Job losses to push 3-million Filipinos into poverty

Image credits: Nonie Reyes

WITH a quarter of breadwinners in the Philippines out of work in 2020 due to Covid-19, the World Bank expects nearly 3 million Filipinos to fall into poverty by the end of this year.

Based on the Philippine Economic Update (PEU), the World Bank said growth is expected to contract to 8.1 percent this year before rebounding to 5.9 percent in 2021 and 6 percent in 2022.

Poverty incidence, the World Bank said, is expected to increase to 22.6 percent this year from 20.5 percent in 2019. This is based on the $3.2-a-day poverty line for lower middle-income countries like the Philippines.

“As the threat of the Covid-19 pandemic dissipates and business activities gradually return to normal, the economic recovery is expected to contribute to poverty reduction. The poverty rate is projected to fall to its 2018 level in 2021 and keep falling throughout 2022,” the report stated.

“Poverty in the Philippines is likely to increase in the short term given the negative impact of the pandemic on employment and household income,” it added.

The World Bank said a large share of breadwinners remained jobless even after the government started easing community quarantines.

The report listed sectors which lost the most jobs as construction at 31.3 percent; food services and accommodation, 25.6 percent; and trade, 25.4 percent.

Based on government estimates, using its own poverty thresholds, National Statistician Claire Dennis S. Mapa said some 4.5 million Filipinos became jobless. This translated to an annual unemployment rate of 10.4 percent this year.

Philippine Statistics Authority (PSA) Assistant National Statistician Wilma Guillen earlier told the BusinessMirror that 104 Filipinos out of 1,000 persons in the labor force also had no income this year.

“The job losses among household heads were more pronounced in the National Capital Region and neighboring regions of Central and Southern Luzon—one-third of household heads reported job losses here—where case infections were widespread and stricter community quarantines were enforced,” the World Bank said.

Typhoons, low consumption

APART from the pandemic, the World Bank said Typhoons Rolly (international name Goni), Siony (Atsani) and Ulysses (Vamco) that hit the country in November in just a span of two weeks brought devastation to a large swath of Luzon, fueling the rise in poverty.

Prior to these disaster events, the economy had already posted a 10-percent contraction in the first three quarters, the worst since the 1985 debt crisis, due to a plunge in private domestic demand, deep contraction in investment activities, and weak exports.

The current economic forecast is a revision from the -6.9 percent World Bank forecast in October, resulting from the deep contraction in the third quarter and the extensive damage and losses suffered by the country from the typhoons and floods in November.

“The series of natural disasters that hit the country while we are battling the pandemic highlights the importance of mainstreaming disaster risk reduction and climate change adaptation into policy and planning,” said Ndiamé Diop, World Bank Country Director for Brunei, Malaysia, Thailand and the Philippines. “While the Philippines is financially resilient, stronger coordination, execution and implementation will help further improve social and physical resilience to frequent shocks.”

Private consumption, which accounts for two-thirds of the Philippine economy, has declined at a record pace because of high unemployment and falling incomes, the World Bank said.

The economic update said the pandemic and natural disasters threaten to reverse the trend of a steady decline in poverty in recent years.

Falling households income

The results of a Covid-19 impact monitoring survey conducted in August 2020 show about 40 percent of households reporting a fall in income. Entrepreneurial income reportedly declined, particularly among households engaged in nonfarm business.

Remittances from abroad, a lifeline for many Filipino families, were reported to have fallen for two in five households that receive remittances, according to the survey.

“I think the most effective way to help the poor is actually to build confidence by continuing to flatten the infection curve, therefore, more activity will open and people will have the confidence to go out and spend. This is really the most effective way to help the poor instead of the cash transfer,” World Bank Senior Economist Rong Qian said.

Boosting confidence

IN a briefing on Tuesday, Qian said the Philippine economy is expected to return to its pre-pandemic growth path in 2022.

Qian said the growth drivers for next year and in 2022 will still be the growth of private consumption and public investments in the country. This will boost confidence and support consumption growth.

The World Bank said the government is expected to ramp up its infrastructure spending starting in the fourth quarter of 2020, creating jobs in the construction sector.

Qian added that the pre-election spending in the latter part of 2021 and election spending in 2022 would also help boost growth in the country.

The PEU’s current forecasts hinge on China’s early recovery, alongside the expected rebound in the global economy in 2021—which will allow for export growth to recover—and larger remittance inflows to stimulate domestic demand.

“Also, the global economic recovery will help the domestic economy via trade of Philippine export goods and remittances,” Qian added.

The PEU summarizes key economic and social developments, important policy changes, and the evolution of external conditions affecting the Philippines over the past six months.

It also presents findings from recent World Bank analyses, situating them in the context of the country’s long-term development trends and assessing their implications for the country’s medium-term economic outlook.

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