The Philippines’ most important economic problem is that poverty and hunger have been high for several years now, and are still unrecovered to their historically low levels prior to the COVID-19 pandemic—Mahar Mangahas
In this issue:
World Bank's Philippine Upper-Middle-Income Upgrade:
Benchmarkism in Action
Part I: The Threshold and the Managed Reality
I.1. Benchmarkism
I.2. The Managed Visibility of the Economy
I.3. Why the Upgrade Matters
Part II: The Anatomy of Intervention-Driven Growth
II.1. From Savings to Debt
II.2. Growth and Fragility Are Two Sides of
the Same Process
II.3. The Missing Dimension
Part III: Benchmarkism in Action
III.1. From Measurement to Mechanism
III.2. The Benchmark Effect
III.3. Cui Bono?
III.4. On the Question of Coordination
III.5. The Accountability Gap
IV. Conclusion: Beyond the Benchmark
World Bank's Philippine Upper-Middle-Income Upgrade: Benchmarkism in Action
When statistical upgrades become instruments of economic narrative management
Part I: The Threshold and the Managed Reality
World Bank Blog: The Philippines achieved its reclassification through broad-based expansion. GDP grew at an average of 5.8% per year over five years, reflecting gains across all major industries, not a single sector boom, but an economy-wide shift.
The World Bank has reclassified the Philippines as an upper-middle-income economy after its Gross National Income (GNI) per capita reached approximately US$4,850, surpassing the US$4,636 threshold under the Atlas method.
On its face, the upgrade is presented as objective statistical recognition of economic progress. Government officials immediately framed it as validation of stronger economic fundamentals, improved investor confidence, and enhanced access to international capital markets.
But the timing—and more importantly, the economic regime that produced the
numbers—matter far more than the threshold itself.
Figure 1
First, the choice of the measurement window matters. The World Bank highlights average GDP growth of 5.8% from 2021 to 2025.
Yet that period begins immediately after the deepest economic contraction in modern Philippine history, making it heavily influenced by base effects. Extending the window produces a markedly different picture. Including 2020 lowers the average GDP growth to 3.2%, while extending the comparison back to 2015 reduces it to about 4.7%. (Figure 1, upper window)
GNI exhibits a similar pattern: approximately 7.1% when measured from 2021, 4.1% from 2020, and roughly 5.0% when measured from 2015. The choice of benchmark materially shapes the narrative. (Figure 1, lower graph)
In short, the elevated GNI growth figures the World Bank highlights are largely a product of base effects — the 2021 starting point follows the deepest contraction in modern Philippine history, mechanically inflating the measured average. Whether the window was chosen deliberately or by convention, the effect on the narrative is the same.
Second—and far more importantly—the World Bank's narrative omits the policy regime that generated these outcomes.
The years feeding into the classification window were defined by an unprecedented macroeconomic configuration: historic monetary expansion, unparalleled fiscal deficits, extraordinary regulatory accommodation, and pandemic-era financial support measures that never fully reverted to their pre-crisis settings.
Between 2020 and 2021, the Bangko Sentral ng Pilipinas injected a record Php 2.3 trillion into the financial system through liquidity facilities, aggressive monetary easing, and various crisis-response measures designed to stabilize output and financial markets.
Those interventions were introduced as temporary, countercyclical responses to an extraordinary crisis.
What followed, however, was not a return to the pre-pandemic policy framework, but the gradual institutionalization of an intervention-heavy economic regime.
It must be emphasized that the World Bank's Atlas GNI is not a production-based measure of real economic output.
It is a smoothed, dollar-converted aggregate that combines nominal income, exchange-rate movements, and the effects of credit-supported expansion into a single statistical measure.
It does not
distinguish whether rising income originates from productivity gains, liquidity
creation, fiscal stimulus, financial leverage, or some combination thereof. It
records the outcome, not the mechanisms that produced it.
