Poverty to rise to 35%-38% due to El Niño, typhoons, food crisis

MANILA, Philippines – Despite the National Economic and Development Authority’s (Neda) expectations that economic growth will be within targets, economists said the government still has to deal with a bigger problem—increasing poverty as a result of the difficult years from 2008 to 2010.

With all the developments that happened in the past two years and the El Niño this year, Southeast Asian Regional Centre for Graduate Study and Research in Agriculture (SEARCA) Director Dr. Arsenio Balisacan believes the food and fuel crisis in 2008, the global economic crisis and the twin typhoons Ondoy and Pepeng in 2009, and the El Niño weather phenomenon this year will likely send millions into poverty or deeper into poverty this year.

Balisacan said that even if the 2009 poverty statistics will not include the effects of the El Niño, poverty will likely increase by around 2 percentage points to 35% from 2006’s 33%. But, when the effects of the El Niño are included, poverty could increase by 3 to 5 percentage points, or up to 38% this year.

“I expect poverty to have increased in 2009. In 2008 we have the impact of the food prices and food prices have not really come down so we are still carrying that and then came this 2009, low growth, calamities and food prices have not gone back to 2006 [levels]. I would expect [poverty to increase] by about 3 to 5 percentage points from the 2006 figures,” Balisacan told the BusinessMirror.

Balisacan said the El Niño may cause agriculture growth to contract by as much as 5% this year. However, this may not have a big impact on growth since, he said, agriculture only accounts for around 17% of gross domestic product (GDP).

He said that even as early as February, there are indications that the El Niño will continue to have worse effects, especially since it is expected to last until May. This will not bode well for agriculture growth in the first half. Balisacan expects delayed planting to possibly extend until the second half.

The SEARCA official said the effects of Pepeng, which was a stronger typhoon than Ondoy, ravaged the Philippine countryside affecting farms and Filipinos engaged in agriculture. In fact, he said that about one-third of the entire labor force is engaged in agriculture.

“Even if agriculture growth declines, if services would grow [GDP will be in good shape]. The only problem is poverty, because the bulk of your poverty is [composed of] poor persons [who] are dependent on agriculture. That is the problem,” Balisacan said.

For his part, former budget secretary Dr. Benjamin Diokno said with all the developments after the 2006 poverty data was collated, poverty could increase by around 1 to 2 percentage points to around 34% to 35% this year.

Diokno said the El Niño may cut around 2.5 percentage points from economic growth. With this, he said he expects economic growth to decline to around 2.8% to 2.9% this year from his initial forecast of 3%.

He said that while this is still within the government’s 2.6% to 3.6% growth estimate, the poor will certainly have a more difficult time coping considering that 60% of their budget is spent on food.

Diokno said El Niño and the fact that prices have not gone back to pre-food and oil crisis levels will send millions more into poverty. He said that while the government expects inflation to remain stable at 4.5% this year, it is likely that food inflation could reach 10% to 12% due to the El Niño.

The former government official added that, traditionally, inflation in Areas Outside the National Capital Region, or the countryside, is usually higher than in Metro Manila.

“Poverty is more serious in the countryside. Higher inflation will decrease the purchasing power of the poor,” Diokno said in an interview.

Further, the El Niño will also affect utility prices. Already, there is talk of power outtages to conserve energy and possible increases in electricity prices.

“The El Niño will not only affect agriculture but also power. If that is the case, you cannot pay, and they will cut off your power supply. This means, consumers will have to scrimp on other things like going to the mall, traveling, going to the movies. This, in turn, will affect employment,” he added.

Other factors include the effects of typhoons Ondoy and Pepeng, which easily affected 63% of the entire Philippine economy. Diokno said that the NCR already accounts for one-fourth of the economy and, with the typhoons affecting Luzon and Metro Manila, this will translate to around 63% of the economy.

Poverty statistics

National Statistical Coordination Board (NSCB) Secretary-General Dr. Romulo Virola admitted that to date the El Niño is the single biggest factor that will negatively affect the 2012 survey round.

The NSCB releases poverty statistics every three years. The last poverty statistics was collected in 2006 and released in 2008, while the next set of data collected in 2009 is slated to be released this year. The poverty data for 2010 will be included in the 2012 survey round to be released in 2013.

Virola said that based on the 1997 to 2000 survey, the El Niño weather phenomenon and the Asian financial crisis in 1998 both severely affected poverty in the Philippines during the period.

With this and the advisory of the Philippine Atmospheric, Geophysical and Astronomical Services Administration that the dry spell this year will be worse than what happened in 1998, Virola said poverty incidence is likely to increase.

However, Virola said the numbers may not be as severe as what economists project. He said the El Niño will not be included in the 2009 survey round, while the 2012 data will likely see some improvement in the lives of Filipinos affected by the dry spell.

“Even with the El Niño, poverty incidence may not be that high because election spending will also provide a stimulus,” he said. Virola added that the exact figures will also depend on the measures to be implemented by the next administration.

In 2006 poverty incidence increased to 26.9% for families in 2006 compared with 24.4% in 2003. This is lower than the 27.5% poverty incidence in 2000.

In terms of poverty incidence among population, out of 100 Filipinos, 33 were poor, or 33% in 2006, compared with 30 in 2003. –Cai U. Ordinario, Business Mirror