[ad_1]
The global health crisis and its massive effect on the economy are expected to widen income disparity in Asia Pacific countries, and the Philippines was noted to be among those that will struggle to address it.
In a recent special report, international credit observer Moody’s Investors Service warned that despite remarkable economic growth in the Asia Pacific region (APAC) years before the pandemic, the impact of the coronavirus health crisis will still exacerbate the income inequality across the region.
“The pandemic will exacerbate inequality, and governments will increasingly turn to fiscal policy to limit widening income gaps and protect human capital,” Moody’s said.
Across the region, Moody’s cited the Philippines as one of four sovereigns who will fight to address looming growing inequality, posing risks of contagion to the country’s social and political climate.
“Governments with weak social protection systems and low fiscal capacity to increase spending will face particular challenges in addressing income inequality. India, Indonesia, and to some extent Malaysia and the Philippines stand out in this regard, ”Moody’s said.
The credit watcher warned that job losses and income crises, such as those caused by the pandemic, often disproportionately affect vulnerable and low-income groups.
According to a study by the International Monetary Fund (IMF), the Gini coefficient, or the statistical measure of income inequality within a nation, increases by about 1.5 percentage points on average five years after a pandemic hits.
Moody’s data showed that the Philippines has the third-largest Gini coefficient in Asia Pacific, after China and India, although the country has made significant improvements in its income inequality status since 2000.
“Past pandemics have also led to increased social unrest, driven by inequality and slower growth,” Moody’s said.
“Lower-skilled workers after a pandemic or those with basic education are more likely to face unemployment and for longer than those with advanced education. Informal sector workers have faced a double whammy of significant job losses and inadequate coverage of social protection systems, ”added the credit observer.
Amid these challenges, Moody’s said sovereigns are using fiscal policy to mitigate income inequality and provide support to vulnerable groups. However, the credit watcher cautioned that the Philippines may not have enough fiscal space to deal with the looming threat.
“The Philippines [along with Malaysia] they have little fiscal room to increase spending without offsetting tax measures, and high Gini rates, ”Moody’s said.
There is hope
As countries recover from the coronavirus pandemic, Moody’s said that social protection systems in particular have the power to mitigate short-term economic impact, while preventing long-lasting effects on work.
Moody’s praised recent efforts by the Philippines to increase its support for social protection coverage. If done efficiently and correctly after recovery from the pandemic, the Philippines could alleviate some adverse effects of pandemic-induced income equality.
“In particular, in the Philippines, the collection of sin tax revenue on tobacco and alcoholic and sugary beverages helps fund the universal health care program, representing a double-barreled tax approach to improve social protection,” Moody’s said.
