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WITH a quarter of the breadwinners in the Philippines out of work in 2020 due to Covid-19, the World Bank expects nearly 3 million Filipinos to fall into poverty by the end of this year.
According to the Philippine Economic Update (PEU), the World Bank said growth is expected to contract to 8.1 percent this year before recovering to 5.9 percent in 2021 and 6 percent in 2022.
The incidence of poverty, the World Bank said, is expected to rise to 22.6 percent this year from 20.5 percent in 2019. This is based on the poverty line of $ 3.2 a day for countries lower middle income like the Philippines.
“As the threat of the Covid-19 pandemic dissipates and business activities gradually return to normal, the economic recovery is expected to contribute to poverty reduction. The poverty rate is projected to fall to its 2018 level in 2021 and will continue to fall throughout 2022, ”the report said.
“Poverty in the Philippines is likely to increase in the short term given the negative impact of the pandemic on employment and family income,” he added.
The World Bank said that a large part of the breadwinners remained without work even after the government began easing community quarantines.
The report listed the sectors that lost the most jobs such as construction with 31.3 percent; food and lodging services, 25.6 percent; and commerce, 25.4 percent.
According to government estimates, using its own poverty lines, National Statistician Claire Dennis S. Map said that some 4.5 million Filipinos were left without work. This translated into an annual unemployment rate of 10.4 percent this year.
Philippine Statistics Authority (PSA) national statistics assistant Wilma Guillen previously told BusinessMirror that 104 Filipinos out of every 1,000 people in the workforce also had no income this year.
“Job losses among heads of households were most pronounced in the National Capital Region and neighboring regions of central and southern Luzon – one third of heads of households reported job losses here – where case infections were they became widespread and stricter community quarantines were applied, “World Bank said.
Typhoons, low consumption
BESIDES the pandemic, the World Bank said typhoons Rolly (international name Goni), Siony (Atsani) and Ulysses (Vamco) that struck the country in November in just a two-week span brought devastation to a large swath of Luzon, fueling the increase in poverty.
Before these disasters, the economy had already registered a 10 percent contraction in the first three quarters, the worst since the 1985 debt crisis, due to the fall in private domestic demand, the deep contraction of the activities of investment and weak exports.
The current economic forecast is a revision of the -6.9 percent forecast from the World Bank in October, a result of the deep contraction in the third quarter and the extensive damage and losses suffered by the country from typhoons and floods in November.
“The series of natural disasters that hit the country as we fight the pandemic highlights the importance of mainstreaming disaster risk reduction and adaptation to climate change into policy and planning,” said Ndiamé Diop, country director of the World Bank for Brunei, Malaysia, Thailand and the Philippines. “While the Philippines is financially resilient, stronger coordination, execution and implementation will help further enhance social and physical resilience to frequent crises.”
Private consumption, which accounts for two-thirds of the Philippine economy, has declined at a record pace due to high unemployment and falling incomes, the World Bank said.
The economic update said that the pandemic and natural disasters threaten to reverse the trend of a steady decline in poverty in recent years.
Fall in household income
Results from a Covid-19 impact monitoring survey conducted in August 2020 show that around 40 percent of households reported a drop in income. Business income reportedly declined, particularly among households engaged in non-farm businesses.
Remittances from abroad, a lifeline for many Philippine families, were reported to have declined by two out of five remittance-receiving households, according to the survey.
“I think the most effective way to help the poor is actually to build trust by continuing to flatten the infection curve, therefore more activity will open up and people will have the confidence to go out and spend. This is really the most effective way of helping the poor rather than transferring cash, ”said World Bank Chief Economist Rong Qian.
Confidence building
In a briefing on Tuesday, Qian said the Philippine economy is expected to return to its pre-pandemic growth path in 2022.
Qian said the growth engines for next year and in 2022 will continue to be the growth of private consumption and public investments in the country. This will boost confidence and support growth in consumption.
The World Bank said the government is expected to increase its spending on infrastructure starting in the fourth quarter of 2020, creating jobs in the construction sector.
Qian added that pre-election spending in the latter part of 2021 and election spending in 2022 would also help fuel growth in the country.
Current UEP forecasts depend on China’s early recovery, coupled with the expected rebound in the world economy in 2021, which will allow export growth to recover, and higher remittance inflows to stimulate domestic demand.
“In addition, the global economic recovery will help the national economy through trade in Philippine export goods and remittances,” Qian added.
The PEU summarizes the main economic and social events, major policy changes, and the evolution of external conditions that have affected the Philippines over the past six months.
It also presents findings from recent World Bank analyzes, placing them in the context of the country’s long-term development trends and assessing their implications for the country’s medium-term economic prospects.