Figure 2
The same intervention-heavy macroeconomic regime that elevated measured GNI also coincided with substantial increases in concentrated private wealth. Using the World Bank's own 2021–2025 benchmark period, the combined net worth of the Forbes Philippines 50 Richest grew by roughly 8 percent annually. (Figure 2, upper pane)
This was not a parallel coincidence but an interconnected consequence of the same policy regime.
Liquidity expansion, credit creation, fiscal stimulus, and extraordinarily accommodative financial conditions supported corporate earnings, business valuations, and financial asset prices, all of which contributed to the accumulation of private wealth.
Rising GNI and rising billionaire wealth thus emerged not as independent developments, but as interconnected expressions of the same underlying monetary-financial process.
Seen this way, the benchmark records only one observable consequence of the policy regime while remaining largely silent about the parallel accumulation of wealth and financial claims generated by the same causal forces.
Nor does its per-capita average reveal how income is actually distributed across households.
The threshold itself illustrates how sensitive the classification can be.
Last year, believe it or not, the Philippines missed upper-middle-income status by only US$26 per person—underscoring how the World Bank's classification rests almost entirely on estimated quantitative outcomes.
In other words, the period
being measured is precisely the period during which emergency intervention
evolved into a permanent feature of the Philippine development model.
I.1. Benchmarkism
This is where what I have termed benchmarkism begins to operate.
Benchmarkism is not simply the use of statistical indicators. It is the transformation of statistical and market benchmarks into instruments of narrative management designed to influence expectations, stimulate confidence—or what Keynes famously called animal spirits—and shape market behavior in ways that reinforce an existing political-economic order.
In practice, the process unfolds through a self-reinforcing feedback loop:
- intervention-driven expansion supports nominal income growth;
- income growth feeds into standardized international benchmarks;
- benchmark upgrades improve investor confidence and credit perception;
- improved confidence lowers financing costs;
- cheaper financing sustains the same intervention-dependent growth model.
What begins as emergency stabilization gradually becomes institutional structure.
What begins as temporary policy support evolves into the governing logic of economic development.
At that point, the benchmark no longer merely measures reality.
It becomes one of the mechanisms through which that reality is sustained.
I.2. The Managed Visibility of the Economy
This phenomenon is not confined to income statistics.
Across the same period, other indicators pointed in very different directions beneath the aggregate numbers:
- persistent inflation above the BSP's target range;
- slowing growth momentum even before the latest oil shock and external uncertainties;
- rising leverage among corporations and major conglomerates;
- the BSP Financial Stability Coordination Council's warnings over concentrated exposures in real estate, power, energy, and expanding household credit;
- rising self-rated poverty exceeding 50 percent in national surveys, alongside widening inequality; and (Figure 2, lower chart)
- Fitch Ratings and Moody's both revised their outlooks on the Philippine banking sector to negative/deteriorating, citing weaker growth, elevated inflation, and rising credit-quality risks.
These are not anomalies existing outside the system. They
are operating realities revealed through different analytical lenses than
aggregate income.
Figure 3
Think of it: the Philippines was upgraded to an UPPER-middle-income economy after GNI per capita reached about US$4,850 (roughly Php 290,000 per person on average at USDPHP 60). Yet more than half of Filipinos continue to describe themselves as poor! A 2021 PIDS study suggests that only about 4.9% of the 2015 population fell within the upper-middle-income category (though this share may be higher today). The same label—"upper-middle income"—thus describes two very different concepts: a national average and the distribution of household incomes. (Figure 3)
In effect, the income profile of a relatively small segment becomes the statistical basis for relabeling an entire economy!
This is precisely why SWS founder Mahar Mangahas recently argued that attaining "upper middle income" under the World Bank's standards has no more bearing on the economic well-being of Filipinos than gross national product (GNP) itself, nor does the re-classification indicate the growth of the Filipino middle class.
His observation underscores the central weakness of benchmark-based classifications: they elevate national aggregates while obscuring the underlying distribution they purport to represent.
