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April 18, 2013 / emmanintheworld

Inequality in the Philippines

With the surprise GDP growth rate that the country achieved last year, many are hoping that the good news would carry over this 2013. Fortunately for PNoy and his administration, a lot of things are pointing to that direction: the high level of business confidence for the Philippine economy, benign inflation rates, historically-low interest rates, the recent investment grade status from Fitch, and the increased consumer and government spending that is expected from an election year. Early warnings of the pricey valuations of most stocks in the Philippine Stock Exchange index have also contained the adverse effects of the correction on the economy to the minimum.

Challenges, however still remain as these economic gains are mostly felt by the upper class or the private sector. Majority of Filipinos, for example, can’t feel the effects of the Fitch upgrade. In an article for Rappler’s Thought Leaders, Ronald Mendoza argued that the upgrade would have minimal effect for the majority of poor Filipinos as there is little credit being extended to SMEs, which is made up primarily of lower-income families, from financial institutions. It also remains to be seen if the Fitch rating would lead to job-generating investments as the Philippines ranks low in the World Bank’s 2012 Ease of Doing Business Index.

Self-rated poverty also rose during October 2012 from 47% to 53%, according to Social Weather Station’s survey. Despite the impressive 7.1% GDP growth during the third quarter (which is the highest compared to other countries in ASEAN), more than half of the whole population thought that they were poor. According to the same report, food threshold or the budget for food remained ‘sluggish despite considerable inflation’. This means that households’ food budgets did not increase with inflation, which implies a lower standard of living. Food budgets even declined in Metro Manila and Visayas.

The 6.6% GDP growth in 2012 is also not shared equitably among Filipinos as it is driven mainly by the services sector. In fact, the agriculture sector, where most poor Filipinos are, only grew a measly 2.7% compared to the 7.4% growth rate of the services sector. Inflation-adjusted gross national income data also shows that the agriculture sector only contributed 8.5% of the total output which is far away from the service sector’s 43.5%.

What’s more depressing is that last year’s inequitable growth has been going on for decades. Increasing inequality in times of rapid economic growth is, in fact, a characteristic of the whole region. According to a report from the Asian Development Bank, the Gini coefficient, a measure of income inequality where 100 indicates absolute inequality, of the region has risen from 39 in the 1990s to 46 in the late 2000s. The Philippines’ Gini coefficient, although declining, is not really something to celebrate about as it only went from 49 to 45 in the twenty-year period.

In a separate World Bank report, income inequality is more evident as the Gini coefficient of the Philippines has never reached levels below 40%. Although the Gini coefficient is on a downward trend after hitting a high of 46.2% in 1997, its level in 2009 is almost the same as what it was in the early 1990s. The lack of improvement with regards to income inequality in the country has made it lag behind other ASEAN members like Cambodia and Thailand, which, at different points in time, have had higher Gini coefficients than the Philippines. Even China, which actually doubled its Gini coefficient from 1984 to 2009, is still better off than the Philippines.

Aside from the differences between the richest and poorest 10%, income inequality is also manifested in the differences of income between regions. Understandably, the National Capital Region has the highest average family income among the regions. However, the gap of P70,000 between NCR and Calaborzon, which has the second-highest average family income, is too large. This is a far cry from 1988 when there was only a gap of P33,000 between NCR and Central Luzon, which was then second region in terms of average family income.

With the elections coming up, one would expect that senatorial candidates, especially from the United Nationalist Alliance, would pounce on these to criticize the government. Although some did and went on record, it hasn’t caught on with the rest of the candidates. For some reason, people have less and less interest with the problem of inequality that it is not even a key election issue. The most anyone could get from these candidates about the topic is a mention of how the rich are oppressing the poor.

It is disheartening to hear this because inequality is so complex that a simple ‘rich vs poor’ argument would only be a scratch in the surface. This topic is also about the gap between the poor and the middle class, the imbalance of resources between regions, the skewed growth towards the unproductive services sector, and so much more.

Inequality is a structural problem that all want to forget, or at the very least ignore.

 

 

 

Sources:

1. http://www.rappler.com/thought-leaders/24978-investment-grade-philippines-inclusive-growth

2. http://www.nscb.gov.ph/sna/2012/4th2012/tables/1Q4-Rev_Summary_93SNA.pdf

3. http://www.adb.org/sites/default/files/ado2012-highlights.pdf

4. http://data.worldbank.org/data-catalog/world-development-indicators /

5. http://www.indexmundi.com/facts/indicators/SI.POV.GINI/compare?country=ph#country=cn:in:id:my:mm:ph:sg:th:vn

6. http://www.nscb.gov.ph/secstat/d_income.asp

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