THE full weight of poverty would be felt, and felt hard, by millions of Filipinos if the lockdown in Luzon and Metro Manila would remain in place for three months, a policy brief released by the De La Salle University Angelo King Institute (AKI) revealed.
In a policy brief, Virginia Polytechnic Institute and State University’s Cesar B. Cororaton and DLSU School of Economics’ Marites Tiongco and Arlene Inocencio estimated a Luzon lockdown for three straight months will cause poverty incidence and poverty gap to increase by 1.4 percent. The severity of poverty, likewise, is seen to increase by 1.8 percent.
Gini coefficient, a measure of inequality where perfect inequality is 1 and perfect equality is zero, will also increase by 0.10 percent.
“Under the Luzon lockdown for straight three months, real GDP [gross domestic product] contracts by P551 billion relative to the 2020 base,” the economists said. “Instead of a 6-percent projected growth, the country will only grow by 0.4 percent in 2020 over 2019.”
“Note that Luzon contributes 70 percent of total GDP. The sectors with the largest negative impact are computer and related activities, textile and related activities (spinning, weaving, texturing and finishing), construction, agriculture crops and motor vehicle,” they added.
Data showed that using 2015 data from of the Philippine Statistics Authority’s (PSA) Family Income and Expenditure Survey (FIES), poverty incidence was at 21.5 percent; poverty gap, 5.578 percent; poverty severity, 2.08 percent; and Gini coefficient was at 0.453.
With a three-month lockdown, the economists projected poverty incidence to increase to 21.799 percent; poverty gap, 5.657 percent; poverty severity, 2.117 percent; and Gini coefficient, 0.4534.
If the entire Philippine archipelago would be placed under lockdown for three months, the economists said the numbers would be more grim for the economy and poverty will be even worse.
A three-month shutdown of the Philippines would cost the economy P817 billion and force the country’s GDP to contract 2.4 percent this year.
Poverty and inequality are also expected to worsen to a poverty incidence of 21.911 percent; poverty gap, 5.697 percent; poverty severity, 2.135 percent; and Gini coefficient to widen to 0.4537.
The economists said a two-month lockdown of the Philippines would lead the economy to lose P522 billion and GDP to post a growth of only 0.6 percent in 2020.
This would lead poverty incidence to increase to 21.778 percent; poverty gap, 5.652 percent; poverty severity, 2.114 percent; and Gini coefficient, 0.4534.
Meanwhile if the entire country is placed on lockdown for a month, the economists estimated this would lead to P251 billion in losses and slow GDP to a growth of 3.4 percent this year.
Poverty incidence would increase to 21.614 percent; poverty gap, 5.612 percent; poverty severity, 2.096 percent; and Gini coefficient to widen to 0.4532.
“If rather lockdown covers the entire Philippines and would last for three months, additional P70 billion is required to reverse the change in all poverty indicators,” the economists said.
The economists issued the policy brief 12 days before the end of a 45-day enhanced community quarantine of Luzon that began on March 17.
Poverty incidence is defined by the PSA as the proportion of families or individuals with per-capita income or expenditure less than the per-capita poverty threshold to the total number of families or individuals.
Poverty gap, meanwhile, is computed as the total income or expenditure shortfall of families or individuals with income/expenditure below the poverty threshold, divided by the total number of families/individuals.
The severity of poverty is measured as the total of the squared income or expenditure shortfall (expressed in proportion to the poverty threshold) of families or individuals with income or expenditure below the poverty threshold, divided by the total number of families or individuals.
Image credits: Bernard Testa