Two of Southeast Asia’s fastest-rising economies have just climbed into Thailand’s income league. On 1 July 2026, the World Bank upgraded Vietnam and the Philippines to “upper-middle-income” status, the same tier Thailand has occupied for years. The milestone is a moment of national pride in Hanoi and Manila. For Thailand, it is a reminder of an uncomfortable truth: its neighbours are catching up, while it has struggled for three decades to take the next step up.
On this page:
| Section (Click to jump) | Summary |
|---|---|
| What the World Bank announced | Why Vietnam and the Philippines joined the upper-middle-income group in the latest World Bank update. |
| Thailand was not overtaken; its neighbours caught up | Thailand remains wealthier per person, but regional rivals have now reached the same income category. |
| The middle-income trap Thailand cannot escape | Why Thailand remains far from high-income status despite decades of economic development. |
| Why Thailand is stuck | How ageing demographics, debt, weak productivity, and inequality continue to hold back economic growth. |
| The neighbours are not standing still | How Vietnam and the Philippines are pursuing faster growth while Thailand struggles to regain momentum. |
What the World Bank announced
Every year on 1 July, the World Bank sorts the world’s economies into four income groups, low, lower-middle, upper-middle and high, based on gross national income (GNI) per capita from the previous year. GNI per capita is a measure of the total income earned by a country’s residents, at home and abroad, divided by the population. The figures are calculated in US dollars using the World Bank’s Atlas method, which smooths out short-term swings in exchange rates.
In this year’s update, five economies moved up from lower-middle to upper-middle income: Vietnam, the Philippines, Sri Lanka, Jordan and Micronesia. Only one country, Togo, moved up from the low-income group, and none were downgraded.
Vietnam recorded an Atlas GNI per capita of US$4,970, while the Philippines reached 4,850, both clearing the US$4,636 threshold for the upper-middle-income category. According to the World Bank, Vietnam’s rise was powered by an export-led boom, with exports surging more than 15% in both 2024 and 2025. The Philippines got there through broad-based growth averaging 5.8% a year over five years, spread across industries rather than driven by a single sector.
Togo’s move from low- to lower-middle income was driven primarily by a population census revision that reduced its estimated population by 11.7%, lifting its per capita figure.
Thailand was not overtaken; its neighbours caught up
It is important to be precise about what happened. Thailand was not upgraded this year because it is already an upper-middle-income country and has been for years. Its Atlas GNI per capita stands at around US$7,690, still comfortably ahead of both Vietnam and the Philippines.
What changed is that Vietnam and the Philippines have now joined the same tier as Thailand. With this shift, all five of Southeast Asia’s major economies now sit at the upper-middle-income level or above. Singapore, at US$81,760, and Brunei, at US$34,790, are classified as high-income. Malaysia sits at 12,380, Thailand at 7,690, and Indonesia at 5,120, alongside newcomers Vietnam and the Philippines. Cambodia, Laos and Myanmar remain in the lower-middle-income group.
Here is how the region’s economies compare on GNI per capita:
| Country | GNI per capita (USD) | World Bank income group |
|---|---|---|
| Singapore | 81,760 | High income |
| Brunei | 34,790 | High income |
| Malaysia | 12,380 | Upper-middle income |
| Thailand | 7,690 | Upper-middle income |
| Indonesia | 5,120 | Upper-middle income |
| Vietnam | 4,970 | Upper-middle income (new) |
| Philippines | 4,850 | Upper-middle income (new) |
| Cambodia | 2,520 | Lower-middle income |
| Laos | 2,150 | Lower-middle income |
| Myanmar | 1,320 | Lower-middle income |
The middle-income trap Thailand cannot escape
Thailand’s real problem lies at the top of the ladder, not the middle. To reach high-income status, a country needs GNI per capita above roughly US$13,925, or about 490,000 baht per person a year. That means Thailand must nearly double its current income per head.
The government has set itself a clear target under its 20-year National Strategy running from 2018 to 2037: to become a high-income nation by 2037. To hit that goal, the country needs to sustain average GDP growth of around 5% a year. The reality has fallen far short. The World Bank expects Thai GDP to grow just 1.8% in 2025 and 1.6% in 2026, and growth has rarely approached the 5% mark over the past decade. The World Bank has stated bluntly that, at the current rate, Thailand will not meet its high-income aspirations by 2037.
This is the classic “middle-income trap,” where a country grows wealthy enough to escape poverty but then stalls before reaching developed-economy status. Thailand has been stuck in the middle-income bracket for more than 30 years. As Burin Adulwattana, managing director of the Kasikorn Research Center, put it, the economy is “like an aircraft that is losing altitude,” and without a new industrial engine, it will not be able to climb again.
Why Thailand is stuck
Economists point to a cluster of structural weaknesses that reinforce one another.
An ageing society sits at the centre of the problem. Thailand is on track to become a “super-aged” society by 2029, when more than 20% of the population will be over 65, a demographic profile similar to Japan and much of Western Europe. A shrinking workforce squeezes labour-intensive industries and drives up healthcare and pension costs.
High household debt is another drag. Thai household debt has climbed above 90% of GDP, and past 100% when informal borrowing is included. A large share of that debt is non-productive, in the form of personal and credit-card loans that do not raise incomes, leaving families with heavy repayment burdens and little room to spend.
Weak productivity and low innovation compound the issue. Thailand’s economy remains heavily dependent on original-equipment manufacturing and low-cost assembly, while rising minimum wages have eroded its cost advantage over lower-cost rivals such as Vietnam and Indonesia. Foreign investment in higher-value sectors has been limited, and the OECD has flagged bureaucracy, weak competition and urban congestion as further brakes on growth.
Inequality caps the gains that do materialise. The World Bank notes that the top 10% of Thai households hold more than half the country’s wealth, making Thailand one of the most unequal economies in the world. As growth slows, upward mobility narrows, and the middle class risks being squeezed rather than expanded.
The neighbours are not standing still
The contrast with Thailand’s neighbours is stark. Vietnam is targeting double-digit growth in 2026 and has set a national ambition to become a high-income economy by 2045, backed by business-friendly reforms and heavy infrastructure investment. The Philippines faces a trickier road, having trimmed its growth targets for 2026 to 2030 in the face of global uncertainty, but its upgrade still reflects years of steady, broad-based expansion.
For both, the new status carries a trade-off. Moving up the World Bank ladder can reduce access to the concessional, below-market loans that lower-income countries rely on for infrastructure and social programmes. Officials in both countries argue that stronger economic fundamentals and improved market access will more than offset that loss.
It is also worth stressing what the classification does not mean. It is based on GNI per capita alone and does not measure productivity, inequality, the quality of institutions or social welfare. An upgrade signals progress, not that a country has reached developed-world living standards.
Thailand has not been leapfrogged. Its neighbours have simply climbed up to stand alongside it. But the direction of travel is what matters. With that, Vietnam and the Philippines are rising quickly, with clear long-term targets and growth to match, while Thailand risks becoming the economy that grew comfortable in the middle and then lost momentum. Unless it can lift growth, tackle household debt, raise productivity and adapt to an ageing population, the leap to high-income status may remain, as it has for a generation, just out of reach.
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