High growth rates bypass poor — WB

The high economic growth rates that the government has been reporting has no meaning for the poor since they have not benefited at all from the supposed economic gains in terms of uplifting their conditions, the World Bank (WB) said in its latest update on the country.

The quarterly update on the country titled “Robust Growth, Stubborn Poverty” stated that despite the remarkable rebound, the latest of which was a record 7.3 percent expansion rate for last year, growth continues to bypass the poor.

The report cited the latest official poverty data which it said “confirm a lack of poverty reduction response to economic growth in the Philippines.”

Even though real gross domestic product (GDP) growth averaged 5.4 percent during 2003 to 2006 and 4.3 percent during 2006 to 2009, or well above population growth, the poverty incidence rose from 24.9 percent of the population in 2003 to 26.4 percent in 2006, and inched up further to 26.5 percent in 2009, it noted.

The WB said the inelastic poverty response suggests that the gains from growth have eluded the

the bottom quarter of the population.

It mentioned Social Weather Station (SWS) surveys in 2010 that painted a broadly similar picture.

“A bright spot amid these generally depressing poverty numbers, is that they point to some distributional improvement within the ranks of the poor as the poverty gap began to decline between 2006 and 2009. The rapid expansion of the 4Ps conditional cash transfer program may have contributed to this improvement and its recent scale-up in the 2011 budget bodes well for the fight against poverty,” it said.

The WB also stated that despite the favorable economic outlook, the formal labor market is projected to improve only marginally as it suffers from several structural problems.

“Both unemployment and underemployment have a large structural component in the Philippines. Over the recent cycle, the lowest level reached for the former was a brief dip to 6.3 percent in October 2007, and for the latter the trough was 17.5 percent in October 2008,” the WB added. It said these troughs were achieved after six years of sustained, accelerating and high growth (average GDP growth between 2002 and 2007 was 5.5 percent and culminated at 7.1 percent in 2007) and during a time when overseas work deployment accelerated noticeably.

It noted, nevertheless, that price rises in the country have been manageable.

In contrast to many countries in the region, food price inflation, however, has been muted so far in the Philippines and is expected to remain moderate in 2011, though the distribution of risks is tilted to the upside. “In the short-term, a return of a 2008-style food crisis in the Philippines seems unlikely, thanks to recent strong domestic palay production, good planting projections, record stockpiles of rice, and domestic retail prices significantly above international prices,” it said.

It said that while international rice prices remain stable, food prices are nonetheless expected to rise moderately.

“Risk factors that could worsen this outlook include severe weather events that would disrupt domestic food supply and further sharp rises in international oil prices,” it said.

The report also raised safety and security concerns in the country where in the Travel and Tourism Competitiveness Index (TTCI) 2009 the Philippines ranked 125th out of 133 countries in terms of the threat of terrorism and 93rd in terms of the incidence of common crime and violence.

It also noted the limited international air transport services liberalization.

“The Philippines has only a third of Thailand’s capacity in terms of available international seat kilometers. There is no government control on domestic airliners but foreign ownership in an air carrier is limited to 40 percent,” according to the report.

The Philippines imposes Common Carrier Tax and Gross Philippine Billing Tax only on foreign carriers operating in the country, creating an unequal playing field as far as international carriers are concerned, it said.

In terms of ground transport, one fifth of paved roads are in poor condition and the quality of the ground transportation network remains weak, restricting the accessibility of touristic sites, according to the report.

It also cited the ineffective marketing being done by government.

“The Philippines spent 3.6 percent of the total government budget on travel and tourism in 2008, higher than Thailand’s 2.7 percent and Malaysia’s 1.7 percent. However, the correlation between the tourism budget and tourist arrivals in the Philippines is below a cross country average,” the report said. –Daily Tribune