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Amid escalating global trade uncertainty driven by tariffs, achieving upper-middle-income status may become more challenging for the Philippines in 2025 and 2026, delaying it further to later years, according to a World Bank economist.
Gonzalo Varela, World Bank lead economist and program leader for the Philippines, told reporters on the sidelines of a high-level conference of middle-income countries on Monday, April 28 that the country could reach upper-middle income status by 2027.
“From the analysis that we have done and the scenarios that we have, it would be reasonable to expect that in a couple of years, the Philippines could be reaching the upper middle income status that is passing that threshold. So, it’s more likely that it will happen in 2027,” Varela told reporters.
However, he argued that becoming a UMIC is not impossible as the country could still achieve the status if its economy is met with upside risks.
Varela had previously said that the Philippines could become an upper-middle income country (UMIC) by next year, should the economy accelerate by six percent.
But the multilateral lender recently trimmed its growth forecast for the Philippines, citing the possible impact of the sweeping tariffs imposed by United States (US) President Donald Trump as a major drag.
If realized, the lowered growth projections for the Philippines over 2025 and 2026 would bring the country to its slowest two-year economic expansion since the pandemic. ‘
Late last year, the World Bank was more optimistic, projecting Philippine GDP growth at 6 percent for 2025 and 6.1 percent for 2026. Now, it expects the country’s gross domestic product (GDP) to grow by 5.3 percent this year and slightly improve to 5.4 percent next year.
These would fall below the government’s more ambitious six-to-eight percent annual economic growth target for the next two years.
Similarly, if these projections hold true, they would mark the lowest growth rates since 2021, when the economy began recovering from the severe pandemic lockdowns that led to the country’s worst post-war recession in 2020.
While the impact of Trump tariff is yet to be seen, Valera said what is visible at the moment is the heightened global economic uncertainty. Such a trend is “likely” to affect growth prospects, he said.
“So in a small local economy like the Philippines, efforts here should be on doubling down on domestic reform so that the increase, so that the costs of investing decrease,” Valera said.
Valera said global economic uncertainty is “a drag on investment,” and to counter this, the focus should be on strengthening domestic reforms to lower investment costs and mitigate the impact of global instability.
He suggested that local policymakers should address issues like the lengthy registration process for foreign firms. Currently, it takes 106 days to register a foreign business in the Philippines, compared to just 15 days in Singapore.
Varela said this delay adds unnecessary costs to investment, which could be reduced by streamlining regulations and speeding up reforms.
“These are all reforms that will make investment less costly, that will boost investment. These are the types of interventions that more policy makers consider to offset the costs of increased government uncertainty,” Valera stressed.
Asked whether the cabinet-level Development Budget Coordination Committee (DBCC) will revise its targets in light of the economic developments, DBCC head Amenah Pangandman told reporters that the interagency would make “no major revisions for growth outlook” for 2025.
She also said “not yet,” hinting that the targets may change once the first-quarter data, including GDP and inflation, are released.
