The Philippines to achieve upper-middle-income status in 2025

The Philippines has a good chance of attaining upper-middle-income status next year if economic growth targets are attained, National Economic and Development Authority (NEDA) Secretary Arsenio Balisacan said.

"We have a good chance of attaining upper middle-income country (UMIC) status in 2025," Balisacan said during the year-end briefing held at the NEDA office in Mandaluyong City.

The World Bank defines UMIC economies as those with gross national income (GNI) per capita ranging between $4,516 and $14,005 for the fiscal year 2025.

GNI per capita measures the economic output per citizen, encompassing both domestic and international partners.

As of end-2023, the Philippines' GNI per capita was at $4,230.

To attain the UMIC status, Balisacan said the country needs to achieve the growth target this year and maintain the growth trajectory in 2025.

He also cited the need for the peso not to weaken significantly relative to the currencies of the country's trading partners.

Balisacan is optimistic that the 6-percent lower end of the government's growth target will still be achieved this year.

Philippine economic growth averaged 5.8 percent for the first three quarters of 2024.

"We remain optimistic about the fourth-quarter economic performance. Holiday spending, more stable commodity prices, and a robust remittance inflow and labor market give us confidence that our 6.0 to 7.0 percent growth target is still achievable," said Balisacan.

Balisacan, however, noted that the series of typhoons that hit the country in the past months affected the agriculture sector.

"On the other hand, the positive forces could outweigh those developments in the agriculture sector," he said.

Balisacan said the Bangko Sentral ng Pilipinas' decision to cut policy rates by a cumulative 50 basis points and reduce reserve requirements are expected to spur growth in private spending, particularly on big-ticket consumer items and investments in capital-intensive infrastructure in the coming quarters.

"This move will support economic growth by making borrowing more affordable for businesses and consumers," he said.

Easing inflation, continuing robust labor market and the continued growth in remittances, he said, will also help boost economic growth.

Balisacan said the government's goal to lower nationwide poverty from 15.5 percent in 2023 to a single-digit rate by 2028 also remains achievable.

"Maintaining low and stable prices is critical to reducing poverty and making economic growth more inclusive," he said.

"We will continue to enhance our social protection programs, particularly through digital solutions enabled by the National ID, to protect our gains and ensure that no one is left behind," Balisacan added.

Balisacan, meanwhile, said that external risks to growth include geopolitical tensions, big-power rivalry and uncertainty arising from the political-economy dynamics within and between the country's major trading partners such as the United States.

"With the upcoming assumption of United States President-elect Trump, we maintain that the Philippines is ready to work with any economy and to adjust our policies accordingly, as we have continuously built solid and close relationships with the US and other countries," he said.

Source: Manila Times

Private construction still faces issues

National Economic Development Authority (NEDA) Secretary Arsenio Balisacan said on Friday that the country's private construction industry had not yet fully recovered after the pandemic, with investors pointing to right-of-way issues and the high cost of electricity as the biggest reasons for holding out.

"Construction has not yet fully recovered since the Covid-19 pandemic struck with the share of private construction declining relative to public construction. We need to substantially improve the investment climate for the private sector," Balisacan said during the Build Better More Infrastructure Forum held at New Clark City in Tarlac.

The socioeconomic planning chief attributed the slowdown to several factors.

"First, we expected some investor hesitation owing to initial policy uncertainty brought about by the elections in 2022. On the other hand, lingering and persistent inflation, and a challenging external environment, particularly a strong dollar in the past two years, led to the elevated interest rates we see today," he said, adding they will continue to invite foreign investors in the infrastructure.

Other factors are right-of-way issues when acquiring private lands for public use, the high cost of electricity and the ease of doing business.

It is for this reason Balisacan is pushing for Congress to pass the Right-of-Way bill into law to ensure infrastructure products are completed on time with an emphasis on the provision concerning the valuation of property, seen as a game changer in resolving conflicts between the government and private owners.

"We have gone back to Congress regarding the Right-of-Way law and through the Ledac (Legislative Executive Development Advisory Council) they agreed to pass that law within the remaining term of this administration. So with that, I think many of the problems we are encountering in the quick implementation of infrastructure projects will be resolved," he said.