That narrative matters because it influences capital allocation, sovereign risk assessments, financing conditions, and ultimately public perceptions of politically driven economic success.
I.3. Why the Upgrade Matters
The World Bank's reclassification does not merely describe the Philippine economy. It repositions the country within the global financial architecture.
Like a sovereign credit-rating upgrade, upper-middle-income status functions as a positive signal. It suggests lower development risk, strengthens perceptions of macroeconomic stability, and improves access to cheaper domestic and international financing.
More importantly, it helps validate the existing development model.
Governments gain external affirmation of their policies. Large borrowers—particularly the state, banks, and major conglomerates—benefit from lower financing costs and easier access to capital. The benchmark itself becomes part of the financing mechanism.
This is precisely how benchmarkism operates.
The benchmark does not simply measure economic performance.
It helps manufacture the confidence that facilitates cheaper money.
Cheaper money, in turn, reinforces the same intervention-dependent political-economic structure that produced the benchmark in the first place.
Theoretically, the process becomes self-reinforcing.
Part II: The Anatomy of Intervention-Driven Growth
If the World Bank measured the outcome, the more important question is what produced it.
The answer lies not simply in higher output, but in a transformation of the Philippine economy's financing structure.
The pandemic
response did far more than stabilize economic activity. It altered the
relationship between savings, investment, credit, and government spending.
Instead of allowing the economy to adjust through market liquidation and the
rebuilding of private savings, policy increasingly relied on liquidity
creation, deficit spending, and regulatory accommodation to sustain aggregate
demand.
Figure 4
Growth therefore became progressively less dependent on internally generated savings and increasingly dependent on policy induced balance-sheet expansion.
Record domestic claims-to-GDP and the persistence of elevated M2-to-GDP ratios since the pandemic expose the economy's drift toward financialization: a growing dependence on credit expansion and liquidity creation that has made growth increasingly vulnerable to financial fragility. (Figure 4, upper diagram)
The paradox is that as the economy has become more
financialized, growth has steadily slowed since 2022, exposing the diminishing
returns of intervention-driven expansion.
II.1. From Savings to Debt
One of the least discussed consequences of the post-pandemic policy regime has been the widening savings-investment gap (SIG). Official or GDP based saving-investment gap reached a record Php 3.9 trillion in 2025 (Figure 4, lower image)
Traditionally, investment is financed by accumulated private savings. Under the intervention regime, however, an increasing share of investment has been financed through government deficits, bank credit, and expanding corporate leverage.
In effect, policy induced balance-sheet expansion substituted for capital accumulation.
This distinction is largely invisible in aggregate income statistics. Gross National Income records the resulting income flows, but not whether they were financed through rising productivity or through increasing indebtedness.
That difference is fundamental because both paths can
generate higher measured income in the short run while producing very different
long-term outcomes.
II.2. Growth and Fragility Are Two Sides of the Same Process
The Bangko Sentral ng Pilipinas' own 2025 Financial Stability Report offers a different perspective on the same expansion.
Rather than focusing on income, it focuses on balance
sheets.
Figure 5
Its latest assessment warns of approximately Php 4.8 trillion in leveraged exposures among non-financial corporations, equivalent to 60.0% of total NFC debt and 21.2 % of nominal GDP, largely concentrated in real estate, power, energy, ICT, construction, manufacturing, and other conglomerate-dominated industries.
Notably, these are substantially the same sectors that the World Bank cites as evidence of "gains across all major industries." What appears in the World Bank's framework as broad-based sectoral progress is, from a political economy perspective, also the expansion of highly leveraged, elite conglomerates that dominate those industries.
These sectors have also been among the principal channels through which post-pandemic credit expansion has been transmitted.
