Despite robust growth, income inequality widening — NEDA

by Czeriza Valencia (The Philippine Star), May 31, 2019

MANILA, Philippines — While economic growth remains strong across regions, but income inequality continues to widen primarily because of weakness in the agriculture sector and rapid population growth, the National Economic and Development Authority (NEDA) said.

Reviewing the data for the 2018 Gross Regional Domestic Product (GRDP), NEDA Undersecretary Adoracion Navarro said the ongoing diversification of growth engines in regions has enabled all regions to register growth in 2018, with some significantly faster than others.

Growth was broadly realized as regional economies are becoming increasingly driven by both investment and consumption, she said.

“The primary story is the sustained growth in the regions and the second story, a very important topic, is the widening of inequality, a challenge that confronts us and we should put more focus on,” Navarro said in a briefing.

Based on data by the Phi-lippine Statistics Authority (PSA), the average growth rate in all of the country’s 12 regions exceeded the 2018 GDP growth rate of 6.2 percent.

Among regions, the fastest growing were Bicol the economy of which grew 8.9 percent, followed by Davao and MIMAROPA, the economic outputs of which both grew 8.6 percent.

NEDA attributed this to the aggressive growth in public construction that cover the improvement of access roads to tourism areas, widening of inter-regional and inter-provincial roads.

The boom in private sector construction also gave rise to new malls and hotels in city centers.

Although slower, growth was also realized in Caraga, Cagayan Valley and National Capital Region (NCR) at 3.2 percent, 3.3 percent and 4.8 percent, respectively.

In Caraga, a slowdown was seen in several of the the region’s industries such as mining and quarrying, wood-based manufacturing, construction, transportation and storage. In Cagayan Valley, its vulnerability to natural calamities was a major hurdle to growth.

In NCR, growth was supported by wholesale and retail trade but was tempered by the slight decline in the manufacturing sector.

Because sources of growth increasingly become more diversified over the years, Navarro noted that no region has consistently been the best or worst performer in the past three years.

As regional economic performance tracks the country’s solid economic growth record for the past decade, Navarro said the widening income disparity is worth looking into.

An analysis of real per capita GRDP data from 2009-2018, showed that the disparity in incomes across regions has been steadily widening over the last 10 years.

“Inequality in income per capita across regions is widening,” said Navarro. “This shows that this disparity did not happen immediately, this happened over a period of time.”

For instance, the average GRDP per capita of NCR in 2012 was placed at P181,748, which is 13 times the per capita GRDP of the Autonomous Region in Muslim Mindanao placed at P14, 052.

In 2018, NCR’s GRDP per capita rose to 253, 893 against P14,657 in ARMM.

Between 2012 and 2018, NCR’s GRDP per capita grew by 5.6 percent while ARMM’s grew by only 0.5 percent.

A pattern that is emerging seems to be that regions with lower GRDP per capita have large agriculture bases and rapid population growth that outpace the growth in GRDP.

“Based on the data we have examined, in some cases, the population growth rate is high and the economic growth rate was not able to outpace the population growth rate,” she said, noting that this is especially the case in Caraga in 2018.

“Another thing is that our agriculture sector has not yet recovered from slump. So regions with low GRDP and large agricultural bases may be left behind,” she said.

Regions that are already ahead may already be taking advantage of gained momentum, attracting more investments and high income population.

Because of this, Navarro said it is imperative that the government double its efforts in pushing for policies that reduce income disparities.

This entails improving connectivity across regions by enhancing the efficiency of transport, communications and overall logistics networks.

As widening income disparities may also be the result of high population growth in some regions, Navarro urged local governments to support the national government’s family planning and reproductive health program.

“This makes it more compelling for the government to pursue policy interventions that will optimize the demographic dividend by improving the country’s human capital,” she said, noting that this can go alongside the implementation of the universal healthcare law and the continued institutionalization of education reforms.

Regions with high agricultural bases, she said, can benefit from government-led efforts to diversify farm products with the gaol of helping farmers venture into commodities with higher value and market potential.

Navarro noted that in Caraga, which is highly dependent on mining, agriculture is being looked into as an alternative source of livelihood for the population.

Regions are also seen benefitting from the enhancement of local industries particularly those in the small and medium categories.