UNDP: Energy crisis may set back PH human development gains

MANILA, Philippines – The Philippines is facing mounting risks to its human development progress as the prolonged fallout from the energy crisis continues to erode household incomes and threaten gains in health and education, the United Nations Development Programme (UNDP) said.

In its latest policy brief, the UNDP said the immediate socioeconomic impact of the crisis was projected to set back human development progress in the Philippines by the equivalent of “0.01 to 0.05 years” putting it on a “crisis path.”’

READ: IMF: High debt limits Philippine response to energy crisis

The impact could deepen substantially if the conflict drags on.

“The setback would run through all three dimensions of the Human Development Index (HDI), which combines a country’s income, health and education outcomes into a single measure,” the UNDP said.

“Income first, as inflation and slower growth erode real household incomes, and health and education more gradually, as households under pressure cut back on food, postpone medical care and, if the strain persists, withdraw children from school,” it added.

The Philippines posted an HDI score of 0.720 in 2023, up from 0.714 in 2022.

However, the country slipped four places to 117th out of 193 countries and remained below the East Asia and Pacific average of 0.775.

A score closer to 1 represents higher development.

“The longer the disruption persists, the greater the development challenge, since the three transmission channels, namely energy, agricultural inputs and remittances, reinforce one another and converge on an economy whose aggregate gains rest on thin household margins,” the UNDP said.

The agency also warned that the projected impact on human development could mask potentially larger effects on poverty and vulnerable households.

Its regional assessment estimated that a prolonged shock could push more than 35,000 Filipinos below the lower-middle-income poverty line of $4.20 a day.

“The shock is profoundly regressive since it hits the nearly three in ten Filipinos who live just above the poverty line,” the UNDP said.

“For these households, even a moderate rise in fuel or food prices can trigger a reversal of progress, pushing them back into poverty, as their incomes sit only a small margin above the subsistence threshold,” it added.

The warning comes as the Philippine Institute for Development Studies (PIDS) projected that between 1.34 million and 3.5 million Filipinos could fall into poverty under various oil-price scenarios, while the World Bank estimated nearly two million Filipinos.

READ: PIDS: Energy crisis may push up to 3.1M Filipinos into poverty

Compounding the challenge, the UNDP said the government faces increasingly difficult trade-offs between containing rising prices and preserving fiscal space for spending on health, education and social protection.

To cushion the impact, the agency urged the government to maintain macroeconomic and price stability, secure energy supplies and accelerate diversification, expand targeted social transfers, and protect jobs and livelihoods, particularly among vulnerable sectors.

“The guiding principles of the response should therefore be to build resilience, to protect the most vulnerable, and to use and strengthen existing systems rather than new designs,” it said.

“The response should not crowd out the structural reforms in energy, food systems and social protection that would reduce the country’s exposure to the next shock.” INQ