Growth and questions loom on the horizon

While there is reason to be optimistic about the decline of poverty levels in the country, economists say more efforts must be expended if the Philippine government’s goal of bringing down the poverty incidence to single digits by 2028 is to be attained.

Recent data by the Philippine Statistics Authority points to a 15.5-percent decline in the national poverty rate from 18.1 percent four years ago.

There was also a marked decrease in poverty incidence in 11 of the 18 regions of the country in 2023.

“These figures are encouraging but we must remember that poverty is a multifaceted issue that requires sustained and coordinated efforts to address,” says National Economic and Development Authority (NEDA) Director General Arsenio Balisacan.

For his part, Bernardo M. Villegas, research director of the University of Asia and the Pacific Center for Research and Communication, said he is “confident that 6-7-percent growth can be maintained over the next four, five years, (but) that’s not enough.”

Villegas was referring to economic managers’ 6-7-percent economic growth target for this year, and 6.5–7.5 percent in 2025.

“Those aren’t enough to bring the country to a single-digit poverty incidence by 2028,” Villegas stressed.

“We have to grow by at least eight-percent GDP,” he said, pointing out that the Philippines continues to have one of the highest poverty rates among ASEAN countries.

The World Bank’s Poverty and Inequality Platform shows Laos as having the highest poverty incidence at 32.5 percent, followed by Indonesia with 18.1 percent, a ranking akin to the Philippines’ last year. In contrast, recording single-digit poverty rates last year are Vietnam with 4.2 percent, Thailand with 0.6 percent and Malaysia with 0.1 percent.

What must the Philippine government do, then, to meet its objective in this matter? Well, for one, Moody’s Analytics says an aggressive push to intensify infrastructure could support the maintenance of a high growth rate.

The country could also take advantage of the expected acceleration in overall growth in the region, on the basis of trade, investment, consumption, and fiscal policy, as well as easing monetary policy, which the Philippine government has started to do.

For Villegas, boosting growth in agriculture by 3-4 percent could help. He noted that agricultural production which contributes about a tenth to GDP, has dropped by 3.3 percent in Q2, the biggest decline since the 3.4-percent decline in Q1 2021.

Government must also do more to address the low investment-to-GDP ratio which, he laments, is in the low 21-22 percent, in comparison to some East Asian countries’ investment-to-GDP ratio which is anywhere between 25 percent and 40 percent.

One of the most important issues that government should take much effort in addressing is corruption.

“Corruption results to leakage of some P800 billion a year and if we can reduce that then that will add to the 8-percent growth that we’d like to hit,” he said.

Of 180 countries in the 2023 Corruption Perception Index, the Philippines ranked 115th.

Villegas is also buoyant about the operationalization of the Luzon Economic Corridor, the ambitious initiative unveiled during the April 2023 trilateral summit of the US, Japan and Philippines leaders at the White House which, once realized, could channel a staggering $100 billion into the Philippine economy within a decade.

Initial proposed projects in the LEC include a $868-million Subic-Clark railway, a $174-million expansion of the Clark International Airport, and a $152-million agricultural initiative.

The LEC is also expected to incentivize US battery and manufacturing firms to access abundant Philippine mineral resources like nickel, cobalt, copper, and bauxite, offering tax incentives to encourage relocation. These firms, along with the semiconductor industry, could bring tens of thousands of jobs and add value to the supply networks.

There’s a real chance for generating growth in the country but for now the big question staring the Philippine in the face is the US elections.

How would the results of that political exercise affect current Philippine growth scenarios? Would it help the country grow the economy? Would Joe Biden’s successor maintain US-Philippine relations, bolster progress and help ward off irritants from our sovereign waters, or would the victor leave us to our own devices to fend off a powerful aggressor who could, if it likes, swallow us whole, like phytoplankton drifting in the vast ocean?