Upper Middle-Income Nation
We’ve been hearing about the government’s aspiration to make the Philippines an upper middle-income country within the term of President Ferdinand Marcos Jr. To the ordinary Filipino and some pessimists, the goal is ambitious and another pipe dream of the administration.
In reality, however, the government’s economic target is very much achievable within the said time frame. Our Southeast Asian neighbors have already achieved such status and I don’t see any reason why the Philippines cannot match their accomplishment.
After seeing our economy survive the pandemic and recover from its deep impact, it is time to focus again on achieving our medium to long-term growth targets. One goal that went off track is the attainment of the upper middle-income status for the Philippines that we originally wanted to achieve in 2021 or 2022.
More than an economic status, being an upper middle-income nation means the Philippines is on a sustainable high-growth path that may eventually lead to being a high-income or advanced country in the coming years. That may persuade many of our Filipino workers to stay home because their income here could match what they could earn in the US, Europe or the Middle East.
The new status also means most Filipino families will be able to buy their own homes, purchase cars and keep their extra income as bank savings. This, in turn, will make our financial system bigger and stronger.
Among the upper middle-income countries in Asia are China, Malaysia, Thailand and recently Indonesia. These nations may join high-income countries and territories such as Japan, South Korea, Singapore and Hong Kong in the coming years.
To join the club of upper middle-income countries, the Philippines should have a per capita gross national income of at least $4,256, based on World Bank standards. The Philippines in 2021 had a per capita GNI of $3,461, which most likely increased in 2022 when the economy expanded by 7.6 percent.
To achieve this status, our economy should continue to grow strongly, with the peso-dollar exchange rate remaining steady and favorable for the Philippines. The good news is that the Philippines is one of the fastest-growing economies in the region and is expected to outperform its peers in the years to come.
A World Bank official said the Philippines would likely grow steadily in the medium term, along with a rising income per capita. A sustainable and inclusive economic growth generates more jobs and increases the income levels for all.
According to National Economic and Development Authority Secretary Arsenio Balisacan, the Philippines may reach upper middle-income status by 2024 as the government works towards reducing poverty.
The Development Budget Coordination Committee, which is composed of the government’s economic managers, recently updated the medium-term macroeconomic assumptions, fiscal program, and growth targets from 2023 to 2028.
After expanding 6.4 percent in the first quarter, our gross domestic product is expected to grow within a range of 6 percent to 7 percent for the whole 2023 and 6.5 percent to 8.0 percent from 2024 to 2028, per the DBCC estimates.
If we grow as projected, we certainly would become an upper middle-income country within that time frame and even get closer to the long-term goal of achieving a high-income status over the next two decades.
The DBCC is confident the country can withstand risks and achieve an upper middle-income status in the next two years through the implementation of near- and medium-term strategies, such as ensuring timely and adequate importation, providing preemptive measures to address El Niño, strengthening biosecurity, enhancing agricultural productivity and pushing for legislative reforms.
Among the updated targets are an inflation rate of 5 percent to 6 percent this year and 2 percent to 4 percent from 2024 to 2028; peso-dollar exchange rate assumptions of 54 to 57 in 2023 and 53 to 57 from 2024 to 2028; merchandise exports growth of 1 percent in 2023 and 6 percent to 8 percent until 2028; and merchandise imports growth of 2 percent in 2023 and 6 percent to 8 percent in the next five years.
The ultimate goal is the AmBisyon Natin 2040 when Filipinos are expected to enjoy a strongly rooted, comfortable and secure life, according to Neda. It represents the national aspirations to have a stable and comfortable lifestyle for every Filipino.
If the Philippines can create more high-income quality jobs, it will bring down unemployment rate and wipe out poverty and hunger. Per the Philippine Statistics Authority, unemployment in the Philippines stood at 4.7 percent in March, down from a record 16.9 percent registered at the start of the pandemic in the second quarter of 2020.
I believe we are back on track to becoming an upper middle-income economy within the next couple of years. The World Bank recently upgraded its 2023 growth forecast for the Philippines to 6.0 percent from a previous estimate of 5.6 percent on robust consumer spending amid the improving labor market conditions.
Recently-enacted reforms such as the amendments to the Public Service Act, Foreign Investment Act, and Retail Trade Liberalization law, along with President Marcos’ aggressive promotion of the Philippines as an investment hub and a heightened focus on infrastructure development, will enable us to reach our goal of finally becoming an upper middle-income nation. That is not an impossible dream.