Philippines Reaches Upper-Middle-Income Status: World Bank

The report identifies electricity prices as one of the country's biggest economic challenges, with power costs remaining among the highest in ASEAN.

The Philippines has entered the ranks of upper-middle-income countries, marking a major economic milestone built on two decades of steady growth, rising incomes and reforms that strengthened the country's economy. The World Bank says this achievement reflects years of efforts to improve the business environment, expand trade, maintain macroeconomic stability and encourage investment that created jobs and reduced poverty.

The latest World Bank Philippines Economic Update notes that reaching this level is an important step, though maintaining it will depend on fresh reforms that strengthen economic resilience, support investment and create better opportunities for Filipino families.

Growth Faces Fresh Challenges

The report expects the Philippine economy to grow by 3.7 per cent in 2026, a slower pace than previously seen. The slowdown is linked to policy uncertainty that has weakened investor confidence, reduced fixed investment and lowered foreign direct investment. At the same time, higher global energy prices have pushed domestic inflation to an average of 4.8 per cent during the first half of 2026, increasing pressure on household budgets and affecting employment.

Low-income families have carried the greatest burden of rising prices, with the poorest 30 per cent of households facing the sharpest impact. The World Bank believes stronger policy action could help the economy recover, with growth projected to improve to 5.2 per cent in 2027.

Reforms Needed to Protect Progress

According to the report, the Philippines should focus on three key priorities to protect its recent gains. Expanding targeted social assistance, including temporarily extending the 4Ps conditional cash transfer programme to near-poor households, would help prevent rising energy costs from pushing an estimated 2 million Filipinos into poverty.

Keeping inflation under control while supporting economic recovery remains another priority. The report also calls for clearer infrastructure policies, lower business costs and measures that rebuild investor confidence, encouraging both public and private investment to return.

World Bank Division Director for the Philippines, Malaysia and Brunei, Zafer Mustafaoglu, described the country's new income status as an achievement earned by the Filipino people, adding that continued reforms will be essential to sustain growth, attract investment and create more quality jobs.

Cheaper Electricity Could Drive Future Growth

The report identifies electricity prices as one of the country's biggest economic challenges, with power costs remaining among the highest in ASEAN. Lower energy costs could improve business competitiveness while easing household expenses.

A scenario examined by the World Bank shows that increasing renewable energy to 35 per cent of the country's energy mix by 2030, together with investments in power transmission, storage, grid flexibility and stronger market competition, could reduce residential electricity prices by as much as 28 per cent in the near term.

The same pathway could create around 161,000 new jobs and help lift approximately 730,000 Filipinos out of poverty, showing how energy reforms could strengthen both economic growth and living standards in the years ahead.