Beatrice M. Laforga, Reporter
THE GOVERNMENT’S target to become an upper middle-income country by 2022 is still achievable even as the pandemic derailed progress, the National Economic and Development Authority (NEDA) said on Tuesday, though private analysts aren’t as optimistic due to the huge impact of the global health crisis on the economy.
“We were likely to become an upper middle-income country (UMIC) in 2020 prior to COVID-19 (coronavirus disease 2019). The original target is next year, and if things still go as planned, we think we can still hit that target but it really hinges on all of society, really working towards this,” NEDA Undersecretary Rosemarie G. Edillon said in an online forum late Tuesday.
The government targets to graduate to upper middle-income status by 2022. It is also eyeing to secure an “A” long-term credit rating by that year as the Philippines loses the concessional loan rates it currently enjoys.
It aims to borrow P3 trillion this year, up by 9.49% from the P2.74 trillion it raised in 2020, to help fund its planned spending worth P4.5 trillion. Its budget deficit is projected to reach 8.9% of gross domestic product (GDP).
The country remained a lower middle-income economy last year with a gross national income (GNI) per capita of $3,850 in 2019, based on latest World Bank data.
The multilateral bank adjusts its income brackets annually to consider inflation: economies with a GNI per capita of $4,046-$12,535 are tagged as upper middle-income, while lower middle-income countries are those with $1,036-$4,045 GNI per capita.
The economy shrank by 9.5% last year, the worst contraction in Philippine history, due to the coronavirus pandemic and prolonged lockdowns.
“With the economy in recession and GDP only expected to return to 2019 levels by end-2022, it would be difficult to expect the Philippines to graduate to upper middle-income status by getting over the threshold of $4,000+ per capita GDP,” ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said via e-mail on Wednesday.
In case it fails to hit the target by next year, Mr. Mapa said the government would still enjoy concessional rates for foreign loans or official development assistance (ODA) for another two years, a “silver lining” for the country as it relies heavily on borrowings, especially now that tax receipts are still down.
“Nonetheless, the Philippine authorities will need to double efforts to get the economy back on its feet, not necessarily to chase lofty goals and status but rather to help support the millions of Filipinos struggling under the weight of this pandemic,” Mr. Mapa said.
Filomeno S. Sta. Ana III, co-founder and coordinator of the group Action for Economic Reforms (AER), said while the government’s goal to gain upper middle-income status by next year has been “impeded” by the ongoing public health crisis, it should avoid getting preoccupied with these targets and focus on managing the pandemic instead.
“We have been set back by a few years. We will recover, and the challenge is how we can facilitate the recovery. It goes without saying that to facilitate recovery, we first have to contain the pandemic,” Mr. Sta Ana said in an e-mail.
He said the government also has fiscal space to increase borrowings and drive economic growth as debt repayment will not be an issue amid the tax and structural reforms previously put in place to strengthen the state’s capacity to boost revenues.
ING’s Mr. Mapa likewise said the government should ensure attaining its targets results in improving Filipinos’ quality of life.
“At the end of the day, upper middle-income status and “A”-level credit ratings would be nice to have but the real goal would be to ensure a vibrant economy with rising incomes amidst declining unemployment and poverty,” he said. “After all, a robust economic growth model and declining poverty go hand in hand with attaining UMIC status, but sometimes we must always be careful not to put the cart before the horse.”