Growth and poverty
The ten years of Gloria Macapagal-Arroyo gave the Philippines a much faster economic growth at around 4.8 percent annually. The only decade-long gross domestic product (GDP) growth higher than this was recorded in the 1950s.
There was a problem, however, with the Arroyo government performance. Poverty incidence did not fall. It was at 33 percent of the population in 2000; it remained at the same level in 2009. Officially though, the country’s 2009 poverty incidence is now placed at 26 percent of the population using a refined method of computing poverty which, according to the government, is now more comparable with other countries.
The Family Income and Expenditures Survey (FIES) conducted every three years by the government is used as basis for computing our poverty data. We still need to wait one year, however, to see the result of the 2012 FIES and one more year before we can see the new 2012 poverty data. What we do see is the result of the self-rated survey on poverty conducted every three months by Social Weather Station. Most of the time, this survey shows a much higher incidence of poverty at more than 50 percent of people surveyed.
Last month, we were happy to read the report that the economy recorded a hefty 6.6 percent growth in 2012 in real terms, much higher than the recorded 3.9 percent recorded growth in 2011. But again not a few are complaining because all around us we still see widespread unemployment and poverty. The government admitted this and vowed to rectify it by promising to make our growth more inclusive.
What is inclusive growth?
The new Medium Term Philippine Development Plan defines inclusive growth as rapid economic growth that is sustained, massively creates jobs and reduces poverty.
How rapid can this growth be?
The plan aims to grow the GDP by 7 to 8 percent annually, the rate seen to create more jobs and bring down poverty as seen in the experience of our high performing neighbors in Asia. Japan did this in the 1950s and 1960s and South Korea in 1970s and 1980s which enabled them to host the Summer Olympics – Japan in 1964 and South Korea in 1988.
From a closef economy, China opened up towards the end of the 1970s and since then had been growing at around 10 percent annually. Now much of its poverty is gone which also allowed it to host the 2008 Summer Olympics.
Can the Philippines ever host the Olympics? Not a chance, based on the size of our GDP at US $199.6 billion in 2010 or per capita GDP which was just over US $2,000 in the same year. We still belong to the lower middle income group, based on the World Bank’s classification of countries by income level. To join the First World, which Arroyo repeatedly said was within our grasp under her care, we need to breach the US$ 12,000 mark per capita GDP mark. This is almost six times our current income level. Assuming we average 6.0 percent annually in our GDP growth and continue to grow at 2.0 annually in our population, it will take us 17 years to double our per capita GDP. That means we have wait more than 40 years to reach US $12,000 in our per capita GDP. By that time, however, those in the high income group will have much more higher level of income, assuming that they do not regress.
But what exactly is the relationship between economic growth and poverty?
Dr. Arsenio Balisacan, the new National Economic Development Authority Chief and Socioeconomic Planning Secretary, has poverty as one focus in his research. In his 2007 SEARCA discussion paper, he asked: Why does poverty persist in the Philippines?
In his paper, Balisacan said, “The persistence of poverty in the Philippines has to do largely with its inability to achieve – and sustain – growth. Contrary to popular claims, economic growth has been beneficial to the poor – as well as the non-poor.”
Balisacan, however, has some good news in his paper. He said that in recent years the growth processes has allowed the lagging regions to catch up with the leading ones. He shows that there is a tendency for convergence of provincial mean incomes over the long term.
At the provincial level, Balisacan said that the key drivers for income growth are infrastructure, human capital, economic climate, trade regime and agricultural relations.
What is disturbing though, according to Balisacan, is the finding that certain policy levers that have often been identified as tools for achieving equity objectives – human capital and asset reform through the Comprehensive Agrarian Reform Program – have no discernible direct effects on poverty reduction, adding that their effects are felt mostly indirectly through the income growth.
Even more disturbing to Balisacan is the government’s posture with respect to the rapidly growing population that had been greatly influenced by the Church. The consequence of this posture on economic growth and poverty reduction, according to him, has been staggering since it has contributed to the country’s transformation to being Southeast Asia’s basket case. This stance has to change, he concluded.
Dr. Balisacan will be in Cebu on March 8, 2013 as guest of the 3rd Cebu Annual Economic Briefing and Investment Forum at the Sinulog Ballroom of the Cebu City Sports Club. He will speak on the performance of the Philippine economy and its prospects for this year in the light of the weak global economy. Interested participants may contact the Cebu Business Club c/o Jojo at 254-4411 or 254-4427 for seat reservation.
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