Despite years of poverty reduction in the Philippines, many households—including a large share of the emerging middle class—remain highly vulnerable to economic shocks that could push them back into poverty, according to the Philippine Institute for Development Studies (PIDS).

In a policy note titled “Escaping Poverty Is Not Enough: Vulnerability, Risk, and the Fragile Middle Class in the Philippines,” published on Thursday, March 5, researchers at the state-run think tank said improvements in income poverty have not fully translated into lasting economic security for many Filipino families.

“Poverty reduction alone does not guarantee economic security... Many Filipinos who have exited poverty remain highly exposed to shocks and face a substantial risk of falling back into deprivation,” said PIDS supervising research specialist Deanne Lorraine D. Cabalfin, senior research fellow Jose Ramon G. Albert, and research analyst Mohammad A. Mahmoud.

PIDS noted that the Philippines has posted significant progress in reducing poverty over the past two decades, driven by economic growth and expanded social protection programs such as the government’s conditional cash transfer program.

While official poverty incidence declined steadily before the Covid-19 pandemic and stood at 15.5 percent in 2023 after rising temporarily during the health crisis, PIDS emphasized that many households remain clustered just above the poverty line, frequently moving in and out of poverty as economic conditions change.

“Empirical analysis... shows that a substantial share of poverty in the Philippines is transient rather than chronic, with many households clustering just above or below the poverty line and frequently crossing it over time,” the report said.

The think tank said this pattern—often described as “poverty churning”—means that improvements in household welfare are often fragile and reversible.

According to the PIDS study, vulnerability to poverty extends well beyond those currently classified as poor.

It cited that in 2023, nearly one-third of Filipino households were considered vulnerable, meaning they face a significant probability of falling into poverty in the future. Even among nonpoor households, close to one-quarter were found to be vulnerable, highlighting how economic insecurity affects a broader segment of the population.

The study found that vulnerability is especially pronounced among households just above the poverty line, many of whom form part of the country’s emerging middle class. These households often lack sufficient financial buffers to withstand disruptions such as illness, job loss, price spikes, or natural disasters.

PIDS researchers identified several structural factors that make Filipino households susceptible to falling back into poverty.

Among the most significant is widespread labor market informality, which leaves many workers without stable contracts or access to benefits such as health insurance and pensions.

Health-related shocks also remain a major risk, as out-of-pocket medical expenses can quickly erode household savings.

At the same time, the Philippines’ high exposure to typhoons, floods, and other natural disasters further compounds vulnerability, particularly for low-income and near-poor households.

Limited asset accumulation among families transitioning out of poverty also leaves them with little cushion against sudden economic setbacks, according to PIDS.

Given these risks, the PIDS researchers said sustaining poverty reduction and building a stable middle class will require policies that directly address household vulnerability.

These include strengthening shock-responsive social protection systems, expanding social insurance coverage—especially for informal workers—and supporting households as they transition out of poverty.

The report also emphasized the importance of improving livelihoods and creating more stable employment opportunities to reduce income volatility.

Ultimately, the authors argued that economic progress cannot rely solely on lifting households above the poverty line.

“The Philippines has made significant progress in reducing poverty amid historical growth in recent years, but vulnerability remains widespread,” the report said.

“Many households—including a large share of the emerging middle class—are just one shock away from poverty.”

For PIDS, durable development gains will depend on policies that address risk and protect households facing economic uncertainty.

“Escaping poverty is not enough,” the authors wrote. “Building a resilient middle class requires policies that explicitly confront risks, protect households in transition, and ensure that progress is durable rather than fragile.”