PHL ‘likely’ to achieve upper middle-income status by 2023 — Chua

By Tobias Jared Tomas

THE PHILIPPINES is “likely” to achieve upper middle-income status by next year, Socioeconomic Planning Secretary Karl Kendrick T. Chua said, given the strong first-quarter print and economic reforms.

“It’s likely, especially since we broadened the economy’s potential with all the reforms that we have done,” Mr. Chua said at an ANC interview on Monday. “We were hit by a pandemic like the rest of the world, but we are seeing one of the biggest bounce backs in the entire world.”

Philippine gross domestic product (GDP) expanded by 8.3% year on year in the first quarter, a turnaround from the 3.8% contraction in the same period last year. The first-quarter growth was also within the government’s 7-9% target for this year. 

Mr. Chua said the economy needs to grow by 6.6% in the next three quarters to achieve the full-year target.

“That’s doable. The bulk of the growth is going to come from domestic demand and we have to ensure a strong domestic rebound, which we are seeing,” he said, adding that recent economic liberalization measures will help attract more investments.

The Philippines had originally targeted to graduate to the upper middle-income status by 2022, but this was derailed by the coronavirus pandemic.

Last year, the World Bank increased its income range for the upper middle-income bracket to a gross national income (GNI) capital of $4,096-$12,695 from $4,046-$12,535. This definition is expected to be updated by the World Bank by midyear.

According to Philippine Statistics Authority (PSA) data, the country’s GNI per capita stood at P182,438, or about $3,500 in 2021, slightly higher than the GNI per capita of P177,546 in 2020. However, this is still lower than the GNI per capita of P200,135 in 2019.

Mr. Chua last week said the country’s GNI per capital had significantly fallen in the last two years as remittances took a hit after nearly a million overseas Filipino workers lost their jobs and were repatriated due to the pandemic.

Other economists have also expressed optimism the Philippines will reach the upper middle-income status by next year.

“I think it’s more than doable, just simply going by the strict definition of what an upper middle-income country is… The Philippines looks set to cross that threshold next year, assuming no material shock to the economy,” Pantheon Chief Emerging Asia Economist Miguel Chanco said in an e-mail.

At present, upper middle-income countries include Malaysia, Thailand, and China.

“We believe that the goal is now more achievable given that the economy appears to be on the mend after the strong first-quarter GDP showing and a likely robust second-quarter GDP print as well,” Nicholas Antonio T. Mapa, ING Bank N.V. Manila senior economist, said in an e-mail.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that improving employment data, with unemployment rates already below pre-pandemic levels, and the further reopening of the economy makes a strong case for the Philippines to reach the upper middle-income status.

The resumption of face-to-face classes, increased tourism, and higher infrastructure spending, among other reopening measures, would temper growth headwinds caused by the Russia-Ukraine war and pandemic scarring.

However, Security Bank Corp. Chief Economist Robert Dan J. Roces was more cautious.

“We are emerging from the deep scarring we experienced from the pandemic faced with elevated inflation, as such, the prime driver — private consumption, may be dampened with price growth, and by this definition, this also dampens growth recovery,” Mr. Roces said in an e-mail.

Headline inflation for April surged to a three-year high of 4.9%, as energy and food prices continued to soar.

“Nonetheless, with fiscal support poised to complement the monetary side, and with most indicators near or at the pre-pandemic level, the trajectory for an upper middle-income country status may be returning,” Mr. Roces said.