The Philippines will likely reach upper-middle-income country (UMIC) status by 2026, as the economy continues to be driven by private consumption spending and the services sector, the World Bank said in a report Monday.
It said, however, human capital development lagged economic growth in the Philippines.
“Between 2011 and 2019, economic growth increased to an average of 6.3 percent year-on-year. Growth was pro-poor, job-rich, carbon efficient, and spatially balanced. Although the Philippines experienced a sharp growth contraction during the pandemic, the country has since recovered and remains among the top growth performers in the region. Although the Philippines is expected to become UMIC by 2026, its human capital indicators fall short of a typical UMIC,” the World Bank said in its Philippines human capital review.
“Catching up with these peers will hence require more and better investments in human capital across the life cycle,” it said. “Across the six subcomponents of the HCI, the Philippines performs lower than its regional peers and an average UMIC, except for expected years of schooling.”
It said the Philippines has the lowest HCI of 52 percent relative to neighboring UMICs such as Malaysia and Thailand. This implies that a child in the Philippines today can achieve just over half of their productive potential by age 18.
Indonesia and Vietnam, despite being lower-middle-income countries (LMICs) like the Philippines, have HCIs of 54 and 69 percent, respectively, about 2 to 17 percentage points higher than that of the Philippines.
Meanwhile, the average HCI for UMICs stands at 56.4 percent, nearly five percentage points higher than the Philippine HCI.
“If the Philippines were to achieve its UMIC status by 2026, it would need sizeable investments in human capital in the short and medium terms to attain comparable human capital outcomes,” the report said.
“The wealth of the country is its people, and its prosperity is generated by its people. Yet human capital is still underutilized,” the World Bank said.
The report says human capital effort should be addressed through nutrition and education throughout the Filipino’s life, starting from its early childhood, in order to nurture its full potential in the future.
“The Philippines urgently needs to address nutrition and early childhood education issues among young children, as these affect their future skill formation and productivity,” the World Bank said.
Human capital is considered essential for the country to reach its potential, as over 70 percent of the wealth of the country is its people, which comprise 60 percent of the economy.