Key facts
- Vietnam and the Philippines have been reclassified as upper-middle-income countries by the World Bank.
- The World Bank uses GNI per capita to classify economies.
- Vietnam's 2025 GNI per capita was $4,970, and the Philippines' was $4,850.
- Vietnam's economy grew 8% last year, driven by increased foreign direct investment and exports to the U.S.
- The Philippines achieved 4.4% growth despite adverse weather conditions.
- Experts warn that moving to upper-middle-income status can lead to the 'middle income trap' if innovation does not keep pace with the loss of cheap labor advantages.
The semiconductor industry's expansion in Southeast Asia is propelling Vietnam and the Philippines toward "high-income country" status, according to recent economic analyses. Both nations have been reclassified as "upper-middle-income" by the World Bank, aligning them with regional peers like Malaysia, Thailand, and Indonesia.
The World Bank's classification is based on Gross National Income (GNI) per capita. For 2025, Vietnam reported a GNI per capita of $4,970, while the Philippines reported $4,850, placing them within the upper-middle-income bracket of $4,636 to $14,375.
Vietnam's economic surge, marked by an 8% growth last year, has been significantly boosted by trade diversions stemming from the U.S.-China trade war, leading to a surge in foreign direct investment and making the U.S. its largest export market. The country aims for an average GDP growth of 10% through 2030 and targets high-income status by 2045, supported by economic reforms and substantial infrastructure investments, including a $67 billion high-speed railway project.
The Philippines experienced more moderate growth of 4.4% last year, impacted by a super typhoon and El Nino. Despite these challenges, economic planning secretary Arsenio Balisacan stated the country has maintained its development agenda. Both nations are expected to continue their growth trajectory, with the ASEAN+3 Macroeconomic Research Office projecting 7.4% for Vietnam and 5.3% for the Philippines this year, surpassing the projected 4.6% for ASEAN overall.
However, experts like Khuong Minh Vu, a professor at Singapore's Lee Kuan Yew School of Public Policy, caution that this upgrade marks the beginning of a more challenging development phase. Countries often face the "middle income trap," where they lose their competitive edge in cheap labor without developing sufficient domestic innovation to compete with wealthier nations. Furthermore, achieving upper-middle-income status can reduce access to development funding from organizations like the World Bank, as nations are expected to become more self-sufficient.