COVID-19 has dialed back some inroads made toward attaining the Duterte administration’s original poverty-reduction and jobs targets, but its chief economist remained confident the ultimate goal to eliminate poverty by 2040 would be achieved despite these pandemic-induced hiccups.
The updated Philippine Development Plan (PDP) 2017-2022, which state planning agency National Economic and Development Authority (Neda) revisited in the light of the new normal brought about by the pandemic, showed a less ambitious target to reduce poverty incidence to 15.5-17.5 percent next year, compared to 13-15 percent at the start of the administration.
The updated medium-term socioeconomic blueprint also presented a less optimistic jobs picture—the unemployment rate would remain elevated at 7-9 percent this year and next year when President Duterte steps down from office.
In comparison, the original PDP had aimed to slash the jobless rate to 3-5 percent in 2022 from 5.4 percent in 2016. But unemployment climbed to a 15-year high of 10.4 percent, which meant about 4.5 million Filipinos were without work, last year.
Neda Undersecretary Rosemarie Edillon noted during the launch of the Updated PDP 2017-2022 that it was the first of at least four successive administrations’ medium-term plans toward achieving AmBisyon Natin 2040.
The long-term vision jump-started during the preceding Benigno Aquino III administration and adopted by President Duterte was aimed at making the country a prosperous, middle-class society where no one would be poor 19 years from now.
Under AmBisyon Natin 2040, the Philippines wanted to triple the Filipinos’ per capita income to $11,000 by sustaining at least 6.5-percent annual gross domestic product (GDP) growth alongside the implementation of policies that would make it a high-income country by 2040.
But last year, the prolonged COVID-19 quarantine that shed millions of jobs and shuttered thousands of businesses slid the Philippines into its worst post-war recession, with a record 9.5-percent GDP drop.
Under the updated PDP, the GDP was conservatively projected to grow by 6.5-7.5 percent this year and next year, but Edillon said this could be surpassed as the economic team’s target of a faster 8-10 percent growth in 2022 was contingent on mass vaccination resuming most businesses and consumer activities by next year.
In a text message, Acting Socioeconomic Planning Secretary and Neda chief Karl Kendrick Chua said he believed the downscaled poverty and unemployment targets for 2022 “won’t derail” the ultimate AmBisyon Natin 2040 goals.
“They are temporary given the COVID-19 [crisis] and the graduation of full K-to-12 from college” next year, Chua said, as the initial graduating batch would bloat the labor force population at a time when economic recovery could still be slow.
Also, Chua pointed to the head start in poverty-reduction prepandemic—nationwide poverty incidence fell to 16.7 percent in 2018 from 23.3 percent in 2015, although he had expected an uptick in urban poverty last year. The next poverty survey will be conducted this year and released in 2022.Chua said growing the economy within the government’s target ranges this year and next would allow the country to rise to upper middle-income country status in 2022.
Citing Neda estimates, Chua said the Philippines’ gross national income (GNI) per capita would reach at least $4,064 in the next two years to climb a notch higher from its current lower middle-income class status.
GNI refers to the total income generated by a country’s residents within and outside its borders. GDP—a proxy for economic performance—measures only local output.
Last year, the Philippines remained a lower middle-income country as its per capita GNI ins 2019 was only $3,850. It did not help that in 2020, the World Bank jacked up the threshold for upper middle-income countries to between $4,064 and $12,535 from $3,996 to $12,375.
Under the new World Bank definition, lower middle-income economies have a GNI per capita of between $1,036 and $4,045, up from $1,026 to $3,995 previously.
While the World Bank would release its calculations of member-countries’ latest per capita GNI by the middle of this year for its 2021 lending groupings, government data released last week showed the country’s GNI fell by a faster 12.3 percent compared to the record GDP decline.
Government estimates had shown the total number of Filipinos had further increased to 109.48 million in 2020, hence a bigger divisor when GNI will be divided among the total population.
Chua had also said that in the case of GDP, the Philippines could only revert to pre-pandemic levels by 2022 amid what could be a slow recovery and GNI might crawl the same way.
Had the COVID-19 pandemic not happened, the Philippines was slated to graduate from lower middle-income economy status in 2020, ahead of the government’s 2022 target, Chua said last year.
The delayed climb to upper-middle income status, however, may benefit the Philippines at a time when it is planning to borrow more from multilateral lenders as well as bilateral development partners to replenish its war chest amid a protracted battle against COVID-19.
Had the Philippines become an upper middle-income economy last year, it will lose by 2022 its access to concessional interest rates now being slapped on official development assistance (ODA) loans.
As such, staying as a lower middle-income country augured well to the Philippines’ borrowing spree during the near term, especially as stimulus spending on public goods and services had been deemed crucial to revive the ailing economy.