Philippines needs an ‘inclusive’ economic recovery

ANALYSIS

The Philippines is one of the few economies that managed to grow despite a global recession, but poverty reduction remains a challenge for this developing Asian economy.

“It is estimated that the global economic recession will throw 1.4 million Filipinos into poverty by 2010 compared to a no-crisis situation,” the World Bank said in its Philippine Quarterly Update issued Wednesday.

The Bank expects that Asian economies—such as the Philippines—are now recovering, thanks mainly to increased consumption and a rebound in exports. This doesn’t mean, however, that poverty incidence will likewise go down and will lead to an “inclusive recovery.”

“The challenge to the Philippines in the post crisis era is to improve the poor content of the economy,” said Eric Le Borgne, senior economist at the World Bank in Manila, in Wednesday’s briefing.

The Washington-based lender forecast the Philippine GDP to expand by 1.4 percent this year, thanks to Philippine government’s stimulus package, the inflow of remittances and monetary easing policies. It also forecast a 3.1-percent GDP growth in 2010.

This is a reversal of the Bank’s earlier forecast of a 0.5-percent GDP contraction for 2009 and a more modest 2.4-percent growth in 2010.

But the higher-than-expected GDP growth in the second quarter and the continued inflow of remittances prompted the World Bank to upgrade its projection.

“Remittances are staying strong. Government consumption and public construction will continue to benefit from the national government’s spending in the remaining months of 2009. So, based on new data, we believe the government growth forecast for 2009 to be entirely feasible,” World Bank Country Director Bert Hofman said in a press statement issued Wednesday.

Despite the rosy outlook, World Bank economists expressed concern over the high poverty incidence and social inequity. A third of the country’s 90 million population still subsist at below $2 a day and the recession is making it worse.

The effect of the crisis on urban areas, the manufacturing and services sectors, as well as for female-led households will be  “particularly high.” This will be largely due to reduced employment and labor earnings that will slowdown economic activity in the country, the Bank said.

The back-to-back typhoons Ketsana (local name Ondoy) and Parma (local name Pepeng)—which caused massive flooding and landslides in most areas in Luzon, northern Philippines, will further widen the gap between the rich and poor as more people lose their livelihood.

As of October 20, the bank said that the flood caused by Ketsana alone left at least 902 people dead and affected about 8. 7 million people, around 1.5 million of this number were displaced either in camps or forced to seek temporary residence from relatives.

“National poverty incidence, based on preliminary findings, could have increased by 0.1 to 0.3 percentage points as a result of Ketsana—the latest official poverty rate is 32.9 percent in 2006. A similar order of magnitude is tentatively expected from Parma,” the World Bank report stated.

“The poverty gap and poverty severity area also expected to have widened noticeably,” the Bank added. –Prime Sarmiento, XINHUA