DEPDev Secretary Arsenio M. Balisacan, Executive Secretary Ralph G. Recto, and Finance Secretary Frederick D. Go

Climbing to upper-middle-income-country (UMIC) status comes with a trade-off: the Philippines faces a looming decline in access to concessional official development assistance (ODA), or low-interest loans extended by the country’s multilateral and bilateral development partners.

However, for President Marcos’ economic team, the country’s improved income status also presents an opportunity to ramp up public-private partnerships (PPPs), deepen domestic debt markets, and tap alternative financing sources.

This comes as the Philippines finally achieved its long-standing goal of attaining UMIC status after posting a record-high gross national income (GNI) per capita in 2025.

The Washington-based World Bank confirmed the upgrade in its latest income assessment, reporting the Philippines’ GNI per capita at $4,850, which exceeds the $4,636 UMIC threshold. The $4,636 to $14,375 range is the income bracket for UMICs for fiscal year (FY) 2027, covering the period from July 1, 2026, to June 30, 2027.

The Department of Economy, Planning, and Development (DEPDev) said the milestone was buoyed by “sustained growth, sound macroeconomic management, and long-term structural reforms,” even as Philippine economic growth slipped in the second half of 2025 amid the high-profile flood-control controversy. Measures put in place included the clean-up of this fiasco, the impact of which is still reflected in moderating economic activity.

After the economic crisis during the Covid-19 pandemic, the country’s gross domestic product (GDP) grew by an average of 5.8 percent through 2025. This momentum culminated in 2025, when strong performance across all industries raised GNI per capita by 8.5 percent.

“This confirms the resilience of the Philippine economy,” DEPDev Secretary Arsenio M. Balisacan said in a statement on Wednesday night, July 1. “Despite global and domestic shocks, we have relentlessly pursued inclusive growth, strengthened fundamentals, and remained on track with our development agenda.”

“Some concessional ODA may decline over time,” Balisacan said.

However, the DEPDev chief said these adjustments could be outweighed by the gains from more robust fundamentals and improved market access.

Balisacan also pointed to the contribution of overseas Filipino workers (OFWs), whose earnings abroad form a vital part of the country’s GNI. He added that the government’s long-term goal is “to create more high-quality jobs at home so overseas employment becomes a choice, not a necessity.”

While access to concessional ODA may eventually decline, the upgrade is also expected to strengthen the country’s credit profile, boost investor confidence, and “expand access to financing and higher-quality investments” that could improve local employment.

The country’s bilateral development partners, as well as multilateral lenders, include the World Bank, the Manila-based Asian Development Bank (ADB), and the China-led Asian Infrastructure Investment Bank (AIIB). For 2026, the Philippines is looking to finalize financing deals with Japan, South Korea, and France, bringing the total number of target concessional loan agreements to over $10 billion.

Executive Secretary Ralph G. Recto, who previously served as finance chief, said the Philippines’ gradual reduction in concessional financing will enable the government to ramp up its partnerships with the private sector.

This echoed what Department of Finance (DOF) Secretary Frederick D. Go said earlier this year. He said it is appropriate to rely more on PPPs to finance major infrastructure, climate change, sustainability, energy, and agriculture initiatives.

Recto further said the government will “deepen domestic capital markets and tap other market-based financing sources to sustain investments in infrastructure and development.”

Ser Percival K. Peña-Reyes, assistant professor at Ateneo de Manila University’s (ADMU) Department of Economics, said attaining UMIC status also carries trade-offs.

“There could be increased borrowing costs,” Peña-Reyes said in a Facebook post, explaining that both the government and private sector corporations would increase their reliance on high-cost commercial loans, private capital, and global bond markets. These financing sources also generally impose “stricter repayment terms,” he said.

Peña-Reyes added that the tariff perks the Philippines currently enjoys could soon fade away. “Some of our exports could lose eligibility for preferential, duty-free treatment under global trade schemes that assist developing economies,” he said.

Before the pandemic, the government had planned to speed up and jack up low-interest borrowing from development partners to fund major infrastructure projects before the country reached UMIC status and became less eligible for these concessional loans.

Former Socioeconomic Planning Secretary Ernesto M. Pernia had said the government could also raise the amount of the country’s borrowing plan as long as it does not become too costly to manage.

For projects funded through multiple tranches, Pernia had said it is best to lock in the loan terms as early as the initial phase so the same conditions apply until project completion.

For Go, the country’s status upgrade affirms the reforms and policies “that the government has consistently pursued to strengthen our economic fundamentals” and expand economic opportunities for Filipinos.

Go, who is a member of the economic team responsible for revenue generation and debt management, said efforts should continue to build on these gains to further develop the economy.

“The Philippines’ move to UMIC status is an important milestone that reflects years of steady economic progress. It signals that the country’s productive capacity and incomes have improved over time,” Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona Jr. said in a statement.

“The move underscores the importance of the efforts to preserve macroeconomic stability and sustain structural reforms by the national government. On the part of the BSP, it underlines the importance of managing inflation to encourage investment and protect the purchasing power of Filipino households; maintaining adequate international reserves to ensure confidence; ensuring banks are solid and able to support economic growth; and payment systems are modernized to provide businesses and consumers fast and safe transfers,” Remolona added.

Balisacan also committed to deepening the government’s reforms to sustain growth while acknowledging that challenges persist, particularly regarding income disparities. He said the priority is to ensure growth does not leave behind those living on the poverty line.

Similarly, Recto stressed that this is more than just a title for the domestic economy. “It means our economy is continuing to grow. More jobs are being created, our fellow Filipinos are earning higher incomes, and more investors are placing their trust in the Philippines,” he said.

However, he said hitting the long-coveted UMIC status is not the finish line, noting that the true measure of success is its direct impact on everyday Filipinos. “That is why we will not stop until more Filipinos are lifted out of poverty and their quality of life improves,” Recto promised.

To sustain the improved fundamentals, Recto said the government is focused on taming price pressures, protecting jobs, strengthening Filipinos’ purchasing power, lifting consumer and business confidence, and attracting more investments.