WB: Economic growth not helping the poor

Noticing the gap between economic growth and poverty reduction, the World Bank urged the Philippines to work for a more inclusive growth that benefits the poor.

The World Bank, which released a report titled “Philippines: Fostering More Inclusive Growth” on Thursday, said broad-based participation in the growth process was critically important to ensure the dispersal of the economic benefits to the poor and the most vulnerable.

“Growth that is inclusive, or growth that works for the poor, also provides a stronger platform for future expansion and competitiveness,” the report said.

It said the acceleration of economic growth since 2001 had not translated into greater progress in poverty reduction. It noted that poverty headcount as a share of the population was now back to where it was at the end of the 1990s.

“The failure of poverty to decline is partly explained by the limited dynamism of the growth experienced in 2000-06, coupled with income inequality,” the report said.

“The income inequality has had the effect of reducing the income elasticity of poverty, slowing down the poverty reduction process,” it added.

The report said several factors had contributed to the deterioration in the distribution of income and consumption in the Philippines.

These factors include a sectoral distribution of growth that benefits the poor less than other income strata, an unequal pattern of regional development, intense demographic pressures, and an unequal access to social services and, in some cases, a decline of public spending on social services that benefit the poor.

It said the main problem was agriculture, the sector that employs the bulk of low-skilled workers, which had been growing slower than other sectors, while those that had been contributing most to the acceleration of GDP growth after 2000 (mainly manufacturing) had been very capital-intensive and had not generated many new low-skill jobs.

World Bank country director Bert Hofman said a “more sustained and rapid growth remains a cornerstone for poverty reduction, but growth must become more inclusive through supporting policies in education, labor market, and support for sectors that generate more jobs for poor people.”

To reduce poverty and build a broader base for future economic prosperity, the bank suggested the implementation of a “two-pronged strategic approach” to foster more inclusive growth.

The first urged the country to take actions that enhance the income-earning opportunities of the poor. This encompasses actions designed to promote faster growth and employment generation, including addressing the vulnerable fiscal situation, upgrading the country’s infrastructure particularly in transport and electricity, and improving the overall investment climate.

The second aims to assist households to participate in markets and benefit from growth by enhancing their human capital to do so.

The report said greater efforts were also needed to improve access to education, health, and social protection services, particularly among the poorest populations and in the poorest regions.

Public spending in the areas of health, education, and social protection for the poor also needs to be improved.

“Judiciously increasing spending in these sectors, better targeting the programs that would benefit the poor, and improving expenditure management will play an important role in allowing the poor to benefit from growth and to participate in it in the future,” said Jehan Arulpragasam, World Bank country sector coordinator for Human Development who is a co-leader of the report. –Roderick T. dela Cruz, Manila Standard Today