The Philippines has the potential to fast-track its transformation into a middle-class society by 2040 – provided it adopts a more strategic approach to economic growth that prioritizes job creation, higher productivity, and improved connectivity, according to a new report by the World Bank.

In its latest study titled “Running Uphill: Growth, Jobs, and the Quest for Productivity,” the multilateral lender emphasized that the country must act urgently to navigate a rapidly evolving global landscape marked by economic uncertainty, disruptive technologies like artificial intelligence, and intensifying climate-related threats.

The World Bank underscored the need for a new policy direction centered on generating more and better-paying jobs to drive inclusive growth. Without decisive reforms, the Philippines risks falling short of the long-term growth needed to raise living standards and reduce inequality across regions.

“Employment is not merely an economic indicator; it’s a cornerstone of social stability and individual dignity. Jobs offer individuals the opportunity to lift themselves out of poverty, support their families, contribute to their communities, and help build a prosperous country,” said Zafer Mustafaoğlu, World Bank Division Director for the Philippines, Malaysia, and Brunei.

To meet its development aspirations, the country must sustain annual growth of 6 to 10 percent over the next two decades. Implementing the report’s recommendations could help lift average GDP growth to 6.8 percent, generate more than 5.1 million additional jobs, and boost real wages by 12.9 percent – particularly in the manufacturing and services sectors.

Over the last 15 years, the Philippine economy posted strong gains, doubling its GDP and achieving record-low unemployment. Growth was also more regionally balanced, with low- and middle-income areas making significant contributions.

Real incomes of the bottom 40 percent grew faster than those of the wealthiest 20 percent, thanks in part to improved labor outcomes and a shift from agricultural self-employment to wage jobs in services, driven by public investments in connectivity and business-enabling reforms.

“The Philippines has demonstrated that investment-led growth can be inclusive. However, 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,” said Gonzalo Varela, World Bank Lead Economist.

Still, serious challenges remain. Productivity has not been a major contributor to economic expansion, and many sectors continue to suffer from limited competition, bureaucratic red tape, and high transport costs. The country’s declining engagement in global trade and value chains further threatens its growth trajectory.

The report warns that the slow pace of technology adoption among Philippine firms hampers innovation, competitiveness, and quality job creation. 

“Technology adoption is no longer optional,” said Jaime Frias, Senior Economist. 

“It is essential for firms to grow, compete, and create better jobs. The Philippines must invest in digital skills and foster an innovation ecosystem that empowers businesses to harness the full potential of emerging technologies.”

To sustain long-term growth, the World Bank outlined a three-pillar strategy: increase investment in both physical and digital infrastructure and human capital; foster a competitive, business-friendly environment; and channel private capital into high-potential sectors that produce tradable goods and services, such as agriculture, tourism, manufacturing, and business services.

With the right mix of policies and a firm commitment to reform, the World Bank said the Philippines can move toward a more inclusive and resilient economy, ultimately securing its place among the world’s rising middle-class nations by mid-century.