The Philippines is poised to defend its newly minted status as an upper-middle-income economy, according to Socioeconomic Planning Secretary Arsenio Balisacan, who downplayed the risk of a reversal unless the country faces a severe political crisis.

Speaking at a midyear briefing on Monday, July 6, Balisacan described the likelihood of the country slipping backward as “quite remote.”

This confidence comes despite a challenging first half of 2026, during which converging external risks—most notably conflicts in the Middle East—and domestic fiscal constraints have pressured the administration’s growth targets.

“Despite the progress we have achieved, our economy remains vulnerable to external shocks beyond our control,” Balisacan said. However, he noted that only a “massively adverse development in our political economy” could derail the country's upward momentum.

While the upgrade to upper-middle-income country (UMIC) status is a milestone 39 years in the making, Balisacan stressed that the work is far from over. “We still have a lot of catching up to do with our neighbors, and that also puts pressure on us to keep pushing reforms so we can sustain our momentum.”

This momentum is now being channeled into a refined long-term vision. Rather than focusing strictly on achieving the World Bank’s high-income classification by 2040—a moving target as global thresholds shift—the government is prioritizing the creation of a stable, resilient middle-class society.

“What we are hoping to achieve by 2040 is not the high-income classification of the World Bank, because that has already moved. Rather, we want to see a much larger part of our population reach the middle-income class,” Balisacan explained.

According to Balisacan, the goal is to foster a society where citizens “live comfortably in communities that are resilient to shocks,” rather than just chasing a statistical label.

Climbing the income ladder, however, requires a shift in how the Philippines finances its development. Having long depended on concessional, low-interest grants and loans, the country now faces a countdown to losing access to concessional official development assistance (ODA) extended by its multilateral and bilateral development partners.

Balisacan assured stakeholders that the impact would not be immediate, noting that the country will still have access to concessional loans over the next three years. However, as progress continues, some of those privileges will eventually be lost, with around 20 to 30 ODA-funded projects expected to be affected by the latest status upgrade.

Even so, Balisacan added that certain development partners remain willing to provide concessional financing, particularly for projects deemed to have a high developmental impact, which are the exact opportunities the government will continue to explore.

This three-year window provides a crucial transition period to build the capacity to access alternative financing sources, such as climate-related funds, and to improve credit ratings for the private sector.

Managing this transition requires strict fiscal discipline. Department of Economy, Planning, and Development (DEPDev) Undersecretary Joseph J. Capuno revealed that the government is navigating a “very limited fiscal space” for the year ahead.

As such, DEPDev is recalibrating its investment strategy to protect social sectors while maintaining infrastructure momentum.

Capuno stated that the message to implementing agencies is to be highly selective in approving projects for next year and to slow down on new infrastructure initiatives, clarifying that the priority remains expediting spending on ongoing projects.

Balisacan further addressed the role of political stability in economic longevity. Commenting on the ongoing impeachment trial of Vice President Sara Duterte, Balisacan shortages that transparency is an economic necessity.

He explained that he views the exercise as a means to improve governance and accountability in the system, maintaining that without trust in the legal and executive systems, the country would struggle to attract the high-value investments needed for faster growth.

Additionally, Balisacan said the Philippines must not be content with just sustaining current growth, urging higher ambition matching that of its regional peers. The economic team recently lowered its full-year growth target to a range of 3.5 to 4.5 percent, down from the previous projection of 5.0 to 6.0 percent.