Philippine poverty rate rises to 32.9%

from The Financial Times

By Roel Landingin in Manila

The Philippines’ poverty rate has risen for the first time since the Asian financial crisis, according to a new government report that deals a potential blow to President Gloria Macapagal Arroyo’s plans to halve the ranks of the country’s poor.

Bar a brief rise in the wake of the 1997-98 Asian crisis, the Philippines’ poverty rate has moved steadily downwards since the 1986 fall of strongman Ferdinand Marcos, shortly after which it stood at almost 50 per cent.

Mrs Macapagal has promised to cut poverty incidence to 17-20 per cent of the population by 2010. But that now looks likely to be much harder to achieve after government economists on Wednesday reported that the proportion of poor people rose to 32.9 per cent in 2006 from 30 per cent in 2003. Manila calculates the poverty numbers from a survey of household incomes and spending done every three years.

The rise in poverty was due most likely to slugglish economic growth and a rapid growth in the population, said Ifzal Ali, chief economist at the Asian Development Bank,. But it put the Philippines at odd with most of Asia as “across the region, we are seeing a sustained decline in poverty levels.”

The Philippines gross domestic product grew by only 5 per cent between 2003 and 2006 compared to almost 8 per cent in the whole of south-east Asia.

Last year, the economy grew by 7.3 per cent, the highest in three decades, on the back of higher government spending, but GDP growth is seen to ease this year amid the global economic slowdown

Clarence Pascual, an independent labour economist, said the Philippines’ economy was simply not generating enough well-paying jobs for the growing number of Filipinos joining the labour force.

While the jobless rate fell, in part because of the changes in the way government counted the unemployed, the underemployment rate surged to 23.5 per cent in 2006, its highest in almost two decades. “Underemployment has a stronger correlation with poverty than joblessness itself,” said Mr Pascual.

But economists warned that the recent surge in global food prices could push poor Filipino households deeper into poverty. Those households spend a greater proportion of their meagre incomes on basic food items, notably rice whose global prices this week soared by 75 per cent to their highest in two decades.

The Philippines is the world’s biggest importer of rice, and is seen as vulnerable to possible supply and price shocks amid falling global rice stocks and rising prices. Mrs Macapagal recently asked the prime minister of Vietnam to guarantee rice supplies for the Philippines for the 2008/09 season.

Mrs Macapagal’s economic adviser, Joey Salceda, was quoted by local newspapers as warning that shortages and uncontrolled price increases of the commodity could develop into “a far bigger disaster than the ongoing political crisis.” His reference was to a continuing kickbacks scandal surrounding an aborted $330m government supply deal with a Chinese telecommunications company.

The president, who has withstood three impeachment suits and several coup attempts, is facing fresh calls to quit amid accusations she approved the deal even after learning of possible irregularities.