The Bangko Sentral ng Pilipinas is confident that the country’s per capita income—one of the lowest among emerging Asian economies—will significantly improve and may match those of its neighbors over the medium term.
BSP Deputy Governor Diwa Guinigundo said ongoing government efforts, such as higher spending on infrastructure and social services, would eventually help spread the benefits of economic growth.
Guinigundo singled out the Conditional Cash Transfer (CCT) program, where the government provides monthly food allowance to some of the poorest households in the country. In return, the heads of recipient households must send their children to school, thereby increasing their opportunity to get decent employment and enjoy higher incomes in the future.
Also, the increase in public spending for infrastructure will help provide jobs for the masses, he added.
Guinigundo explained that the significant decline in the Philippine government’s debt burden over the years allowed it to increase spending on initiatives that would improve the incomes of the poor and thus enable them to attain higher income over the medium term.
From 84 percent of the country’s gross domestic product, the outstanding debt of the Philippine government now stands at only about 50 percent.
The Philippines is still rated one to two notches below investment grade by major international credit agencies.
Although the current ratings have improved from those seen the previous years, economic managers are still pitching for an investment grade. Officials argue that the Philippines already deserves an investment grade due to sustained economic growth and declining debt burden.
But the credit firms said the Philippines would need to improve on other areas before it can get an investment grade. One of these is its per capita income, which is one of the lowest among emerging markets.
The Philippines’ per capita income in 2010 stood at about $2,000—lower than the average of $3,000 for Indonesia, $4,700 for Thailand, and $8,400 for Malaysia.
But Guinigundo said the credit firms failed to consider the positive impact of declining debt burden on the country’s per capita income.
The average income of Filipinos may inch closer to those of its neighbors as more resources are spent on anti-poverty programs, he explained.
“This is something credit rating firms miss out. The dramatic drop in the country’s debt-to-GDP means less is being allocated for debt servicing, and more resources are available for infrastructure and social protection programs,” Guinigundo said.