Earth Hour

Sunday, October 28, 2018

Poverty in the Philippines: An Assessment

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I recently attended a presentation on the latest World Bank study entitled, “Making Growth Work for the Poor: A Poverty Assessment for the Philippines.”   Dr. Xubei Luo, Senior Economist of the World Bank, presented the findings of the main study.  

Dr. Luo identified the three key messages of the study: the Philippines can overcome poverty; the Philippines needs to do more to overcome poverty, and it requires concrete actions by all concerned to do it.  Poverty had declined by 5 percentage points from 26.6% in 2006 to 21.6% in 2015.  The factors that contributed to this decline include the increase in wage income and movement of employment out of agriculture, which contributed 2/3 of poverty reduction.  Another driver of poverty reduction is government transfers which accounted for ¼ of the reduction.   Remittances also accounted for 1/5 to the decrease of poverty, with some 2/3 of Filipino households receiving domestic and foreign remittances annually.  

Luo noted that in spite of these developments, the Philippines continues to lag behind its peers in terms of poverty reduction.  Less than 1 in 10 Filipinos joined the global middle class while 1 in 10 remains vulnerable to getting poor.  The study showed that this is due to several factors including the limited growth in agricultural productivity in the past decade and the limited manufacturing base which can absorb low skilled workers from agriculture, most of whom end up in low-end service jobs.  High inequality also contributes to poverty in the country with only 1% owns half of the nation’s wealth.  Natural disasters and conflict further add to poverty, with more than a million people pushed into poverty each year due to disasters, while protracted conflicts in some areas exact a significant toll on the local economy and trap people into poverty.  Luo stressed that poor people start their lives at a disadvantage: they have limited access to good health, limited access to good education and thus lack the necessary skills to land good jobs.  This vicious cycle trap people in poverty for generations.

The report identified six concrete actions to end poverty in the Philippines.  Create more and better jobs, focusing on quality.  To do this, we must improve the business environment to attract more investments, upgrade the value chains, strengthen the backward linkages to create jobs for both skilled and unskilled workers.  Since 60% of the poor work in agriculture, improving productivity in all sectors, especially in agriculture, is crucial in poverty reduction.  This includes increasing productivity in agriculture and supporting agribusiness development.  Another action is to equip Filipinos with the skills needed for the 21st-century economy.  

Luo said education is essential, and people living in a household headed by someone with limited education will be more likely poor than someone who lives in a household headed by someone with a good education.  To improve education, we need to boost quality in basic education, increase secondary completion rate especially among the poor, and develop socioeconomical skills in people.  

Investing in health and nutrition is also crucial.  Stunting rate is very high with 1/3 of children under 5 years are stunted, and half of the children in poor households are stunted.  One out of 10 teenage girls are either pregnant or already had a child.  It is crucial to improve health care quality and equity, reduce child stunting and fully implement the Responsible Parenthood and Reproductive Health Law.  

There is also a need to focus on poverty reduction efforts on Mindanao Two out of 5 poor people live in Mindanao, and more than 50% of the ARMM population are poor.  It is vital to increase public investment and resolve conflict and promote peace in Mindanao.  

Lastly, we must manage risks and protect the vulnerable.  Every year, 1 million people are impoverished due to natural calamities.  Improving natural disaster risk management systems and strengthening social protection systems are crucial to support the poor and protect the vulnerable.  

Luo also provided updates on the implications of recent economic developments to poverty.  Inflation, particularly food inflation, has increased very rapidly and remained very high. Economic growth outlook remains positive and is projected at 6.5% in 2018.  If we look at the composition of income and expenditure by income quintile, poor people spend more on food.  The poverty rate is seen to continue to decline, but with the uncertainty and high inflation, poverty reduction may slow down.  This means that everyone must act together to fight poverty.