The Philippine Statistics Authority (PSA) released two important data last week that were drowned by the euphoria of the Southeast Asian (SEA) Games and the President’s statement on the Metro Manila water concessionaires. These are the 2018 full poverty statistics and the results of the October 2019 round of the Labor Force Surveys.
The results of these reports are unprecedented. The poverty rates for 2018 has fallen to 16.6 percent of the population, from 23.3 percent during the last Family Income and Expenditure Survey in 2015. The fall is spectacular considering that from 2003 to 2012, poverty rates have fallen only by about 5-percentage points from 30 percent to 25.2 percent. It should be noted also that the 2015 result was 21.6 percent but the PSA said that it was adjusted upward to consider the rebasing of the consumer price index from 2006 to 2012 and the results of the 2015 Population Census. Likewise, inflation rates spiked in 2018, which means that if that did not happen, the poverty rate could have been much lower than 16.6 percent. Our colleague and Senior Fellow of Eagle Watch, Dr. Cielito Habito, wrote in his Inquirer column that the steep drop in poverty rates was due to the strong growth of the manufacturing sector since 2010 and the accompanying double-digit growths in investments during the same period. Habito also cited that the conditional cash transfers also contributed to this faster decline. At this rate, the government is well in line or is even possible to overperform its target of bringing down poverty to 14 percent by 2022.
This result is complemented by the lowest recorded unemployment rate of 4.5 percent and 13 percent for underemployment in the last 14 years. Indeed, the low poverty rate is seen to have come primarily because more people have jobs and, therefore, income. The low underemployment rate is most encouraging because, like the poverty rate, it has stubbornly been in the high 25 percent for the most of the 1990s to 2010. This implies that lesser working people are looking for more hours of work. The fall in these numbers are indeed welcome development for our country and this is something that we have been waiting to see in the last two decades.
We want to see these “falls” to continue at their current pace. We are, however, challenged by another set of falls. The same factors that Habito pointed out to be the source of falling poverty have recently reversed their increasing trend. In particular, the contribution of manufacturing to gross domestic product growth has fallen to 0.5 in the third quarter of 2019. This is the lowest since the third quarter of 2011 when it contributed only 0.4. This is way below its average contribution of roughly 1.5 in the last 30 quarters. Similarly, investments posted its two consecutive quarters of decline from growing by an average of more than 12 percent during the same period. The last times investments also posted declines were also during the third and fourth quarters of 2011. If this pattern is to be followed, the rate of decline of poverty from 2009 to 2012 was only 1.1 percent, from 26.3 percent to 25.2 percent. This could mean that the rate of decline of poverty might also slow from 2018 to 2021.
We, therefore, need to address the fall in manufacturing and investments soonest if we want to maintain the decline in poverty. Our challenge with the fall in manufacturing is that a portion of it is externally driven due to the trade war of the US and China. With a significant portion of our manufacturing linked to the global value chain, the decline of trade between the two affects us both ways. Another aspect of the decline of manufacturing is also related to our capacity constraints. The infrastructure program of the government might have suffered from delayed approval of the budget, but it also suffers from manpower capacity in terms of skills to implement these huge projects. This might have also contributed to the decline in investments as logistics and traffic management remain to be clogging the flow of economic activity. (We are not yet talking about the results of the PISA, which will be part of the work force in about five years from now).
This is why it is imperative for the government to show that it has the capacity to address the traffic and logistical challenges. At the rate we are going, infrastructure projects need to be facilitated to the extent that construction is done three shifts for those not requiring special skills or working 24 hours not only in Metro Manila but all over the country. This approach could help sustain lower skilled jobs and, thereby, supporting income. This should be complemented by a traffic management that is incentivized by better flow rather than by violations. We are getting there, let us do some more.
Acerd invites you to our 2020 Philippine Economic Outlook Eagle Watch Economic Briefing on January 16, 2020, at the Ateneo Rockwell Campus featuring Dr. Cielito Habito and Dr. Luis Dumlao. For more details please contact sales.cce@ateneo.edu