The World Bank has elevated Vietnam and the Philippines to upper-middle-income status—but now they face ‘a far more demanding phase of development’

Vietnam and the Philippines are now “upper-middle-income” countries, at least according to the World Bank, putting them on the same level as Southeast Asian peers like Malaysia, Thailand, and Indonesia. The upgrade is “a highly encouraging milestone,” says Khuong Minh Vu, a professor at Singapore’s Lee Kuan Yew School of Public Policy. “It represents strong international recognition of the development progress achieved by the two economies.” Yet it will also force both countries to confront the so-called middle income trap that has stalled many other developing countries, including several in Southeast Asia, on their path to upper-income status. The World Bank determines a country’s economic status by its Gross National Income (GNI) per capita in the year before. The development bank classifies a country as upper-middle-income if its 2025 GNI per capita fell between $4,636 and $14,375. The World Bank cited Vietnam’s export boom and the Philippines’ broad-based economic growth—which reflected gains across all major industries, rather than just a single-sector—to explain the reclassification. In 2025, Vietnam and the Philippines reported gross national income per capital of $4,970 and $4,850, respectively. Vietnam’s economy grew by 8% last year, the highest among Southeast Asian countries. Fueled by trade diversions from the U.S.-China trade war, foreign direct investment into Vietnam surged, and the U.S. became the country’s largest export market. Hanoi is targeting average GDP growth of 10% through to the end of the decade, and wants to rise to high-income status by 2045. The country has passed a series of economic reforms and is investing heavily in infrastructure, including a $67 billion high speed railway to shuttle travelers between Hanoi and Ho Chi Minh city within eight hours. The Philippines grew by a more moderate 4.4% last year, after the country was battered by super typhoon Ragasa and an especially strong El Nino season, which resulted in around $24