people working than dependents (such as children and elderly individuals). Therefore, there is an opportunity to implement reforms now before aging populations increase fiscal burdens such as pensions and healthcare.”

Moving forward, the IMF said deliberate and ambitious structural reform packages can help bolster sustainable and inclusive growth.

“A major simultaneous reform package improving business and external regulation, governance, and human development could raise output levels by up to 3% after four years. The benefits from enacting a single major economic reform would be more modest.”

These reforms can also make economies more resilient amid external headwinds.

“Amid a shock-prone global environment, ambitious economy-wide structural reforms can also help build resilience by fostering diversified, broad-based, inclusive growth at the domestic level, and ensuring a credible and robust institutional framework to further unleash private sector-driven growth.”

Source: Business World

Filipino youth are optimistic for the future

More than four in five Filipino youth have a positive outlook for the next five years, according to a new collaborative study by Vero Advocacy and Kadence International. However, this optimism is tempered by a strong demand for urgent reforms in employment, education, and healthcare.

The study surveyed over 2,700 Gen Z and Millennials across six Southeast Asian countries, including 453 respondents from the Philippines. Vero Advocacy, a government relations arm, and Kadence International, a global market research agency, aim to explore the shared perspectives of these generations, uncovering their aspirations and challenges to help guide governments and the private sector in developing policies and initiatives that address current needs and drive long-term growth.

According to the survey, 43% of Gen Z Filipinos expect a “much better” future, and 42% anticipate a “better” life in the next five years – only slightly higher than the combined optimism rate of Millennial Filipinos, which stands at 84%. Overall, Filipino youth are more optimistic than their peers in Singapore (69%) and Malaysia (77%), with similar levels of hope for the future as young people in Indonesia (89%), Vietnam (89%), and Thailand (87%).

Both Gen Zs and Millennials in the Philippines, however, identified employment opportunities, quality education, and accessible healthcare as their top challenges. Though these issues are prevalent across the surveyed markets, satisfaction rates for these three areas of concern were the lowest among Filipino respondents. Other concerns include environmental protection, affordable housing, and effective taxation and resource management.

Employment opportunities – or the lack thereof – create uncertainty

Many young Filipinos feel uncertain about their professional futures, with 35% of Gen Z and Millennial respondents expressing a dissatisfaction over job security. Indeed, Filipino youth were the least satisfied with job security among the six countries surveyed, with a 29% satisfaction rate that lags far behind the second lowest satisfaction rate of 43% for Malaysia.

It comes as no surprise, then, that 31% of Gen Z Filipinos and 36% of Millennial Filipinos ranked employment opportunities as the top challenge they face, with most citing a lack of jobs as a key issue. For these young generations, securing a stable job is directly tied to achieving a stable life, as it ensures not just the ability to meet daily needs, but also long-term access to healthcare, housing, and further education.

To help address this issue, Filipino youth are calling for job creation programs and better employment services like career counseling and job placement schemes. These can provide students with the mentorship and opportunities they need to succeed in their chosen careers. Many also feel that additional training and education can help bridge the gap between workers and employers, helping young people align their skills with the evolving work landscape and establish sustainable careers.

High education costs education limit opportunities for Filipino youth

As with job security, Filipinos are the least satisfied with the cost of education in the region, with a satisfaction rate of 43% for Gen Z and 38% for Millennials.

Most respondents cited high costs as the main impediment to accessing quality education in the country, as families must contend with not just tuition, but also other school-related expenses like books, notebooks, uniforms, daily allowance, and special projects, school year after school year. The high cost of education is one of the main reasons why many young people forego secondary and tertiary education in the country, which further limits their employment opportunities and prevents them from building stable careers—and, by extension, a stable future.

Aside from cost, 31% of Gen Z and 30% of Millennial Filipinos cite the quality of education as the top challenge faced by the country. Many believe that the government should prioritize investments in educational facilities and technology, as well as enhanced professional development for educators. Gen Z Filipinos were more likely to indicate more support for students with special needs as something they would like to see in the future, while Millennial Filipinos raise the importance of regular review of and updates to school curricula to better prepare students for the future.

Healthcare access remains elusive for Filipino youth

Despite healthcare being a constitutional right, six out of ten Filipinos die without seeing a doctor, according to statistics from the Department of Health. Access to healthcare remains elusive for most Filipinos, with 10% of Filipino Gen Zs and 14% of Filipino Millennials citing it as the top challenge faced by the country.

Similar to employment opportunities and education costs, Philippine satisfaction rates for healthcare are the lowest in the regional survey, with only 36% of Filipino youth (39% of Gen Z and 34% of Millennials) saying they are satisfied with the current healthcare system in the country. 50% indicate that the high costs of healthcare services and treatments are a major challenge to accessing healthcare, while 25% point to the limited availability of facilities and equipment.

To improve the situation, survey respondents feel that the government must address issues of affordability, accessibility, and quality of healthcare services in the country.

Affordable housing options and better living conditions:

Young Southeast Asians, who are ushering in a new wave of urban mobility as they seek education and careers in major cities, dream of homes that offer comfort, security, and access to essential services, such as public transport, healthcare, and education. This is often tied to the broader goal of becoming financially independent and moving out of their family homes in the name of freedom, convenience, and personal growth.

All hands in: Recommendations for public policy and private initiatives

“As Southeast Asia’s youth are poised to drive the region’s future,” explained Pongsiri, Managing Partner at Vero Advocacy, “addressing these challenges is not just beneficial but essential for harnessing their full potential and ensuring a sustainable and inclusive economic growth.”

With its expertise in government relations in Southeast Asia, Vero Advocacy recognizes the essential link between youth, private stakeholders, and government. By understanding young people’s concerns, Vero Advocacy underscores the need for meaningful engagement and effective responses from governments and companies to create inclusive and sustainable policies and initiatives.

• Youth-Centric Policies – Governments should prioritize initiatives that guarantee access to quality education, expand job opportunities, and improve healthcare affordability and accessibility. By focusing on these areas, they can create a supportive environment for young people to thrive.

• Genuine Youth Engagement – It is crucial to involve young people in policy dialogues and decision-making processes. Their insights and perspectives should be actively sought, ensuring that their voices are both heard and valued in shaping policies that impact their future.

• Dedicated Spaces for Youth Advocacy – Establishing dedicated forums or platforms where youth can freely share their advocacy efforts is vital. These spaces should facilitate open dialogue, encourage innovative thinking, and provide opportunities for young individuals to highlight their contributions to national development.

• Support for Entrepreneurs – The private sector should develop entrepreneurial programs that leverage existing resources and expertise. By offering funding and training, businesses can nurture creativity and business acumen, empowering a new generation of innovators and leaders.

• Corporate Social Responsibility – Businesses should embed youth-centric goals into their Corporate Social Responsibility (CSR) strategies, focusing on initiatives that uplift communities and address social issues pertinent to young people. This alignment will foster a more inclusive approach to social development.

“With Gen Z and Millennials comprising over half of the Philippine population, it is critical for leaders and changemakers to listen to their needs,” said Gio Tingson, Youth Advocate and former Chairperson of the National Youth Commission. “Many of us often hear and repeat Dr. Jose Rizal’s statement about youth being the hope of the motherland. But while it is true that young people are eager to effect change, it is just as important for us to listen to them and empower them with the tools they need to succeed and build a future that is sustainable for all.”

Source: Adobo Mag