San Miguel Corporation provides a concrete illustration of this balance-sheet expansion at the firm level. According to its SEC filings (17-Q and 17-A), outstanding debt reached approximately Php 1.668 trillion in Q1 2026, up from Php 1.587 trillion in Q4 2025. (Figure 5, lower chart)
While this figure is not directly comparable to the BSP’s aggregate estimate of corporate leverage, it reflects the scale of debt-financed expansion within one of the country’s largest conglomerates operating inside the same macro-financial environment.
This is not a contradiction.
It is the other side of the same process.
Credit-supported expansion can simultaneously produce higher income and higher systemic vulnerability.
Measured growth and financial fragility are therefore not competing explanations.
They are
complementary outcomes generated by the same intervention regime. The
benchmark records the expansion in output; the balance sheet reveals the
leverage that helped produce it. Looking only at the former mistakes one
dimension of the process for the whole.
II.3. The Missing Dimension
None of this appears in the World Bank's Atlas GNI.
Nor is it intended to.
The Atlas methodology answers a narrow question:
Has national income crossed a specified statistical threshold?
It does not ask:
- how that income was financed;
- whether national income reflected productivity gains or leverage;
- whether debt increasingly replaced private savings;
- whether intervention became permanent policy;
- whether balance-sheet risks accumulated alongside growth; or
- whether rising income translated into broad improvements in household welfare.
Those questions belong to political economy and financial stability—not to the construction of an income benchmark.
Yet they are precisely the questions that determine whether today's measured prosperity proves durable tomorrow.
The World Bank's upgrade therefore captures only one
dimension of the Philippine economy.
The BSP's Financial Stability Report, Savings-Investment gap, BSP’s liquidity conditions, SWS survey, Top 50 Forbes net worth captures another.
But taken together, they describe an economy in which rising income and rising fragility have emerged from the same underlying development model.
Part III: Benchmarkism in Action
III.1. From Measurement to Mechanism
Benchmarkism does not end with the publication of a statistic. Its operative function begins when that statistic is accepted as a proxy for economic reality in policy and financial decision-making.
This is not limited to income classification.
Across the same period in which the World Bank highlighted the Philippines’ broad-based expansion, other indicators pointed to a more complex underlying structure: persistent inflation above target, slowing economic momentum, rising corporate leverage, concentrated exposures flagged by the BSP Financial Stability Coordination Council, and continued self-rated poverty among a majority of households. These are not anomalies outside the system. (This pattern has been examined in greater detail in the author's earlier stagflation series.)
They are different manifestations of the same economy observed through non-aggregate lenses.
Yet the Atlas GNI ultimately presents these diverse
developments through a single aggregate benchmark. Once accepted as a signal of
economic progress, that benchmark becomes the language through which
policymakers, investors, lenders, and the public increasingly interpret the
economy.
III.2. The Benchmark Effect
The World Bank’s reclassification does not merely describe the Philippine economy. It alters how the economy is interpreted in financial markets and policy discourse.
The response was immediate. President Marcos Jr.'s administration, the Bangko Sentral ng Pilipinas, and the Department of Economy, Planning, and Development presented the reclassification as external validation of the country's economic management, reinforcing the narrative of policy success. Like a stroke of luck, the UMIC upgrade arrived just as the administration faced record-low popularity ratings and only weeks before the President's State of the Nation Address (SONA).
Like a sovereign credit-rating upgrade, upper-middle-income status signals reduced development risk, strengthens perceptions of macroeconomic stability, and supports access to cheaper financing.
This is reflected in market outcomes--the Philippine government’s US$2.5 billion sovereign bond issuance and more than US$1 billion in World Bank financing for the energy sector happened just days before the UMIC upgrade announcement.
Whether coincidental or not, the sequencing highlights the functional role of benchmarks: statistical upgrades shape perceptions of risk, and perceptions of risk influence financing conditions.
- Confidence lowers perceived risk.
- Lower perceived risk reduces borrowing costs.
- Cheaper financing extends the policy space of the existing economic model.
In turn, favorable economic benchmarks also reinforce political legitimacy. They furnish incumbent policymakers with externally certified evidence of success, strengthening the credibility of existing policies and improving the prospects for advancing their political and legislative agenda.
