Upper-Middle-Income Country at Last
Our economic managers have predicted that the Philippines is set to join the ranks of upper-middle-income economies this year on the back of sustained economic growth of above 6 percent, after being stuck in the lower-middle-income group for decades.
As a Filipino, I am hopeful and positive that this forecast will come true. A higher economic standing will encourage more foreign investors to visit our country and further propel the economy.
No longer the economic laggard in Asia, the Philippines is even touted as the region’s next economic powerhouse.
The World Bank in 2017 categorized countries into four major groups based on gross national income (GNT) per capita: low-income (less than $1,000), lower middle-income ($1,000 to $3,900), upper middle-income ($3,940 to $11,120) and high-income group ($12,570 and higher).
GNI per capita in nominal terms is computed as the total value of goods and services produced within the country plus foreign asset inflows divided by the population at midyear. In 2017, the Philippines was listed in the lower-middle-income group with a GNI per capita of $3,660, ahead of Indonesia’s $3,540.
The World Bank has yet to compile the 2018 GNI per capita of different nations, but the National Economic and Development Authority believes the figure for the Philippines exceeded the $3,700 mark last year, after the 6.2-percent growth in the gross domestic product and the 5.9-percent expansion of the GNI.
Data from the National Income Accounts compiled by the Philippine Statistics Authority show that the GNI of the Philippines reached P20.91 trillion at current prices in 2018, while per-capita income improved to P196,155.
Unfortunately, the peso depreciated 4.5 percent last year to average 52.6614 per US dollar in 2018 from 50.4037 in 2017, based on the data of the Bangko Sentral ng Pilipinas. Despite the weaker peso, the dollar value of the country’s GNI per capita still improved to around $3,724 last year.
With the projected economic expansion of 6 percent to 7 percent in 2019 coupled with the strengthening of the peso against the greenback, the Philippines is on its way to breaching the $3,900 threshold and joining the ranks of the upper-middle-income countries this year. This is way ahead of the 2022 target originally set by Neda.
Finance Secretary Carlos Dominguez III himself announced before the World Bank the country’s improving financial condition. “This year, as the bank celebrates its 75th year, we are proud to announce that the Philippines will achieve the status of an ‘upper-middle-income’ nation ahead of schedule. The bank shares much credit for this achievement,” Dominguez said in a speech in Washington, D.C., which hosts the World Bank.
Dominguez said with the resilience that the country displayed under an inclusive economy that grew 6.2 percent last year despite the uncertainties of a looming trade war, a sharp spike in oil prices, and an elevated domestic inflation rate, the Philippines would likely become an upper-middle-income country ahead of the target this year.
Our ultimate goal, of course, is to become a high-income economy, which means our GNI per-capita income should exceed $12,500. The Duterte administration hopes that this will be achieved by 2040. For the meantime, let us cherish our new status as an upper-middle-income country.
Dominguez sounds bullish because the Philippines is now one of the fastest-growing economies in the world. “Reaching this milestone in our development story is attributable to many years of hard work, especially in building a strong fiscal position and a bureaucracy honed to the task of catalyzing growth,” he said.
In a separate speech before the United States Chamber of Commerce, Dominguez said now is the “best time” to invest in the Philippines, which is poised to become Asia’s next economic powerhouse.
His speech is actually an invitation for foreign investors to participate in the remarkable growth story of the Philippines. The final credit goes to the Filipino people for their outstanding resilience and hard work that paved the way for our strong economy.