Poverty in the Philippines

Poverty and inequality have been recurrent challenges in the Philippines and have again come to the fore in the wake of the current global financial crisis and rising food, fuel, and commodity prices experienced in 2008. he proportion of households living below the official poverty line has declined very slowly and unevenly in the past four decades, and poverty reduction has been much slower than in neighboring countries such as the People’s Republic of China (PRC), Indonesia, hailand, and Viet Nam. he growth of the economy has been characterized by boom and bust cycles and current episodes of moderate economic expansion have had limited impact on poverty reduction.

Other reasons for the relatively moderate poverty decline include the high rate of inequality across income brackets, regions, and sectors; and unmanaged population growth.his study aims to provide a comprehensive analysis of the causes of poverty in the Philippines and give recommendations for accelerating poverty reduction through sustained and more inclusive growth. he study will provide an overview of the current status of government responses, strategies, and achievements and will identify and prioritize future needs and interventions. Millennium Development Goal (MDG) accomplishments to date will also be assessed. It will examine implications of the current financial crisis on poverty and recommend ways to move forward. he study is based on analytical work using current literature and the latest available data, including the 2006 Family Income and Expenditure Survey (FIES).

Current Profile of Poverty in the Country
Poverty incidence among households increased from 24.4% in 2003 to 26.9% in 2006 and the number of poor families increased from 4.0 million in 2003 to 4.7 million in 2006. he headcount index increased from 30.0% in 2003 to 32.9% in 2006 and the number of poor people increased from 23.8 million in 2003 to 27.6 million in 2006. It should also be noted that poverty incidence and magnitude do not necessarily coincide. According to the 2006 poverty data, Mindanao has the highest poverty incidence at 38.8% but Luzon has the highest number of poor families, with almost 2 million families (42.4% of the total). Self-rated poverty1 has ranged from 50% to 52% for most of 2008, peaking at 59% (an estimated 10.6 million people) in the second quarter.

Inequality has also been persistent over the years. Although the Gini coefficient2 improved to 0.4580 in 2006 from 0.4605 in 2003 and 0.4872 in 2000, the level of inequality remains high compared with other countries in Asia and has hardly changed for more than 20 years. High inequality has limited the impact of economic growth on poverty reduction. he Philippines’ midterm progress report on the MDGs shows that the following gains have been made: (i) decrease in the proportion of people living in extreme poverty; (ii) visible improvements in household and population poverty indicators; (iii) maintained net enrollment rates by sex at both elementary and primary education levels; (iv) reduction in infant deaths per 1,000 live births; (v) prevalence of HIV/AIDS below the national target of 1% of the population; (vi) improvements in environmental protection; and (vii) active participation in the World Trade Organization.

However, the Philippines is still lagging behind in meeting the targets on access to primary education, maternal mortality rates, and access to reproductive health care. Because of the current global economic crisis and recent increases in poverty incidence, the goal of reducing the proportion of people living in extreme poverty may not be achieved. In all goals and targets, existing indicators exhibit significant disparity by region. In terms of gender, the Philippines has made substantial progress in enhancing the opportunities and welfare of its women and men (ADB et al. 2008); however, challenges remain in implementing key policies and improving maternal health and reproductive health care.he main characteristics of the poor include the following:

the majority live in rural areas and work in the agriculture sector, mostly as farmers and fishers. In the urban areas, such as Metro Manila, they are found in slums and the informal sector. They have large families (six members or more).

In two-thirds of poor families, the head of household has only an elementary education or below. They have no or few assets and minimal access to credit. A major income source of the poor is from enterprise income (informal sector activities). A significant segment of the poor households are “chronically poor.”

Causes of Poverty
The main causes of poverty in the country are
low to moderate economic growth for the past 40 years;
low growth elasticity of poverty reduction;weakness in employment generation and the quality of jobs generated; failure to fully develop the agriculture sector;
high inflation during crisis periods;
high levels of population growth;
high and persistent levels of inequality (incomes and assets), which dampen the positive impacts of economic expansion; recurrent shocks and exposure to risks such as economic crisis, conflicts, natural disasters, and “environmental poverty.”

Background of the Study
Poverty and inequality have been recurrent challenges in the Philippines and have again come to the fore in the wake of the current global financial crisis and rising food, fuel, and commodity prices experienced in 2008. he proportion of households living below the official poverty line has declined very slowly and unevenly in the past four decades, and poverty reduction has been much slower than in neighboring countries such as the People’s Republic of China (PRC), Indonesia, hailand, and Viet Nam. he growth of the economy has been characterized by boom and bust cycles, and current episodes of moderate economic expansion have had limited impact on poverty reduction. Other reasons for the relatively moderate poverty decline include the high rate of inequality across income brackets, regions, and sectors; high population growth rates; and perennial occurrences of disasters and longstanding conflicts in various regions, especially in Mindanao. After years of recognizing poverty as a key development problem and devising various strategies and programs for its reduction, the government is still confronting high levels of poverty and hunger among its citizens.

Long and persistent periods of high poverty may harm a country’s development path as poverty itself becomes a drag to economic growth. In addition to the slow decrease in poverty incidence, there has been mixed progress in addressing human development concerns, particularly outcomes in education and health. The government has committed to achieving theMillennium Development Goals (MDGs) through pro-poor sustained economic growth as reflected in the Medium-Term Philippine Development Plan (MTPDP) 2004–2010. However, efforts to meet the MDGs and reduce poverty and inequality are constrained by weak implementation of reforms, financing gaps and leakages, coordination failure, and governance concerns.

The current global financial crisis has started to affect the domestic economy as growth slowed to 4.6% in 2008 from a high of 7.2% in 2007. Exports have continued to decline while the growth rate of remittances, the economy’s lifeline, will likely slow down in 2009. Efforts to protect the poor from the crisis and further reduce poverty must remain an important priority, as the number of vulnerable sectors of the economy will increase if the crisis deepens. he government has laid out the Philippine Economy Resiliency Plan, a P330 billion stimulus package consisting of increased allocations for national agencies and government, corporate, and financial institutions for infrastructure spending, corporate and individual tax breaks, and social protection and safety nets intended to protect the poor from the impact of the crisis.