Confidence, therefore, is not the endpoint. It is the transmission mechanism.
Cheap money is the immediate financial outcome. Political reinforcement is its institutional counterpart. Together, they help sustain the intervention regime that produced the benchmark in the first place.
III.3. Cui Bono?
Political economy asks a simple question: who benefits?
Governments benefit from external validation of economic performance. The narrative shifts from inflation pressures, rising leverage, and structural constraints toward international recognition of progress.
Sovereign borrowers gain improved access to global capital markets. Large conglomerates—among the most credit-dependent actors in the economy—benefit from lower funding costs and easier refinancing conditions. Financial markets receive reinforcement of the prevailing development narrative.
The distributional effects are uneven. Gains are concentrated among state-linked financial actors and large corporate borrowers, while adjustment costs are diffuse across households facing persistent inflation, structural debt accumulation, and constrained real income growth.
Benchmarkism does not eliminate these conditions. It reorganizes how they are perceived and politically processed.
III.4. On the Question of Coordination
It is important to recognize that benchmark institutions do not operate in political isolation. They function within broader political and diplomatic environments where engagement between sovereign governments and international organizations is continuous and multifaceted, involving formal reporting, technical consultations, policy dialogue, and high-level interactions. Of course, there are also informal dialogues and interactions that can take place.
Benchmark outcomes may be grounded in standardized statistical methodologies, but their interpretation, framing, and policy significance are shaped within this broader institutional ecosystem. Consequently, formally independent classifications can acquire political and strategic importance when they reinforce the interests, objectives, or narratives of multiple stakeholders.
None of this, by itself, demonstrates explicit coordination or political bargaining, nor should such claims be presented as established fact. It does suggest, however, that benchmark systems cannot be understood solely as technical exercises divorced from the political economy in which they operate.
Whether one describes the resulting alignment as coordination, convergence, or mutually reinforcing incentives, the practical consequence is similar: favorable benchmark outcomes strengthen confidence in the prevailing development model at moments when that confidence carries tangible political and financial value.
III.5. The Accountability Gap
If the underlying fragility — conglomerate leverage, the savings-investment gap, persistent inflation above target — resolves badly in the coming years, there is no mechanism by which the World Bank bears any cost for having certified resilience at the peak of the imbalance (no skin in the game).
The Philippines bears the full cost either way. Balisacan himself conceded as much in the same breath as the celebration: income disparities persist, many still face economic difficulty.
Of course, the classification can be revised. The narrative can be updated.
Benchmarkism can shape expectations. But it cannot absorb economic consequences.
IV. Conclusion: Beyond the Benchmark
The Philippines' upgrade to upper-middle-income status is more than a statistical event. In practice, it becomes a political and financial one.
Governments present it as external validation of economic management, financial markets interpret it as a positive signal, and institutional confidence is reinforced far beyond the narrow question of national income.
An aggregate measure of national income thus becomes more than a statistical classification. It becomes a signal of economic success. That signal shapes confidence. Confidence influences the price of risk. Lower perceived risk facilitates cheaper financing, reinforcing the same political-economic structure that generated the benchmark in the first place.
That is the central proposition of benchmarkism. Benchmarks are not merely passive measures of economic conditions. Once embedded in policy, finance, and public discourse, they become institutional mechanisms that shape expectations, influence the allocation of capital, and reinforce existing political-economic arrangements.
Whether the Philippines' recent gains ultimately reflect durable productivity and genuine capital formation or an economy increasingly sustained by intervention, leverage, and confidence management remains to be seen. Time—not statistical thresholds—will render that judgment.
Benchmarks can
shape narratives. They can influence incentives. They can buy confidence.
They cannot repeal economic reality.
____
Notes
See the author's Stagflation series, Parts 1–11,
for a more detailed examination of the interaction between slowing growth,
persistent inflation, and intervention-driven expansion.