The NEDA chief expressed confidence that by 2025, private construction would spike back to its pre-Covid numbers, if not more.

"But with public investments coming in strongly, that will be the signal for the private sector to come in, too, especially that regional and global community investment climate is improving, notwithstanding these geopolitical tensions, because that's another factor that can matter," Balisacan said.

Source: Manila Times

PHL on track to reach upper middle-income status

The Philippines is still on track to become an upper middle-income economy next year as long as the growth momentum continues, National Economic and Development Authority (NEDA) Secretary Arsenio M. Balisacan said.

“If growth this year is not dampened, [we] should be on track,” he told reporters on the sidelines of the BusinessWorld Economic Forum on Wednesday.

The administration of President Ferdinand R. Marcos, Jr. has set a target for the Philippines to reach upper middle-income status by 2025. An upper middle-income country means having a gross national income (GNI) per capita income range of $4,466 to $13,845.

The World Bank currently classifies the Philippines as a lower middle-income country with a GNI per capita of $3,950.

Mr. Balisacan said gross domestic product (GDP) growth must average 6.1% in the next three quarters to hit the government’s 6-7% growth target.

The Philippine economy expanded by 5.7% in the first quarter, slightly faster than 5.5% in the previous quarter.

“There are still three quarters out there. The good thing is inflation is manageable now. Even though we expected worse for the April [print,] it turned out better than expected. So, we hope that will continue,” Mr. Balisacan said. 

Inflation accelerated for a third straight month to 3.8% in April from 3.7% in March. Inflation averaged 3.4% in the January-April period, below the central bank’s 3.8% full-year forecast.

In the coming months, NEDA expects economic growth to be favorable as the Bangko Sentral ng Pilipinas (BSP) was “less hawkish” in its last policy meeting and has signaled a possible rate cut in August.

“If the BSP is not going to raise any further the interest rate, and in fact, the governor has indicated that they might start loosening, so that will improve expectations, and expectation drives consumption,” Mr. Balisacan told reporters.   

Last week, the Monetary Board kept its target reverse repurchase rate unchanged at a 17-year high of 6.5%.

The waning El Niño dry pattern and expected easing of rice prices may also improve the country’s GDP growth prospects, according to the NEDA chief.

“Since El Niño is tapering, we expect that world prices for commodities, including rice, are expected to moderate and start falling, especially for rice,” Mr. Balisacan said.

Rice inflation, which contributes nearly half to the overall inflation print, accelerated by 23.9% in April. However, this was slower than 24.4% in the previous month.

Security Bank Corp. Chief Economist Robert Dan J. Roces said that achieving upper middle-income status “is not just about hitting a specific threshold, but about building an equitable economy.”

“While the Philippines has made significant progress in recent years, driven by factors such as a young population, a thriving services sector, and increasing foreign investments, it is also crucial that the benefits of economic growth are more evenly distributed,” Mr. Roces said.

To increase its GNI per capita, the country must also ensure competitiveness across all sectors, address infrastructure gaps and challenges, and improve governance in all institutions, Mr. Roces said.

Since 1987, the Philippines has been classified as a lower middle-income economy, according to the World Bank’s earliest records.

“While the Philippines has strong growth prospects that suggest it could reach upper middle-income status in a few years, several challenges — like a potential global economic slowdown, infrastructure and education deficits, and the impact of natural disasters — could impede this goal,” Jonathan L. Ravelas, senior adviser at professional service firm Reyes Tacandong & Co., said.

The World Bank forecasts that the Philippines would be the fastest-growing economy in Southeast Asia this year with a 5.8% growth estimate.

For 2025, the multilateral lender hiked its growth forecast for the Philippines to 5.9% from 5.8%.

However, the World Bank’s growth forecasts for the Philippines still fall behind the government’s 6-7% target band.

Mr. Balisacan cited the need to “diversify” the country’s growth sources to ensure inclusive and sustainable economic expansion.

“So, what are the growth drivers? We are pushing on all fronts. Opportunities across the entire economy abound in enabling public infrastructure such as energy, water, and physical and digital connectivity, as well as social infrastructure such as schools, healthcare facilities, and housing,” he said.

The government is also looking to expand growth outside the National Capital Region (NCR), he added.

Source: Business World