Despite recent economic success, the Philippines continued to lag behind its Association of Southeast Asian Nations-5 (Asean-5) neighbors in terms of achieving inclusive economic growth, according to the World Economic Forum (WEF).
In its Inclusive Growth and Development Report 2018, WEF said the Philippines ranked 30th among 74 developing economies.
The country had a score of 3.83 for 2018 and an average of 2.4 in the past five years out of a perfect score of 7. The country’s ranking this year was an improvement from 2017’s 40th out of 79 economies.
“Turkey [16], Mexico [24], Indonesia [36] and the Philippines [38] are among economies which show potential on Intergenerational Equity and Sustainability, but lack of progress on inclusion indicators, such as income and wealth inequality,” the report stated.
Socioeconomic Planning Secretary Ernesto M. Pernia said that while the country’s GDP has been above 6 percent, especially in recent years, determining how GDP has been distributed is another matter altogether.
A high GDP, Pernia added, is good, but countries need efficient and fair taxation, as well as sufficient social protection, which can redistribute income and wealth to all. This will result in greater poverty reduction.
“It would be good if you have a pie to share among more people so a bigger pie would be generated by GDP. But the cutting up of the pie into slices is another matter,” Pernia said.
“For poverty reduction, there are many more things that you need to do like social protection, you have to generate employment, especially among the poor, so that they will improve their income earnings,” he added.
The WEF explained that the Inclusive Development Index is an annual assessment that measures how 103 countries perform on 11 dimensions of economic progress in addition to GDP.
It has three pillars: growth and development; inclusion; and intergenerational equity—sustainable stewardship of natural and financial resources.
Based on the rankings, the other Asean-5 countries, which are considered emerging economies, outranked the Philippines.
Malaysia ranked 13th out of 74 followed by Thailand, 17th; Vietnam, 33rd; and Indonesia, 36th. Singapore, however, was still not included in this year’s report due to incomplete data.
In terms of indicators, the Philippines ranked in the bottom 20 percent of the index in net-income gross national income (GNI) and wealth Gini, or inequality, and bottom 40 percent in healthy-life expectancy, poverty incidence, median income and dependency ratio.
Net-income GNI measures the extent to which the net distribution of income (that is, post-tax, post-transfers), among individuals or households within an economy deviates from a perfectly equal distribution while wealth Gini measures differences in income distribution.
Healthy-life expectancy, meanwhile, is the average number of years that a person can expect to live in “full health” by taking into account years lived in less than full health due to disease and/or injury, while poverty rate is the percentage of the population living on less than $3.20 a day at 2011 international prices.
The WEF also explained that the median income is the median of daily per capita income/consumption expenditure in 2011 purchasing power parity dollar, while the dependency ratio is the ratio of dependents, people younger than 15 or older than 64 years of age, to the working-age population, those aged 15 to 64 years old.
Meanwhile, the Philippines was ranked in the top 20 among emerging economies in terms of adjusted net savings, while in employment and public debt, the country was ranked in the top 40 percent of the index.
The WEF said adjusted net savings are equal to net national savings, plus expenditure on education and minus depletion of energy, minerals and forests, and damage by particulate emissions. Carbon damage, however, has been excluded from the calculation.
Employment, meanwhile, referred to the employment-to-population ratio, which is the proportion of a country’s population that is employed, while public debt refers to gross debt, which includes all liabilities that require payment of interest and/or principal by the debtor to the creditor at a date or several dates in the future.
The most inclusive advanced economy in the world in 2018 is Norway. The Nordic nation ranks second overall for intergenerational equity and third for the two other pillars of the index: growth and development, and inclusion.
Small European economies also dominated the top of the index, with Australia (9), which was the only non-European economy in the top 10.
Of the Group-of-7 economies, Germany (12) ranks the highest followed by Canada (17), France (18), the United Kingdom (21), the United States (23), Japan (24); and Italy (27).
Six emerging European economies are in the top 10 spots in the emerging economies’ ranking: Lithuania (1), Hungary (2), Latvia (4), Poland (5), Croatia (7) and Romania (10). Latin America also performed well, with three countries featured in the top 10: Panama (6), Uruguay (8) and Chile (9).
“These countries perform well on growth and development, benefiting from EU membership, as well as on inclusion indicators, as median living standards rose and wealth inequality declined significantly,” the WEF said.