The government has again announced the possibility of the Philippines attaining upper middle-income country (UMIC) status with “a good chance” in 2025. If attained, the Marcos Jr administration will doubtless hype this as a sign of economic success. It really isn’t though and any hype to that effect will just tokhang* the truth.
Does UMIC status mean that Filipinos will have reached upper middle-income status? Unfortunately not. The measure of being UMIC is an average that completely obscures the conditions of the majority. Also, UMIC doesn’t really mean development in its most important sense of the well-being of people.
What is this UMIC thing anyway?
Status symbol
It’s the World Bank that has been classifying countries according to income levels since 1989. Their main motivation was to have a convenient indicator for designating whether a member country is or is not eligible to borrow and, if so, whether this borrowing is on commercial or concessional terms. It’s like a bank looking at someone who walks into a branch to borrow money and then charging low interest rates if they’re poor and high interest rates if they’re rich.
The World Bank settled on using gross national income (GNI) per capita. GNI – which used to be called gross national product or GNP – is the total value of goods and services produced by a country’s residents whether domestically or abroad. This GNI is then divided by the population to account for differences in the size of countries.
The World Bank classifies a country as an “upper middle-income economy” when its GNI per capita reaches US$4,516 and does not go beyond US$14,005; beyond this it becomes a “high-income economy.” This is calculated using its Atlas method rather than prevailing market exchange rates. The World Bank estimated the Philippines’ GNI per capita at US$4,230 already in 2023, hence the government’s optimism for 2025.
The “per capita” computation is to get a better idea of the level of development or underdevelopment of a country than looking at just what GNI would give. For instance, the Philippines’ GNI of US$485.2 billion (2023) is 103 times larger than the US$4.7 billion (2022) of the Cayman Islands where so much of the Marcos’ ill-gotten wealth is stashed.
Adjusting for the difference in population, however, the Cayman Islands’ GNI per capita of US$68,790 is over 16 times that of the Philippines’ US$4,230. This is because our 115 million population is much bigger than the Cayman Islands’ 69,000.
Status quo
It’s pretty obvious that 115 million Filipinos don’t have the nearly Php250,000 each per year that “US$4,230 per capita” seems to imply. More so if we convert this using the average family size of 4.1 persons to get the approximate average annual family income of over Php1 million – it’s probably only the richest 5% or so of Filipino families who earn that much..
In contrast, IBON estimates that about 17 million families, or about two-thirds of Filipino families, struggle to make do with anywhere from Php20,000-300,000 a year (from less than Php2,000 to Php26,000 monthly). Inequality is undoubtedly stark in the country. According to the latest Family Income and Expenditure Survey (FIES) for 2023, the richest 10% of Filipino families have about as much income as the poorest 50% of families combined.
The World Bank’s classification scheme obscures more than it describes. On the part of the Philippine government, it will be grossly insensitive to hype an “upper middle-income” classification according to the World Bank’s narrow scheme because the well-being of most Filipinos is clearly very far from the “upper middle-income” status that the term seems to imply.
Some six to seven out of ten Filipino families are still stubbornly poor or in otherwise economically vulnerable circumstances. This is according to various surveys by the Social Weather Stations (SWS) on self-rated poverty, the Bangko Sentral ng Pilipinas (BSP) on household savings, and even the Philippine Statistics Authority (PSA) on family incomes (using PSA income data but not the unrealistically low official poverty threshold). This comes to around 16-19 million Filipinos who can be considered poor or in otherwise economically vulnerable circumstances.
The World Bank justifies using GNI per capita as a proxy for development with the argument that various measures of socioeconomic well-being are anyway correlated with GNI per capita – that poverty incidence, mortality rates, educational levels and other measures of well-being improve as GNI per capita increases. This is only true up to a point.
To begin with, there’s that problem of the average measure being so far removed from the lived experience of tens of millions of Filipinos. Looked at more broadly, the income classification fails to reflect the daily reality for so many: low family incomes and earnings; lack of secure and decent work; inadequate education, nutrition and health; poor housing; lack of clean water, sanitation and electricity; lack of assets; and pervasive vulnerability, exploitation and violence.
GNI does not even measure the loss or degradation of natural resources. If anything, economic activity that destroys the environment boosts GNI.
The country’s political and economic structures are so rigidly unequal. So much so that while increasing economic activity boosts GNI and GNI per capita, the benefits from this are concentrated in an elite few. These are not distributed equally or even just less disproportionately among the 115 million Filipinos.
Empty status
The Philippines cannot but eventually reach UMIC status as the World Bank measures it – the normal course of economies alone will ensure that this will happen sooner or later. But this is just an aggregate number and won’t mean that chronic poverty for the poorest, bloating disguised joblessness or worsening inequity have been resolved.
The Philippines attaining upper-middle income status is inevitable. This is even if year-on-year growth has been slowing from 7.7% in the third quarter (Q3) of 2022 to 6% in Q3 2023 and further to 5.2% in Q3 2024. But that status is still ultimately meaningless. It will just be used for economic propaganda and to hide all sorts of development sins. ###
* Operation Tokhang was the flagship police operation of the Duterte administration’s so-called war on drugs which killed tens of thousands of mostly poor Filipinos.
