As expected the Philippines did not move up to upper-middle-income status under the latest World Bank classification which took into consideration last year’s economic data, marked by slower domestic growth due to delayed budget approval.
Had the COVID-19 pandemic not happened, the Philippines was slated to graduate from lower-middle-income economy status this year, Acting Socioeconomic Planning Secretary Karl Kendrick T. Chua told a meeting of the House economic affairs committee on Thursday.
Amid uncertainties brought about by COVID-19, Chua said “we might see a delay” in the Philippines’ bid to become an upper-middle-income economy.
But on July 1, the World Bank redefined the threshold for upper-middle-income countries to a gross national income (GNI) per capita ranging between $4,046 and $12,535, up from the previous range of $3,996 to $12,375.
Chua, who heads the state planning agency National Economic and Development Authority (Neda), said the Philippines was nonetheless “on track” to move up to upper-middle-income status during the next two years.
The latest data on the World Bank’s website showed that the Philippines had a GNI per capita of $3,850 in 2019, up from $3,830 in 2018.
Under the new World Bank definition, lower-middle-income economies have a GNI per capita of between $1,036 and $4,045, up from $1,026 to $3,995 previously.
Last year’s 6-percent gross domestic product (GDP) growth was the slowest in three years, no thanks to the late implementation of the P3.7-trillion 2019 national budget.
During the first quarter, GNI declined by 0.6 percent year-on-year, as a result of the 0.2-percent contraction in GDP.
As such, GNI percent shrank by 2 percent during the January to March period.
Amid the COVID-19 crisis, the government had projected GDP to contract by 2-3.4 percent in 2020, hence also bringing down GNI.
The delayed climb to upper-middle-income status, however, may benefit the Philippines at a time when it planned to borrow more from multilateral lenders and bilateral development partners to replenish funds for COVID-19 response.
Had the Philippines become an upper-middle-income economy this year, it will lose by 2022 the access to concessional interest rates currently being slapped on official development assistance (ODA) loans.
In this regard, the delay in the ascent to upper-middle-income economy status augured well to the Philippines’ plan to jack up borrowings in the near term, especially as stimulus spending on public goods and services was deemed crucial to revive the ailing economy.
As of July 1, neighboring Indonesia moved up to upper-middle-income status under the new World Bank threshold; Benin, Nepal, and Tanzania became lower-middle-income economies; while Mauritius, Nauru and Romania rose to high income.
On the other hand, three economies moved to lower categories: Algeria and Sri Lanka slipped from upper-middle-income to lower-middle-income, while Sudan became low income from lower-middle-income previously.