Rich-poor gap in PHL could be worse –WB

Inequality—or the gap between the rich and the poor—in the Philippines could be worse as the household-income surveys are probably not that accurate due to “non-response” from rich respondents, the World Bank said.

In the latest Philippine Development Report, the Washington-based lender said while the country’s Gini coefficient, a measure of inequality, stands at 0.43, this level may not reflect the true state of the rich-poor gap in the country.

The World Bank said the Gini coefficient of inequality varies between 0, which reflects complete equality and 1, which indicates complete inequality. In perfect inequality, only one person has all the income or consumption, all others have none.

Data showed the net worth of the top 10 billionaires in the country accounts for 15.4 percent of the country’s gross domestic product (GDP). The World Bank said this “is the highest among lower-middle income countries in the region.”

“Problems with the household surveys, such as high rate of non-response among the rich, suggest that inequality could actually be higher in the Philippines. If the imputed income of the top 40 Filipino billionaires is added to the household survey, the Gini coefficient increases by 2.8 points,” the World Bank said. It can be noted that the top 50 richest Filipinos, led by SM Group’s Henry Sy, had a combined net worth of $65.8 billion, or P2.8 trillion. The Forbes list also included 17 Filipinos among the dollar billionaires of 2013, with a combined net worth of $54.4 billion.

The World Bank said the high economic growth that the Philippines posted was not able to benefit the poor. This indicates that a higher economic growth may be needed to lick poverty.

The government aims to post a growth of 6 percent to 7 percent this year, 6.5 percent to 7.5 percent in 2014, 7 percent to 8 percent in 2015, and 7.5 percent to 8.5 percent in 2016. In the first half of 2013, the Philippine economy grew by 7.6 percent.

The bank said the National Statistical Coordination Board even said the data from the first half of 2012 showed that poverty incidence “hardly declined” from 28.6 percent of the population in the first half of 2009 to 27.9 percent in the first half of 2012.

“[This suggests] that gains from higher economic growth are still not benefiting the poorest Filipinos,” the report stated. “This slow progress in reducing poverty, despite higher economic growth during this period, points to deeper structural problems, which express themselves in a pattern of economic growth that makes poverty reduction stubbornly difficult,” it added.

Further, the World Bank said for over 20 years, efforts to reduce poverty in the Philippines have been slow. The bank said growth elasticity of poverty in the country was only -1.37 between 1985 and 2009.

The bank explained that this indicated that a 1-percent increase in per capita income is associated with only a 1.37-percent decline in the number of poor living below the $1.25-a-day poverty threshold.

The report stated that this is lower than the average in the East Asia and Pacific region as a whole, and in neighboring countries such as Thailand, Indonesia and Vietnam. The response of poverty reduction to economic growth also declined over the years.

“Between 1990 and 2000, growth elasticity of poverty was -2.44, but between 2000 and 2009 it went down to -0.66, indicating that a much higher growth rate is needed to pull more poor people out of poverty,” the World Bank said.

The World Bank also said per-capita growth started to accelerate to as high as 5 percent in 2007 and 2010 but over a longer period, the official poverty incidence hardly declined between 2000 and 2009.

In 2009 the report stated that around 23 million Filipinos, or 26.5 percent of the population, were poor. This is based on the new methodology to calculate poverty. About 41.5 percent of the population lived below the $2-a-day poverty line.

“With high inequality and a lack of structural transformation, growth largely benefited the non-poor,” the World Bank said. –Cai U. Ordinario, Businessmirror