Philippines Falls Short as Vietnam Rises

JULY03,2025

MANILA, Philippines – Despite hitting a new record in average income, the Philippines remains stuck in the lower middle-income category, missing its long-held goal of joining Southeast Asia’s upper middle-income economies, according to the latest World Bank (WB) classification.

For the 38th consecutive year, the country remains in the lower tier — a signal that millions of Filipinos are still struggling to catch up economically with their regional neighbors.

📉 What’s Holding the Philippines Back?

In its 2025 income classification report, the World Bank placed the Philippines in the group of lower middle-income economies — defined as countries with a gross national income (GNI) per capita between $1,136 and $4,495.

The Philippines’ GNI per capita reached $4,470 in 2024, narrowly missing the new threshold of $4,496 required to qualify as an upper middle-income economy. This comes despite the World Bank slightly lowering the income range from the previous year (from $4,516 to $4,496).

While this marks a record-high income figure for the country — improving from $4,320 in 2023 — it still wasn’t enough to climb the ladder.

💬 “We’re just $26 short,” remarked many economists, pointing out the frustratingly narrow gap.

🇻🇳 Vietnam Surpasses the Philippines

What’s even more striking is that Vietnam has now overtaken the Philippines, posting a GNI per capita of $4,490 — enough to be ahead, despite once lagging far behind. Just a decade ago, Vietnam was still trailing the Philippines economically.

This shift highlights how fast-paced economic reforms, industrialization, and export-led growth have propelled Vietnam forward, while the Philippines continues to grapple with systemic challenges like infrastructure gaps, slow-paced job creation, and population pressures.

📊 How Does the Philippines Compare in ASEAN?

Here’s where the Philippines stands among its Southeast Asian neighbors:

• Lower Middle-Income Group: Philippines, Vietnam, Cambodia, Myanmar, Laos
• Upper Middle-Income Group: Indonesia, Thailand, Malaysia
• High-Income Group: Singapore, Brunei

The Philippines has been stuck in the lower middle-income group since 1987, despite its growing population and expanding economy.

🏛️ Government’s Goal vs Reality

The Marcos administration had previously expressed hopes to elevate the country to upper middle-income status before the end of its term in 2028. However, the World Bank now predicts that the Philippines is more likely to achieve this goal by 2027, delayed by global headwinds such as inflation, interest rate hikes, and ongoing trade tensions.

While economic growth has been relatively stable, the challenge lies in ensuring that growth translates into inclusive development — where income gains are felt not just in macro numbers but in the everyday lives of Filipinos.

💸 Why This Matters: Aid, Loans, and Global Standing

The World Bank’s income classification isn’t just symbolic — it has real-world consequences. A country’s status can influence access to concessional loans, grants, and foreign aid. Many low and lower-middle-income countries enjoy favorable financing terms from global institutions to fund poverty reduction and development projects.

As the Philippines remains just below the cutoff, it walks a tightrope: not poor enough to access generous aid packages, yet not rich enough to graduate to better economic status.

Still, there’s good news: the World Bank recently approved a new country partnership framework, unlocking billions of dollars in development financing to help the country accelerate inclusive growth, infrastructure upgrades, education, and social protection programs. NOWTREND

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