World Bank Lending Unaffected by Philippines' Upper-Middle Income Status

The World Bank said the Philippines’ recent reclassification as an upper-middle income economy will not affect its lending program or broader engagement with the Philippines, reaffirming its commitment to support education, job creation and climate resilience through 2031. Zafer Mustafaoğlu, World Bank Division director for the Philippines, Malaysia and Brunei, said the bank’s engagement and lending program in the Philippines will remain unchanged. “Moving to an upper-middle income country (UMIC) does not affect our program or our lending to the country or lending rates to the country,” he said in an appearance on the Money Talks with Cathy Yang program on One News. “From the World Bank perspective,… our country partnership frameworks that we presented at Malacañang Palace in the presence of President Ferdinand R. Marcos, Jr. remains the same,” he added. The World Bank’s engagement is anchored on the Country Partnership Framework (CPF) for 2025-2031, which was launched last year. The framework outlines goals like of creating 4 million new or better jobs, improving access to quality health services for 19 million Filipinos, and increasing the number of people with enhanced resilience to climate risks to 13 million. The World Bank this month reclassified the Philippines as an UMIC after its gross national income per capita hit $4,850 in 2025, making it into the $4,636 to $14,375 threshold for that income group. Mr. Mustafaoğlu said the targets set under the CPF remain achievable despite headwinds from the Middle East war and the lingering effects of last year’s corruption scandal. “We all know that the Middle East crisis has affected many countries and the Philippines adversely. There is a short-term slowdown in the growth of the economy. But we are talking about a medium-term to long-term case of 5-6 years,” he said. The fighting in the Middle East was among the factors cited by the World Bank when it slashed its 2026 growth forecast for the Philippines to 3.7% from 5.3%. Mr. Mustafaoğlu said that if the current shocks prove temporary, the Philippines is well-positioned to sustain growth because of its young population. “It is within Asia. It has very good opportunities, well-connected. So from that angle, as long as the government and all partners continue to focus on important structural reforms, the goals are still achievable, I would say,” he added. Meanwhile, Mr. Mustafaoğlu said the Philippines must address infrastructure gaps and weak productivity to avoid the middle-income trap. He said this entails means improving access to basic services, roads, ports and digital infrastructure. “One of the challenges of middle-income trap often is this productivity. And for productivity and innovation, what is important is to create a very good business environment… where firms can easily enter, compete, grow, create jobs, and innovate,” he said. He noted that starting a business in the Philippines still takes longer than in many neighboring economies, putting the country at a competitive disadvantage. — Justine Irish D. Tabile