Daven Tamayo

A tale of two economies: Why the Philippines now lags Vietnam

Article (news)

Jekki Pascual

ABS-CBN News

<div><img src="https://od2-image-api.abs-cbn.com/prod/editorImage/1783421580481hanoi.jpg" style="width:960px" class="fr-fic fr-dib" width="960"/>Street scene in Hanoi, Vietnam. Arthur Fuentes, ABS-CBN News</div>MANILA — The Philippines and Vietnam are two ASEAN neighbors that recently moved up together to the upper middle income classification of the World Bank. But each represents a different story of growth, with Vietnam outpacing the Philippines.Vietnam’s Gross National Income (GNI) per capita for 2025 hit $4,970, while the Philippines’ GNI per capita is $4,850. A year prior in 2024, the income gap of the two countries was just $20, but one year later, the income gap widened to $120.Over a decade ago, Vietnam was still classified as a low income country, while the Philippines was already a lower-middle income country.The Philippine Department of Economy, Planning, and Development (DEPDev) admitted that the Philippines has been on a slow growth pace for the past decades. Secretary Arsenio Balisacan said many ASEAN neighbors have outgrown the country, including Vietnam.<div><a href="https://www.abs-cbn.com/news/business/2026/7/7/inflation-eases-to-6-4-percent-in-june-as-fuel-prices-decline-0914">Inflation eases to 6.4 percent in June as fuel prices decline</a></div>“If you’re asking why we are poor, the big part of the story is the country has not grown as fast as our neighbors,” Balisacan said.Comparing the Philippines to other ASEAN neighbors, Singapore’s GNI per capita is $81,760, Malaysia $12,380, Thailand $7,690, and Indonesia $5,120. Singapore is a high income country, while the rest have been upper-middle income in recent years. The Philippines and Vietnam both graduated together to upper-middle income this year, but the latter has a higher GNI per capita.But why is the Philippines achieving slower growth?“When Vietnam opened up its economy to foreign investors, it made it clear that it signals to the world its major driver for growth would be exports and foreign investments,” Balisacan said. He said the Philippines did not follow that path and instead started exporting labor and was dependent on domestic consumption for growth. He added that Vietnam chose to beef up its industries, opened up the economy, and improve its exports sector.“We neglected developing our exports sector, our competitiveness. We didn’t invest in competitiveness, productivity, and we were so constrained, foreign investors are <a href="https://www.abs-cbn.com/news/business/2026/7/2/-ph-middle-class-being-quietly-squeezed-by-high-inflation-interest-rates-1236"></a><a href="https://www.abs-cbn.com/news/business/2026/7/2/-ph-middle-class-being-quietly-squeezed-by-high-inflation-interest-rates-1236"></a>constrained from coming into the country,” he said.<div><a href="https://www.abs-cbn.com/news/business/2026/7/2/-ph-middle-class-being-quietly-squeezed-by-high-inflation-interest-rates-1236">PH middle class becoming economy&#x27;s &#x27;quiet absorber&#x27; as high prices, elevated interest rates squeeze households: PIDS</a></div>Balisacan said the Philippines has been playing ‘catch-up’ in recent years. Several reforms have been made to make it easier for foreign investors to invest in the Philippines. He said there is also now an emphasis on manufacturing, semiconductors and other higher quality industries.He also said that other industries must also be strengthened like tourism, agriculture.“We have realized that for us to continue growing and to continue making our economy resilient, we need to get the other drivers of growth coming in, to complement consumption,” he said.UP School of Economics Associate Professor JC Punongbayan also said that the growth of Vietnam has been quick and steady. He said Vietnam entered the lower-middle income category around 2008-2009 and yet became an upper middle income in less than 20 years. Meanwhile, the Philippines was already the lower-middle income country since 1987 and took almost 40 years to graduate to the upper-middle income bracket.“Yung Vietnam din kasi sobrang lakas ng paglago ng ekonomiya niya. Ang lakas ng exports niya, yung manufacturing,” Punongbayan said.<div><a href="https://www.abs-cbn.com/news/business/2026/7/1/philippines-now-an-upper-middle-income-country-2222" rel="noopener noreferrer" target="_blank">Philippines now an &#x27;upper-middle income&#x27; country</a></div>The Philippine economic managers said many reforms continue to be done, as well as the push to build more infrastructure and eradicate corruption. Finance Secretary Frederick Go welcomed the creation of the US and Japan-led Luzon Economic Corridor because this will potentially build more factories and industrial zones. Several economic policies have also been changed or created to have a more investment-friendly environment.“That means factories can be rooted there, to be manufacturing all these things we just mentioned- technology, chips, semiconductors, all the things that go into a computer, all the things go into a data center, all the things going into AI framework,” said Go.Both Balisacan and Go remain confident of growth for the country, saying this upper-middle income status is a recognition for the country and a signal that more needs to be done to make this growth be felt by all Filipinos.

Vietnam was trailing the Philippines just a few years ago, but is now outpacing us.

Vietnam was trailing the Philippines just a few years ago, but is now outpacing us.