Inflation delivers two million Pinoys to poverty

Published by rudy Date posted on April 7, 2009

Study says poverty threshold rose

MORE than two million Filipinos fell below the country’s poverty threshold because of the increases in the prices of rice and fuel, according to a government think tank.

In a study, the Philippine Institute for Development Studies (PIDS) said the recent increases in the prices of rice and fuel raised poverty incidence by 2.5 percent, which means about 2.2 million people would slip into poverty.

PIDS said the poverty incidence would go up by about 2.5 percent from 26.4 percent before the rice price increase, to 28.9 percent after the price increase.

Based on the 2006 Family Income and Expenditure Survey (FIES), rice was consumed by about 97.4 percent of households in the country with average annual rice expenditures of about P11,461. This accounted for about 11.9 percent of their total expenditures.

 Fuel, on the other hand, accounted for about 1.5 percent of their total expenditures. The amount spent on fuel increased as households moved from one income decile to a higher decile.

The increase in the number of poor households is due to falling real incomes as a result of the price increases, PIDS said.

The PIDS simulation used the 2000 Input-Output framework analysis to capture the overall effects of price changes.

The study said the actual price of rice rose P30.01 per kilo in September last year from only P23.31 per kilo eight months before, while fuel prices stood at P49.45 per liter from P41.45.

PIDS said the price hikes would cause a 5.2 percent increase in the total household spending, adding the previous national poverty threshold would now be about P15,840 per capita per year.

PIDS said poor households in the Philippines—those living below the poverty threshold of about P15,057 per capita per year—would need an additional P783 per person to maintain their original utility level.

Given an average household size of five, a poor household would need at least P3,915 additional income per year to cope with the higher prices of rice and fuel.

 In 2006, there were about 25.2 million poor Filipinos.

“Poverty gap is also expected to increase which means that the poor households become poorer as their per capita income falls far below the poverty threshold,” PIDS said.

The average per capita income in the Philippines stood at P42,823 as of 2006. In urban areas, the per capita income reached P59,238 with a poverty incidence of 14.6 percent and in rural areas, P26,677 with a 35.9 percent poverty incidence. –Darwin G. Amojelar, Senior Reporter, Manila Times

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