World Bank: Reforms Could Propel Philippines to 7% Growth, Middle-Class Future

The Philippines is at a pivotal juncture. With the right policy and investment strategies, the country has the potential to achieve sustained annual GDP growth of nearly 7 percent, laying the groundwork to become a middle-class society by 2040, according to a newly released World Bank report titled “Running Uphill: Growth, Jobs, and the Quest for Productivity.”

The report underscores that reaching this ambitious goal demands a strategic pivot—from merely maintaining growth to fostering inclusive, productivity-driven economic transformation. The Philippines must now embrace reforms focused on job creation, technological innovation, investment mobilization, and regional empowerment.

Beyond Numbers: Jobs as the Cornerstone of Inclusive Growth

The World Bank makes a compelling case that job creation lies at the heart of social progress. “Employment is not merely an economic indicator; it’s a cornerstone of social stability and individual dignity,” said Zafer Mustafaoğlu, World Bank Division Director for the Philippines, Malaysia, and Brunei. Jobs not only provide income but also empower individuals and families to escape poverty, contribute to community development, and bolster national resilience.

According to the report, implementing its recommendations could:

• Boost GDP growth to 6.8% annually

• Create over 5.1 million additional jobs by 2040

• Raise real wages by 12.9%, driven mainly by wage growth in manufacturing and services

Past Progress: A Foundation for Future Reform

Over the past 15 years, the Philippines has made notable economic strides. It has:

• Doubled its GDP

• Reduced unemployment to record lows

• Achieved more geographically balanced growth, with low- and medium-income regions playing a larger role in economic expansion

• Witnessed faster income growth among the bottom 40% than the top 20%

Much of this progress was powered by increased public investment, especially in connectivity infrastructure, and policy reforms that encouraged private sector activity. Notably, a shift in the labor market from self-employment in agriculture to wage employment in services marked a crucial structural change.

“The Philippines has demonstrated that investment-led growth can be inclusive,” said Gonzalo Varela, World Bank Lead Economist. “But to secure a prosperous, job-rich future, the country must now double down on reforms that unlock productivity, empower regions, and connect to global markets. The next leap is within reach.”

Key Challenges: Productivity, Competition, and Connectivity Gaps

Despite the progress, critical challenges persist:

• Productivity remains weak, contributing little to overall growth

• Limited competition in key sectors stifles innovation and discourages firm growth

• Cumbersome permitting and regulatory processes deter business expansion

• The Philippine economy is becoming increasingly inward-oriented, with reduced export activity and minimal participation in global value chains

• Infrastructure gaps, particularly in transport and logistics, keep costs high, undermining competitiveness

These structural issues hinder the creation of quality jobs and undermine the country’s ability to compete regionally and globally.

The Technology Imperative

The report emphasizes that technology adoption is a game-changer. In an era marked by rapid digital transformation and emerging technologies like artificial intelligence, Filipino firms must embrace innovation to remain competitive.

“Technology adoption is no longer optional,” warned Jaime Frias, Senior Economist. “It is essential for firms to grow, compete, and create better jobs. The Philippines must invest in digital skills development and build an innovation ecosystem that enables businesses to harness technology for productivity and inclusive growth.”

Digital transformation can enhance productivity across sectors and expand employment opportunities, particularly in IT services, e-commerce, and digital financial services, areas where the Philippines has untapped potential.

The Three Pillars of Reform

To transition into a prosperous middle-class economy, the World Bank outlines three interconnected policy pillars:

1. Foundational Investments Strengthen physical and digital infrastructure and human capital, ensuring that citizens are equipped with the skills, health, and connectivity needed to thrive in a modern economy.

2. Business-Enabling Environment Reform regulatory and institutional frameworks to reduce barriers to entry, simplify permitting, and foster competition, particularly in high-potential sectors.

3. Smart and Targeted Private Capital Mobilization Attract private investments, especially in tradable sectors like agriculture, manufacturing, tourism, and business services, that can drive both domestic growth and international competitiveness.

These pillars aim to revitalize productivity, increase employment, and make growth more inclusive and resilient, especially amid global uncertainties, climate shocks, and evolving technologies.

A Call to Action

The Philippines has the vision and capability to become a modern, inclusive economy. But realizing this vision requires bold and coordinated reforms, deep public-private collaboration, and unwavering focus on job creation and productivity enhancement.

As the global economic landscape becomes more unpredictable, and as technological and climate disruptions intensify, the country's future depends on its ability to adapt, innovate, and remain open to the world.

With the right policies and investments, the Philippines could become a model for inclusive, sustainable development in Asia, lifting millions into the middle class and securing a prosperous future by 2040.