The Philippines is projected to become an upper middle-income economy by 2031, surpassing the government’s goal of achieving this status by 2025. This growth comes amidst a broader slowdown in the Association of Southeast Asian Nations (ASEAN) economy, according to a report by ANZ Research.
ANZ economists Sanjay Mathur, Krystal Tan, and Debalika Sarkar authored the report, stating that the Philippines is expected to meet the World Bank’s threshold for upper-middle-income nations by 2031. While this is a positive development, ANZ Research raised concerns about the speed of growth and the potential for higher per capita incomes.
Currently classified as a lower middle-income country with a Gross National Income (GNI) per capita of $3,950, the Philippines aims to reach the GNI range of $4,466 to $13,845 for upper middle-income economies. In comparison, Malaysia, Thailand, and Indonesia already fall within the upper-middle-income category.
However, ANZ Research warned that the growth in ASEAN-4 countries, including the Philippines, may slow down over the next decade due to demographic challenges. While the Philippines has a more favorable demographic phase with a significant portion of the population in the working-age bracket, there is room to increase the labor force participation rate (LFPR) to counter the effects of slowing population growth.
To mitigate this slowdown, ANZ suggested interventions such as enhancing digital skills, improving infrastructure, and fostering digitalization in various sectors. Successful policy interventions could potentially lift the overall GDP by 0.5 to 0.7 percent from baseline forecasts.
Despite these opportunities, challenges remain in improving digital skills and education in ASEAN-4 economies to meet global standards. ANZ emphasized the importance of policy interventions to drive economic growth and create a cycle of increased productivity and income growth in the region.
