Cycle of poverty to continue in RP and jeopardize economic growth, says study

AS the Philippines strives to attain higher growth to cut poverty and increase incomes of Filipinos, an Asian Development Bank (ADB) published study showed that the cycle of poverty will likely continue in the Philippines and prevent the country from attaining its desired economic growth in the future.

The ADB published study, titled “Poverty in the Philippines: Causes, Constraints and Opportunities,” prepared by former Philippine Economic Society (PES) president Prof. Fernando Aldaba said chronic poverty experienced by a portion of the Philippine population is already “jeopardizing” the chances of the Philippine economy to growth at desired levels.

The study defined chronic poverty as a situation where the poor remain poor for an extended period of time or are poor from birth. This is also the same as intergenerational poverty.

“The chronic poverty experienced by a segment of the population might already be jeopardizing the Philippines’ chances to achieve and sustain high levels of economic growth—a situation called a ‘poverty trap,’” the report said.

“Chronic poverty [results] in lower education, poor health and malnutrition of children, all of which hamper their long-term productivity and impede their ability to manage and generate new knowledge,” it added.

In a phone interview, Aldaba said 20 percent of poor households in the country live in chronic poverty. This affect the economic growth potential of the country in the next decade or so.

The study stated that with a fewer number of fully skilled and productive workers, jeopardizing the country’s economic growth is more likely. The report said poor households living in chronic poverty cut back investments on productive and human capital like education expenses.

This become especially true during economic crises or large natural disasters, which can also cause poverty traps and dampen growth. The study added that Filipino families living in areas frequented by typhoons or prone to flooding like Bicol, Leyte and Samar are very vulnerable to chronic poverty.

“Poverty is already affecting growth due to chronic poverty. If we don’t solve chronic poverty, we will be caught in a poverty trap,” Aldaba told the BusinessMirror in a phone interview.

“Chronic poverty has become a major constraint in attaining high levels of sustained growth and the country’s overall development. Finding a solution to poverty is thus of public interest; benefits will accrue not only to the poor, but also to society as a whole,” the report said.

The study, quoting the ADB Key Indicators 2008 report, stated that economic growth for the past 40 years has been low and only averaged 1.6 percent. At this rate, the same report showed that poverty incidence will still be in the range of 21.1 percent to 28.7 percent by 2020.

The ADB Key Indicators 2008 report stated that unless the Philippine economy is able to shift to a higher growth trajectory, it might be stuck in a poverty trap.

In a statement, the ADB said a package of reforms, investments and long-term strategies must be instituted by the government to free the country from chronic poverty, which constrained its economic and social development.

The Philippines’ poverty-reduction rate of 0.47 percent per year is slower than those of neighboring Cambodia, Indonesia, the Laos People’s Democratic Republic, Thailand and Vietnam. Among Southeast Asian nations, only the Philippines has recorded an increase in the absolute number of poor people since 1990.

The ADB said the study cited the lack of quality employment for many poor people, especially in the agriculture sector, as the main reason for the relatively slow decline in poverty rates. Other reasons include inequality across income brackets, high population growth, natural disasters and long-standing conflicts in various regions.

A more coordinated response to poverty, the ADB said, will help the Philippines attain higher levels of sustained growth and bolster the country’s overall development.  –Cai U. Ordinario / Reporter, Businessmirror