CAUSES OF POVERTY IN THE PHILIPPINES

SCHELZIG, KARIN: POVERTY IN THE PHILIPPINES(INCOME, ASSETS AND ACCES) ASIAN DEVELOPMENT BANK, JANUARY 2005.

SUBMITTED BY: Almuhandez D. Omar SUBMITTED TO: Maam Lilian Domingo

Poverty in the Philippines: Income, Assets, and Access This publication examines official income poverty statistics and trends, but takes a multidimensional approach in exploring questions of access. The report looks at access by the poor to five important assets: human, physical, natural, social, and financial capital. The report identifies seven broad causes of poverty: macroeconomic problems, employment issues, rapid population growth, low agricultural productivity, governance concerns including corruption, armed conflict, and physical disability. (http://books.google.com.ph/books?id=iVIWQh50HoC&dq=poverty+in+the+philippines+karin+schelzig&sou rce=gbs_navlinks_s) Description Poverty and inequality in the Philippines remains a challenge. In the past four decades, the proportion of households living below the official poverty line has declined slowly and unevenly and poverty reduction has been much slower than in neighboring countries such as the People's Republic of China, Indonesia, Thailand, and Viet Nam. Economic growth has gone through boom and bust cycles, and recent episodes of moderate economic expansion have had limited impact on the poor. Great inequality across income brackets, regions, and sectors, as well as unmanaged population growth, are considered some of the key factors constraining poverty reduction efforts. Causes of Poverty The main causes of poverty in the country include the following:

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; and recurrent shocks and exposure to risks such as economic crisis, conflicts, natural disasters,and environmental poverty.

Key Findings The report's key findings include the following:

Economic growth did not translate into poverty reduction in recent years; Poverty levels vary greatly by regions; Poverty remains a mainly rural phenomenon though urban poverty is on the rise; Poverty levels are strongly linked to educational attainment; The poor have large families, with six or more members; Many Filipino households remain vulnerable to shocks and risks; Governance and institutional constraints remain in the poverty response; There is weak local government capacity for implementing poverty reduction programs; Deficient targeting in various poverty programs; There are serious resource gaps for poverty reduction and the attainment of the MDGs by 2015; Multidimensional responses to poverty reduction are needed; and

Further research on chronic poverty is needed.

The report comprehensively analyzes the causes of poverty and recommends ways to accelerate poverty reduction and achieve more inclusive growth. In the immediate and short term there is a need to enhance governments poverty reduction strategy and involve key sectors for a collective and coordinated response to the problem. In the medium and long term the government should continue to pursue key economic reforms for sustained and inclusive growth. (http://www.adb.org/publications/poverty-philippines-causes-constraints-andopportunities)

Rapid population growth

Given that the population of the Philippines is increasing at a rapid rate of 2.36% per year, it can be translated as an increase of more than 5,000 people daily in a country that already has an increase of more than four million poor people since 1985. In 1985, the absolute number of people living in poverty was 26.5 million. This increased to 30.4 million in 2000 and from 2006 to 2009, increased by almost 970,000 Filipinos from 22.2 million to 23.1 million. As the Philippines has financially limited resources and a high poverty rate, the rapid increase in population has become a problem because there is insufficient resources to support the population, which leaves much fewer resources to improve the economy. From 2003 to 2006, even though the Philippines experienced above-average economic growth, the poverty incidence increased as a result of its population growth rate.
Unemployment

Poverty reduction has not kept up with GDP growth rates, largely due to the high unemployment rate, high inflation rate and wide income inequality. The official rate of unemployment for 2012 in the Philippines was 6.8 per cent. This was an increase of joblessness even though in 2012, the GDP grew at 6.6 percent. From 2000 to 2009, the economy of Philippines grew by 3.2% on average annually, which was on par with the economic performance of its neighbors. However, this recent growth did not translate into more jobs. Unemployment in the Philippines has been high in comparison to its neighbors, at around 7.5% to 8.0% since 2006. The Philippines have faced difficulty in job creation due to its inability to attract more foreign, direct investments. Diwa Guinigundo, who is the Central Bank Deputy Governor, mentioned that while capital flows are turning to the emerging markets, foreign, direct investments to the Philippines remain relatively low due to the weak investment climate. The Philippines have hefty business procedures, poor tax and customs administration, weak protection against expropriation and high-energy cost. Therefore, the poverty rate remains constant over the years. (http://en.wikipedia.org/wiki/Poverty_in_the_Philippines)