“UMIC status means higher incomes, improved living standards and greater opportunities within the country.”
The Philippines is poised to join the upper-middle-income country (UMIC) ranks by 2025, a significant milestone after decades as a low-income and lower middle-income nation. Sustained economic growth and a stable foreign exchange rate are fueling this transition.
“With current data, estimates suggest that the Philippines is poised to achieve UMIC status by 2025, provided the economy sustains a robust growth rate in 2024 and 2025,” National Economic and Development Authority (NEDA) Secretary Arsenio Balisacan said.
This shift has far-reaching implications for Filipinos and businesses. The country’s gross national income (GNI) per capita, a key metric used by the World Bank to classify countries, surpassed $4,200 in 2023. Achieving UMIC status, which requires a GNI per capita of around $4,500, will have significant effects on the government, businesses, consumers and the general public.
For Filipinos, UMIC status means higher incomes, improved living standards and greater opportunities within the country. Increased incomes would provide better access to quality goods and services, including healthcare, education and housing. This would also lead to improved overall well-being, a higher life expectancy and a more educated workforce, further driving economic growth.
As a country ascends to the UMIC bracket, it sees increased government revenues through taxes and other sources. These additional funds can be invested in infrastructure, healthcare, education and social services, creating positive ripple effects. Improved infrastructure such as roads, airports, communication networks and power plants foster commerce and attract foreign investments. Stronger healthcare and education systems contribute to a more productive and healthier population.
For businesses, UMIC status opens up one of the world’s largest consumer markets, with over 115 million people who have the capacity to spend. UMICs are attractive destinations for foreign direct investments (FDIs). A more stable economic environment, stronger institutions and a growing consumer market offer lucrative opportunities for international businesses. FDIs bring capital, technology transfer, managerial expertise and access to global markets, which are crucial for further economic development.
Moving into the UMIC category typically involves diversifying the economy away from dependence on a few sectors such as agriculture or raw material exports. This diversification reduces vulnerability to external shocks and fosters the development of more sophisticated industries, including manufacturing, services and information technology. The economy thus becomes more resilient, sustainable and capable of generating higher-value jobs.
Economic growth and the accompanying rise to UMIC status often go hand in hand with improved governance and stronger institutions. As countries develop economically, there is usually a parallel improvement in the quality of governance, including better rule of law, more effective public administration and reduced corruption. Strong institutions are essential for sustaining economic growth, ensuring social stability and maintaining investor confidence.
Becoming a UMIC can lead to significant reduction in poverty and inequality. As incomes rise and economic opportunities expand, more people are lifted out of poverty. The government also has more resources to implement social safety nets and programs aimed at reducing inequality. While challenges remain, especially in addressing income disparity, the overall trend in upper-middle-income countries is towards greater economic inclusion.
With greater economic power comes increased influence on the global stage. UMICs often play a more prominent role in international organizations, trade negotiations and regional partnerships. This increased influence allows these nations to better protect their interests, advocate for policies that benefit their development, and contribute to global economic stability.
As economies grow, there is a corresponding increase in investment in research and development (R&D). UMICs typically have the resources and infrastructure to support innovation and technological advancements. This can lead to the development of new industries, improved productivity, and a stronger position in the global economy. Innovation is crucial for maintaining competitiveness and ensuring long-term economic growth.
In UMICs, financial systems become more developed and accessible. Citizens and businesses have better access to credit, banking services and financial products, which can spur entrepreneurship and investment. A more stable financial system reduces the risk of economic crises, providing a more secure environment for both domestic and international investors.
Finally, economic growth and increased income levels often lead to cultural and social enrichment. With more resources, countries can invest in preserving and promoting their cultural heritage, supporting the arts and enhancing the quality of life for their citizens. A more prosperous society tends to be more inclusive, tolerant and open to cultural exchange, fostering a richer, more diverse social fabric.
To attain UMIC status, the government proposed a budget of P6.352 trillion for 2024. Department of Budget and Management (DBM) Secretary Amenah Pangandaman said the budget aims to fulfill the needs and aspirations of the Filipino people and continue fostering economic and social transformation for a prosperous, inclusive, and resilient future.
The proposed budget represents an increase of 10.1 percent from the 2024 appropriations. It is also equivalent to 22.0 percent of GDP. The budget aims to sustain the high growth trajectory of the Philippine economy to achieve the administration’s economic target and reduce poverty levels to a single digit by 2028.
Department of Finance Secretary Ralph Recto said the government anticipates a 10.3-percent average annual growth in total revenues to support people’s growing needs. Tax collections are projected to increase by an average of 11.8 percent annually, faster than the projected growth of the nominal GDP.
“We will soon witness and experience the results of every effort, every policy decision, and every investment commitment we have secured,” Recto said. “All these are designed to ensure a more comfortable life for all, lifting 14 million Filipinos out of poverty by the end of the President’s term.”
“These are all meant to build an inclusive economy that secures the future of every Filipino child,” Recto said. “It will be an economy with a more secure base of food production, a more efficient logistics backbone, and a more responsive healthcare system. It will be a Bagong Pilipinas that every Filipino rightfully deserves—one that the next generation will proudly inherit.”
Becoming a UMIC is a significant achievement that brings social and economic benefits. While the journey is challenging, the rewards are substantial, paving the way for a brighter future for Filipinos.
