The World Bank’s upgrade marks a long-sought economic milestone for the Philippines, but high prices, unemployment, and income inequality continue to plague millions of Filipinos.
MANILA, Philippines – The Philippines is now classified as a middle-income country by the World Bank (WB).
The WB confirmed the improvement in the latest update of the country’s income classification on Wednesday, July 1, placing the Philippines in the middle-income category after its national income per capita reached $4,850. This surpassed the $4,636 threshold set by the World Bank for middle-income economies.
“This confirms the stability of the Philippine economy,” Department of Economy, Planning, and Development (DEPDev) Secretary Arsenio Balisacan said in a press release. “Despite global and domestic shocks, we have relentlessly pursued inclusive growth, strengthened fundamentals, and remained on track with our development agenda.”
The World Bank said the Philippines’ reclassification was driven by a broader economic expansion rather than a boom in just one sector. The Philippine economy grew by an average of 5.8% from 2021 to 2025, with growth in key industries helping to lift GDP per capita by 8.5% in 2025.
The Philippines was one of five economies that moved from low- to middle-income status this year, along with Jordan, Micronesia, Sri Lanka and Vietnam. Togo also moved up, but from low income to lower middle income.
The WB updates its income classification every July 1, using estimates of gross national income per capita from the previous calendar year. The classification covers 218 economies this year and will serve as a global reference until the end of June 2027.
The categories also help determine access to soft loans and development assistance, and are widely used by governments, researchers, and international institutions to monitor economic development.
For the Marcos administration, the improvement is expected to support investor confidence and help attract high-quality investments that can generate better jobs.
DEPDev said some concessional official development assistance may decrease over time, but said that strong fundamentals and better access to market-based financing should outweigh these adjustments.
Structural problems remain
But upper-middle income status is not the same as broad prosperity. GDP per capita is a national average, not a measure of how income is distributed among households. It also includes income earned by overseas Filipinos, meaning overseas Filipino workers helped push the country over the threshold.
“Our OFWs have played an important role in reaching this point,” Balisacan said. “At the same time, our long-term goal is to create more high-quality jobs at home so that employment abroad becomes an option, not a necessity.”
The improvement also comes at a time when many Filipinos continue to face high costs of living. The latest available inflation data from the Philippine Statistics Authority showed inflation at 6.8 percent in May 2026still above the Bangko Sentral ng Pilipinas’ target range of 2 to 4%. Inflation of food and non-alcoholic beverages reached 5.7%, inflation of transport prices at 16.2% and housing, water, electricity, gas and other fuels at 7.8%.
Inflation is still expected to remain high in June, with the BSP estimating it to have stabilized in the 6% to 7% range. Some of the price pressure may have eased when domestic fuel prices fell and staple food items such as rice and meat became cheaper. But these can be partially mitigated by higher electricity rates and grocery prices.
Income inequality has decreased, but remains a concern. The PSA Family Income and Expenditure Survey put the average annual family income at P353,230 in 2023, while the average annual family expenditure reached P258,050.
The average, however, masks large differences across households and regions, with the National Region posting the highest average household spending in poorer regions such as Bangsamoro Autonomous Region in Muslim Mindanao among the lowest.
Quality of work is another pressure point. In April 2026, unemployment rate stood at 4.7%, equivalent to 2.41 million unemployed Filipinos. But the largest number, 7.41 million employed Filipinos, were not employed, meaning they wanted more work hours, another job, or a new job with more hours. The underemployment rate rose to 15.2% in April from 14.6% a year earlier.
Balisacan agreed that the new classification does not eliminate these structural problems.
“We acknowledge that income inequality persists, and many continue to face economic hardship. Our priority is to ensure that growth becomes more inclusive, and that its benefits reach all Filipinos,” he said. – Rappler.com
