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The pandemic will widen the gap between rich and poor in the region and countries like the Philippines will struggle amid low spending on social protection, debt observer Moody’s Investors Service said on Tuesday.
“The impact of the coronavirus pandemic will exacerbate income inequality in Asia-Pacific. Governments with limited fiscal capacity have limited scope to address the resulting social and political stresses, which could amplify credit risks, ”Moody’s said in a report.
“Expenditure measures can support vulnerable groups, but almost all emerging markets in Asia-Pacific have weaknesses in their social protection systems: social spending is lowest in India, the Philippines and Indonesia, although efforts to strengthen the systems redistribution is underway, ”Moody’s said.
In the Philippines, spending on social protection was equivalent to only about 2.9 percent of gross domestic product (GDP), even when 36.7 percent of its population was covered by programs aimed at alleviating poverty.
As such, Moody’s expects emerging economies to struggle as they address the social and political risks stemming from the growing income gap amid the pandemic.
“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.
However, the debt watcher noted that these four emerging Asian economies have already used fiscal policy to reduce income inequality, in particular through their cash transfer schemes and broader social assistance coverage for the poor households.
In the case of the Philippines, Moody’s said it “reports strong coverage and benefit incidence, but low spending as a percentage of GDP.”
The Philippines disburses conditional cash transfers through its Pantawid Pamilyang Pilipino Program targeting low-income households, which also benefited from cash assistance under the Social Improvement Program at the height of the longest and strictest blockade of the region. INQ
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