Leveling Up: More Filipinos are Escaping Poverty and Becoming Middle Class

Though mostly comprised of the lower middle class segment, the increase in the ranks of Filipinos joining the middle class is fueling consumption, evolving consumer behavior, and enabling growth.

The middle class is the backbone of a nation’s progress. They spur economic development, fuel consumption, encourage good governance and lead entrepreneurial activities.

“The middle class is the source of economic growth. A strong middle class provides a stable consumer base that drives productive investment,” explains labor scholar and author David Madland, in an article on the growth of the middle class for democracyjoournal.org. “Beyond that, a strong middle class is a key factor in encouraging other national and societal conditions that lead to growth.” He adds.

Fortunately, the Philippines, known to have a mostly poor population, is seeing more Filipinos escape poverty and move up to the ranks of the middle class.

According to the 2025 Philippine Venture Capital Report, despite a 20% population growth, the Philippine’s middle class increased to 47.5% of the population in 2023, from 42% in 2012, an improvement by 13%.

However, the study notes it consists mostly of a lower middle-income population, which could hopefully further elevate in the coming years. Nevertheless, it is a notch better than poor, a hopeful sign that more Filipinos are moving out of poverty, which has led to a 39% reduction in the country’s poverty level.

Higher purchasing power and saving capacity

Along with the growing middle class, the report notes an increase in discretionary spending— a good sign that incomes are growing faster than expenses, enabling more Filipinos to save for the future. Saving ratios have nearly doubled in the last two decades, while income inequality has declined by 15% across all regions. The impact is felt in some areas more than others, with the Visayas region enjoying a five-fold increase in its savings ratio, while the southern region only reports a marginal increase.

In terms of consumer behavior, most Filipinos still opt for the more affordable brands especially with the proliferation of cheaper alternatives to meet their basic needs. But another trend called Premiumization— or a willingness to pay more for better quality of product or service—is increasing among the middle class, particularly in the areas of health, services, communication, and education.  

“Consumers are prioritizing investments in their well-being, connectivity, and personal growth,” says the report.

The trend is most evident in food choices, where the middle class is willing to pay more for fresh, healthy, and safe produce. The Asia Food Challenge Report by Pricewaterhouse Coopers Temasek and Robobak reveals that 65% of the world’s middle-class population will move to Asia by 2030, highlighting the need to increase the production of high-quality produce.

In addition, the Philippine Venture Capital Report sees an increase in spending beyond basic necessities towards personal growth, aspirations, and well-being.  Specifically, the report sees increased spending in four categories:

Health- There is an increasing demand for health care services and products, preventive care options, and insurance products.

Financing– More than 1 in every two Filipinos want to have their own business. This means access to more credit will become increasingly important.

Power– The wider middle-class base has led to a bigger demand for large appliances and air conditioning, requiring more infrastructure in the power sector to cope with the expected continuous surge in energy requirements, as more people aim for higher living standards.

Agriculture- The current interest in wellness and better quality of food requires increased and improved food production and more sustainable farming practices to adapt to the changing times and values of consumers.

“Entrepreneurs and businesses that can tap into these changing needs— whether through health-focused innovations, premium consumer goods, new solutions in financial services and insurance products, or experience-driven offerings— are well-positioned for success,” the report says.

Benefits of a wider middle class population

Madland points out that a strong middle-class base leads to higher and longer-term economic growth, which he attributes to several factors:

Stable demand

For businesses to be profitable and encourage the continuous stream of investments, demand for goods and services must be ample and steady. This way, consumption is sufficient enough to take up the current industrial output, encouraging more investments, creating employment, and powering economic growth.

“The wealthy in unequal societies simply do not consume enough to drive a modern economy. The wealthy save more than the middle class and they consume less,” explains Madland in his article.

Trust

Research shows that societies with a bigger middle-class population have a higher level of trust because people believe they share a common fate and values, and form stronger social bonds.

“It is difficult to convince people in a highly stratified society that the rich and the poor share common values, much less a common fate,” explains Madland.

Madland adds that a society where people trust one another more has lower transaction costs with less time and money spent verifying and policing each other. Instead, people tend to take more risks and become more innovative.

Good governance

Philosophers throughout history have emphasized that a strong middle class leads to a more engaged population, which leads to better governance. They hold the government accountable, reduce factional fighting, promote policies that benefit the majority, and foster active citizenship.

Madland explains that societies with a weak middle class usually have a higher corruption rate and experience poor service from government agencies, which affects not only people’s quality of life but also their nation’s growth.

Capitalist values

The middle class fosters attitudes and behavior that promote a capitalist society, such as the value of studying and working hard, which Madland asserts are essential to keep an economy going.

“There is no doubt that some behaviors, achievements, and attitudes that promote economic growth come directly from a middle-class environment,” he says.

Sharing a study done by the Kauffmann Foundation, Madland revealed that 72% of entrepreneurs also come from middle class backgrounds, highlighting their importance in establishing healthy capitalism.

The case for the Philippines

The emergence of a larger middle class in the Philippines is, on the surface, a hopeful sign. Some economists warn, however, that the government must study what fuels this growth. Is it truly the product of domestic progress—robust investment, sustainable job creation, and fair wages? Or is it simply the bittersweet fruit of a labor force exported abroad— OFWs torn from their families and professionals reduced to menial labor in foreign lands, relied on to keep the economy afloat.

They caution that until the government builds real opportunities at home, growth will be superficial, and the hope for a thriving, self-sustaining middle class will remain a dream.

The Philippine Venture Capital Report is an annual report done by Foxmont Capital Partners and Boston Consulting Group that uncovers the latest startups and growth trends in the Philippines.