While the Philippines has made important gains in poverty reduction, inequality remains high, with the country having one of the highest rates of income inequality in East Asia, according to a report released by the World Bank released yesterday.
The report titled “Overcoming Poverty and Inequality in the Philippines: Past, Present, and Prospects for the Future” revealed that although poverty fell by two-thirds between 1985 and 2018 thanks to high growth rates and structural transformation, income inequality did not begin to decline until 2012.
“It is still high: the top one percent of earners together capture 17 percent of national income, with only 14 percent being shared by the bottom 50 percent,” the World Bank said.
With an income Gini coefficient of 42.3 percent in 2018, the Philippines ranks 15th of 63 countries for which data on income inequality is available. Of East Asia Pacific countries for which data are available for 2014 to 2019, only in Thailand is income inequality greater than in the Philippines, the report said.
“The Philippines aims to become a middle-class society free of poverty by 2040, but we know from global experience that no country has managed to make this transition while maintaining high levels of inequality,” said Ndiamé Diop, World Bank country director for Brunei, Malaysia, Philippines and Thailand.
“Inequality of opportunity and low mobility across generations wastes human potential and slowdown innovation, which is crucial for building a competitive and prosperous economy that will in turn improve the well-being and quality of life of all Filipinos,” he added.
The report highlights that the expansion of secondary education, mobility to better-paying jobs, access to basic services and government social assistance have started to reduce inequality since the mid-2000s.
However, unequal opportunities, slow access to tertiary education among low-income households, inequality in returns to college education and social norms putting the heavier burden of childcare on women has slowed the narrowing of inequality in the Philippines.
Despite the strong recovery of growth and the labor market, the World Bank said the pandemic partly reversed decades-long gains in reducing poverty and inequality in the Philippines.
It halted economic growth momentum in 2020, and unemployment shot up in industries that require in-person work. In 2021, the World Bank pointed out, the national poverty rate rose to 18.1 percent despite government assistance.
Recovery in the Philippines is uneven across the income distribution and the poorest who suffered the most from COVID have yet to fully recover their incomes, the World Bank said.
“With food prices going up, many families coped by reducing their consumption, including eating less. These coping strategies can have serious consequences on the health and nutrition of children in these vulnerable households,” it added.
The report said policy priorities to reduce inequality in the Philippines can be structured around three themes, including healing the pandemic’s scars and building resilience, setting the stage for a vibrant and inclusive recovery and promoting greater equality of opportunity.
In his speech during the report launch yesterday, National Economic and Development Authority Secretary Arsenio Balisacan said the findings and suggestions of the report will prove useful as inputs and references to the strategies that the government is going to implement through the upcoming Philippine Development Plan or PDP 2023-2028.
“The past decade has seen our economy sustain high levels of growth while reducing inequality — an outcome which has resulted in a relatively rapid pace of poverty reduction between 2015 and 2018. Increasing the
equality of opportunities made available by an expanding economic pie will allow us to achieve growth that is truly inclusive,” Balisacan said.
“We aim to sustain this performance for at least two more decades, in the hope of attaining the AmBisyon Natin 2040, which states that all Filipinos will enjoy a firmly rooted, comfortable and secure life by 2040,” he added.
