THE Philippine economy needs two more decades of high economic growth before it can finally consider itself a high-income country and make poverty a thing of the past, according to the National Economic and Development Authority (Neda).
In the 2022 Economic Journalists Association of the Philippines-San Miguel Corporation Economic Forum, Socioeconomic Planning Secretary Arsenio M. Balisacan said rapid poverty reduction can only be achieved by sustaining a high level of economic growth.
Balisacan noted that the same outcome can also be facilitated by a reduction in inequality of opportunities and a relatively low level of inflation. In 2021, income inequality in the country as measured by the Gini coefficient was reduced to 0.4119 in 2021 from 0.4267 in 2018.
“Expanding the economic pie quickly and sustainably leads to more resources for social services like health and education, better infrastructure like railways, ports, roads, and
airports, as well as energy, water, and telecommunication networks. These encourage investment and business activity, create jobs, raise incomes, and improve the Filipino’s quality of life,” Balisacan said.
Baliasacan explained that inequality partly determines how responsive poverty reduction is to economic growth. Based on the 2021 Family Income and Expenditure Survey (FIES), the income of the upper 10 percent income group was 7.02 times as much as that of the bottom 10-percent income group.
The data from the Philippine Statistics Authority (PSA) also showed that the total annual family income of the upper 20 percent income group was 4.74 times as much as the total annual family income of the bottom 20 percent income group.
The PSA said this was driven by the growth in the average annual family income of the first to fifth income deciles and reduction in the average annual family income of the sixth to 10th income deciles.
Among the regions, BARMM had the lowest income disparity with a Gini coefficient of 0.2764, while Region VIII registered the highest income inequality with a Gini coefficient of 0.4531.
Nine regions registered a Gini coefficient higher than the national figure. These were Region VIII (0.4531), Caraga (0.4474), Region VII (0.4344), Region VI (0.4283), Region II (0.4201), MIMAROPA (0.4193), CAR (0.4191), Region XII (0.4181), and Region X (0.4128).
“The more unequal an economy is, the more difficult it becomes for its members to participate in expanding opportunities made available by growth. In other words, in a highly unequal society, growth is likely to be exclusive, with the wealthier segments of the population reaping most of the gains,” Balisacan said.
Inflation’s impact
Meanwhile, Balisacan emphasized how high inflation can dampen prospects for poverty reduction, especially as different segments of the population exhibit different expenditure patterns for essentials like food.
Balisacan said the sugar situation is a matter that needs the economic team’s attention as it will impact local producers and food manufacturers.
The situation, he said, could also affect lowly vendors selling Filipino street food favorites such as banana cue and camote cue, and who rely on affordable sugar prices to continue their microenterprise.
“I want to add that food inflation, especially, is a primary determinant of poverty simply because food constitutes a more significant proportion of the expenditure of poorer households,” Balisacan said.
The economic managers aim to lower poverty incidence to 9 percent in 2028 from 18.1 percent in 2021. This target is to be attained by reducing poverty incidence by 5 percentage points by 2025 and reducing it further by another 4 percentage points by 2028.
The Neda chief said the toughest constraints to job creation and business investments in the country must be addressed to achieve this target.
“The attainment of the poverty targets depends on income growth and the quality of growth, whether the growth also generates opportunities, particularly employment, for the less well-off individuals and households. Opening more and better-quality jobs sets the pace of household income growth,” Balisacan said.
“Job creation is, in turn, dependent upon businesses’ short- and long-term investment decisions. Therefore, it is imperative that we quickly and efficiently address the binding constraints that limit, hamper, or discourage investments and job creation in this country,” he emphasized.
Government and private economists have looked to Public-Private Partnerships or PPPs to upgrade the country’s inadequate infrastructure. This is intended to boost the competitiveness of domestic industries and encourage more investments in growth drivers such as manufacturing, tourism, IT-BPOs and the creative sectors.