PH poverty rate seen falling below 20% starting 2020

Amid easing inflation and rising incomes, the World Bank expects poverty rate in the Philippines to fall below 20 percent starting next year.

In its Macro Poverty Outlook for East Asia and the Pacific report, the World Bank projected poverty incidence in the Philippines at 20.8 percent by the end of 2019, down from 26 percent in 2015, the latest comparable full-year date from the Philippine government.

The report was released this week on the sidelines of the Washington-based lender’s annual meeting.

The World Bank had estimated poverty incidence in the Philippines at 24.5 percent for 2016, 23.1 percent for 2017 and 21.9 percent for 2018.

Its medium-term poverty projections were based on the lower middle-income poverty line of $3.20 per day.

At that threshold, the World Bank sees the Philippines’ poverty rate further declining to 19.8 percent next year and 18.7 percent in 2021.

“Despite a temporary growth slowdown in the first half of 2019, progress on shared prosperity is likely to continue,” it said.

Partial estimates of the 2018 Family Income and Expenditure Survey showed that incomes of households in lower-income deciles grew at a much faster pace than the average, the World Bank report read.

“Meanwhile, cash transfer schemes from the government will continue to help cushion the impact of negative shocks. Given the continuous expansion of nonagriculture wage employment, rising real wage, continuation of social programs, and stabilizing inflation, the declining trend in poverty is likely to continue,” it added.

In a report last month, the World Bank said the 12-year-old conditional cash transfer scheme called Pantawid Pamilyang Pilipino Program (4Ps) slashed the nationwide poverty rate by 1.2-1.5 percentage points (ppt) between 2012 and 2015.

4Ps also reduced income inequality by 0.5-0.6 ppt in the same period, it said.

Citing the latest Philippine government data, the World Bank noted that poverty incidence slid to 21 percent in the first half of 2018 from 27.6 percent during the same period of 2015 “as real wages continue to rise, and employment continues to expand towards nonagriculture wage employment.”

The latest poverty incidence figure is equivalent to 23.1 million poor Filipinos, down from the 28.8 million below the poverty threshold three years ago.

“However, the high inflation experienced in the second half of 2018, especially among lower-income households, may have dampened the gains from higher wage and salary incomes,” the World Bank said.

To recall, inflation hit a 10-year high of 5.2 percent last year as consumer prices peaked mostly during the second half when global oil prices skyrocketed and food prices soared due to local supply bottlenecks, especially of rice.

But state planning agency National Economic and Development Authority (Neda) had nonetheless pointed out that traditionally, full-year poverty incidence rates were lower than those posted in the first half.

“What we hope is that the increase in income will offset the increase in prices in the second semester of 2018,” Neda Assistant Secretary Carlos Bernardo Abad Santos said in April.

The Philippine Statistics Authority will release the full-year 2018 poverty data in December.

Moving forward, the World Bank said that fostering high-quality job creation and boosting human capital investment would enhance the impact of economic growth on poverty reduction and shared prosperity.

To increase the growth impact on poverty and inequality, targeted investments and supportive business regulations are needed in industries and sectors that generate high-quality jobs, it said.

Human capital investments in education and health must be fortified, including training and skills development, which will be needed for workers to stay competitive in a fast-changing global work environment, it added.

“Finally, improving social-protection programs, including the 4Ps, will support the incomes of poor households and help build their resilience against adverse shocks,” the World Bank said.