THE new administration must be focused on increasing budgetary allocations to improve the quality of life in the countryside, as the International Monetary Fund (IMF) noted the Philippines’s inability to translate its high growth rate to a decrease in poverty and inequality.
While the IMF recently lauded the country’s economic expansion as one of the fastest in the region and leading to an upgrade in growth rates for 2016 and 2017, the global organization also pointed out the contrast between the fast growth of the economy’s GDP and the minute improvements in the country’s “stubbornly high” poverty rates.
“The strong economic performance has not yet fully benefited a wide range of the population. Poverty and inequality remain high,” the IMF said.
“Executive directors commended the [Philippine] authorities for their continued strong macroeconomic management, with robust growth and low inflation. Directors noted, however, the favorable macroeconomic performance has not led to corresponding improvements in poverty reduction, inequality and unemployment,” the global organization said.
In the first half of the year, the Philippine economy grew by 6.9 percent, making it one of the fastest-growing economies in the region despite external volatilities during the period.
Consumption and investment grew rapidly during the period, while net exports continued to be a drag to growth due to weak external demand.
The unemployment rate also declined to 6 percent in the first half of 2016, while inflation in the country remained subdued at an average of 1.6 percent in the first eight months of the year.
Despite these, the IMF noted the Philippines’s “high” poverty rate fell only by 0.3 percentage point per year, from 28.8 percent in 2006 to 26.3 percent in 2015.
As such, the IMF said it welcomes the new administration’s plan to reduce the poverty rate by 1.25 percentage points to 1.5 percentage points per year during its term—which would likely result in a cumulative decline of 7.5 percent to 9 percent in six years.
However, the IMF said the targets set were “ambitious” and said the government’s plans to achieve this target will only yield a reduction of about 0.6 percentage point per year, or about half their target.
“Therefore, in order to achieve this target, it is imperative the scale-up in social and infrastructure is well targeted to the most vulnerable, particularly in rural areas, and accompanied by strong structural policies,” the IMF said.
Among proposals to improve the speed of poverty reduction in the country, the IMF said, include further developments in the Conditional Cash-Transfer Program, raise investment in education and health, promote rural and value-chain development, and ensure land tenure in agriculture.