IMF forecasts modest growth for PH, prods gov’t to boost program to curb poverty
The International Monetary Fund said the Philippine economy should grow modestly this year on domestic demand despite the risks to the broader global economy from Europe’s sovereign debt crisis, but raised concern on the country’s inability to translate economic growth into poverty reduction.
The multilateral agency said the main challenge for the Philippines was to make the benefits of a growing economy felt across all income groups and not just concentrated on the middle-and high-income earners.
In its annual review of the Philippine economy, the IMF forecast growth would rise to 4.2 percent this year, up from 3.7 percent in 2011.
Growth over the next two years could recover to around 5 percent, while inflation was likely to remain within the 3 to 5 percent official target range, it said.
But the IMF said measures must be implemented to make the benefits of economic growth trickle down to the poor.
The multilateral institution noted that although the Philippines managed to grow over the past decades, poverty reduction has been limited.
In fact, in the last decade, poverty has slightly increased. From 24.4 percent in 2003, poverty incidence in the country rose to 26.4 percent in 2006 and to 26.5 percent in 2009.
“The low elasticity (low impact of growth on poverty reduction) may owe in part to high and rising inequality, which reflects unequal distribution of growth and regional development, rapid population growth, declines in the relative price of labor provided by the poor, and limited access by the poor to social and financial services,” the IMF said in the report.
The IMF said the Philippine government must improve tax collection so that it would have more resources for social services and infrastructure. It said spending more on social services, such as health and education, was also a key way to spread the benefits of a growing economy.
The government has to invest more on improving human capital so that individuals belonging to poor households would have the opportunity to access employment opportunities and thus get out of poverty, the IMF said.
“Emphasis (should be) on strengthening human capital, job training and job search assistance, which will help employment,” the IMF said.
It also cited the need to increase social safety nets and to improve access to financing by the poor. Social safety nets include the conditional cash transfers—food subsidies—given by the government to the poorest households.
Although a growth rate of 5 percent for the medium term was respectable, the IMF said the country has to grow at a much faster pace to make economic growth translate to poverty reduction.—With a report from Reuters
