World Bank Upgrades Vietnam and Philippines to Upper-Middle-Income Countries, Both Face ‘More Demanding’ Development Stage
WASHINGTON / MANILA / HANOI – The World Bank officially upgraded Vietnam and the Philippines from “lower-middle-income” to “upper-middle-income” countries on July 1. The reclassification marks a high-level endorsement of two major Southeast Asian economies after years of sustained growth.
Under the World Bank’s income classification, an economy is designated as upper-middle-income if its previous year’s gross national income (GNI) per capita falls between US$4,636 and US$14,375. Data show that Vietnam’s GNI per capita reached US$4,970 in 2025, while the Philippines hit US$4,850, both surpassing the US$4,636 threshold.
In explaining the upgrades, the World Bank noted that Vietnam’s success is largely attributed to its export‑oriented growth model. Driven by trade diversion effects from US‑China tensions, foreign direct investment inflows into Vietnam have surged, with the United States becoming its largest export market. In 2024 and 2025, Vietnam’s exports grew by over 15% each year, while GDP expanded by 7% and 8%, respectively. Between 2021 and 2025, Vietnam’s GNI grew at an average annual rate of 10%, making it one of the region’s most dynamic economies.
The Philippines’ upgrade, by contrast, stems from broad‑based and inclusive growth, the World Bank said, noting that the country’s gains spanned all major sectors rather than relying on the boom of a single industry. Over the past five years, the Philippines’ GDP grew at an average annual rate of 5.8%. Arsenio Balisacan, Director‑General of the National Economic and Development Authority, said in a statement on July 2: “Despite global and domestic shocks, we have consistently pursued inclusive growth, strengthened economic fundamentals, and steadily advanced our development agenda.”
With the latest upgrades, all five major Southeast Asian economies – Singapore, Malaysia, Thailand, Vietnam and the Philippines – now fall into the upper‑middle‑income category or above. Aside from the two countries, Jordan, the Federated States of Micronesia and Sri Lanka were also moved from lower‑middle to upper‑middle income in this round, while Togo was raised from low‑income to lower‑middle‑income.
However, Professor Khuong Minh Vu of the Lee Kuan Yew School of Public Policy at the National University of Singapore warned that the upgrade is “an encouraging milestone” but also means the two countries will enter “a more demanding phase of development.” He pointed out that they must now confront the so‑called “middle‑income trap” – a predicament that has stalled many developing economies on their path to high‑income status.
In terms of development targets, Vietnam has taken a more ambitious stance. As one of Asia’s fastest‑growing economies, Vietnam aims for double‑digit growth in 2026. Hanoi is pushing ahead with a series of business‑friendly reforms and heavy investment in infrastructure, including a US$67 billion high‑speed railway linking Hanoi and Ho Chi Minh City. The Philippines, by contrast, has adopted a more cautious approach, trimming its 2026‑2030 growth targets due to uncertainties in the Middle East and the lingering impact of El Niño. The ASEAN+3 Macroeconomic Research Office (AMRO) projects Vietnam’s growth at 7.4% and the Philippines at 5.3% in 2026, both above the ASEAN‑wide forecast of 4.6%.
The reclassification will also affect the two countries’ financing environment. As upper‑middle‑income nations, they may have reduced access to concessional development loans. But Philippine officials say the benefits of stronger economic fundamentals and improved market access are expected to outweigh that effect. Ruben Carlo Asuncion, Chief Economist at UnionBank of the Philippines, noted: “The higher you go on the World Bank classification ladder, the more self‑reliant you are as a country, including in fiscal terms.”