The Philippines’ biggest economic opportunity may no longer be moving up the global income ladder, but bringing down one of Asia’s highest electricity bills.
The World Bank says cheaper and more reliable power could create more than 161,000 jobs, lift about 730,000 Filipinos out of poverty, and strengthen the country’s competitiveness, arguing that energy reform—not its recent reclassification as an upper-middle-income country—will determine the next chapter of Philippine growth.
The recommendations come weeks after the World Bank officially reclassified the Philippines as an upper-middle-income country, a milestone based on the country’s 2025 income level that capped two decades of economic expansion. But the lender says the bigger challenge now is turning that achievement into faster productivity growth, better-paying jobs, and broader improvements in living standards by making the economy more competitive.
“This is a milestone the Filipino people have earned. The World Bank is proud to have been supporting the Philippines in its continuous development,” Zafer Mustafaoğlu, World Bank division director for the Philippines, Malaysia, and Brunei, during the launch of the Philippines Economic Update Midyear 2026 in Makati City on Monday, August 3.
“Sustaining it requires going further—prioritizing reforms that lower the cost of doing business, restore investor confidence, and create more and better jobs for Filipino families,” Mustafaoğlu added.
At the heart of the World Bank’s message is electricity, which it says will increasingly shape the country’s ability to attract investment, generate jobs, and sustain economic growth as industries become more energy-intensive. As the Philippines urbanizes and expands into manufacturing, digital services, transport electrification, and data centers, affordable and reliable power will determine whether businesses choose to invest and expand in the country.
Yet electricity remains one of the Philippines’ biggest competitive disadvantages. The report says power prices are among the highest in Southeast Asia even after accounting for consumer subsidies in neighboring countries. It attributes the high cost not only to fuel prices but also to structural issues, including long-term power supply agreements, concentrated electricity generation, transmission bottlenecks, and limited competition in wholesale electricity markets.
To demonstrate what’s at stake, the World Bank modeled two possible futures for the country’s power sector. One assumes existing bottlenecks continue to delay investments. The other accelerates renewable energy deployment to 35% of the country’s power mix by 2030—consistent with government targets—while expanding transmission, battery storage, grid flexibility, and competition in electricity markets.
Under that reform scenario, residential electricity prices could fall by as much as 28%, gross domestic product would be more than 1% higher by 2030, more than 161,000 additional jobs would be created, and roughly 730,000 Filipinos would be lifted out of poverty. The reforms would also reduce dependence on imported fuel and make the power system more resilient to future energy shocks.
“In a period of constrained fiscal and policy space, power-sector reform is not only an energy priority,” the report said. “It is central to restoring competitiveness, supporting investment, and strengthening the medium-term recovery.”
The recommendations come as the World Bank expects the Philippine economy to slow to 3.7% this year from 4.4% in 2025 as weaker investment and higher energy costs weigh on growth. The lender projects the economy will rebound to 5.2% in 2027 if governance conditions stabilize, public investment recovers, and inflation eases.
According to the report, the slowdown reflects two overlapping shocks. A review of public infrastructure projects launched in mid-2025, combined with broader policy uncertainty, has dampened investment, private sector confidence and foreign direct investment. At the same time, the conflict in the Middle East has pushed up global oil prices, feeding through to domestic fuel, transport, and electricity costs while eroding household purchasing power. Lower-income Filipinos have borne the heaviest burden as inflation accelerated and the labor market softened.
The World Bank estimates the energy shock could push about 2 million Filipinos into poverty without stronger social protection. It urged the government to temporarily expand the Pantawid Pamilyang Pilipino Program, or 4Ps, to include near-poor households not currently covered, saying targeted cash transfers would reduce the projected increase in poverty at roughly one-third the fiscal cost of suspending fuel excise taxes.
Beyond social protection, the lender said restoring investor confidence is equally critical. It called for resolving uncertainties surrounding infrastructure procurement, improving the business environment, and lowering the cost of doing business to revive both public and private investment. It also urged the government to prioritize tax reforms and improve spending efficiency instead of relying on deeper cuts in capital spending, warning that weaker public investment could further delay the recovery.
The World Bank also warned that risks remain tilted to the downside. A prolonged disruption in the Strait of Hormuz could keep oil prices elevated and inflation high, while a downturn in the global artificial intelligence investment cycle could weaken exports, technology-related foreign investment, and financial conditions. Continued delays in infrastructure projects and increasingly frequent climate-related disasters would add to those risks.
For the World Bank, the Philippines’ recent income reclassification is an important milestone—but not the destination.
The bigger test, it says, is whether the country can translate that achievement into lower electricity costs, stronger competitiveness, and better-paying jobs, ensuring the benefits of growth are felt not just in economic statistics but in the daily lives of Filipino families.
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