‘6% growth to end poverty’


    The Philippines must sustain at least 6 percent growth in its gross domestic product (GDP) per year to eradicate poverty in the country, according to the World Bank.

    In its Philippine Economic Update report, the Washington-based lender said that higher growth in the country in recent years has begun to lift more people out of poverty.

    Between 2012 and 2013, it noted that poverty incidence declined by 3 percentage points to 24.9 percent.

    The World Bank said the drop in poverty incidence was supported by falling underemployment among the poor, which declined significantly in 2013.

    It added that the 2012-2013 poverty incidence data is in sharp contrast to weak poverty reduction between 2000 and 2009, when poverty incidence declined by an annual average of only 0.05 percentage point.

    “If strong poverty reduction in 2013 is sustained in the near-term, it is very likely that the government will achieve its poverty target of 18 percent to 20 percent by 2016,” it stated.

    The Philippine economy grew by 7.2 percent in 2013. In 2014, the World Bank estimated the country’s GDP expanded by 6 percent, and has forecast GDP growth to accelerate to 6.5 percent in 2015 and 2016.

    Growth elasticity
    The lender pointed out that a straightforward method to project poverty incidence is to estimate the growth elasticity of poverty.

    The growth elasticity of poverty refers to the percent change in poverty incidence for every percent change in GDP per capita.

    The World Bank said growth elasticity of poverty between 2006 and 2012 is estimated at -0.24, while it is -2.02 between 2012 and 2013.

    Explaining the report, Karl Kendrick Chua, senior country economist at the World Bank, said that this means that for every 1 percent increase in GDP per capita, the rate of poverty incidence declines by more than 2 percent.

    “This is not far-fetched since we have already experienced that level of elasticity between 1985 and 1997,” he said.

    According to the report, the combination of higher growth and stronger elasticity between 2013 and 2016 can result in much faster poverty reduction.

    For instance, the report showed that a scenario of 4.2-percent per capita growth—equivalent to 6 percent GDP growth—coupled with an elasticity of at least -1.50 can help the government achieve its poverty target of 18 percent to 20 percent by 2016.

    “Over the long-term, if we are able to sustain 6 percent growth at this level of elasticity, we can double per capita income in 1 decade, raise it five times in 2 decades, and multiply it by 11 times in 3 decades,” Chua said.

    “This means it is very possible to eradicate poverty and boost shared prosperity,” Chua added.

    Anti-poverty efforts to help
    Lastly, the World Bank report said strong poverty alleviation efforts in the last four years suggest that the strong elasticity can be sustained.

    It mentioned that in its first four years in office, the Aquino Administration more than doubled social services spending.

    The lender acknowledged that the government has implemented sweeping reforms to improve transparency and accountability of the budget.

    It also cited the government’s initiatives through programs such as universal health care (UHC) and the conditional cash transfer (CCT) program.

    Between 2012 and 2013, the World Bank said UHC coverage increased from 5 to 8 million poor households, covering the bottom 40 percent of the population.

    “This is expected to significantly increase protection of poor and vulnerable households from health-related shocks,” it stated.

    Similarly, the coverage of the CCT program has expanded by 3.2 million households since 2010, now reaching 4.2 million poor households, the lender noted.


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    1 Comment

    1. This coming from an “economist” who thinks real life is directly proportional to “statistics” ….ASSuming everything else is held constant.

      CCT lifts people from poverty he says…like it was easier for this gov’t to redefine poverty, where you are no longer poor if you have a cup of coffee and an extra piece of bread in a day!

      No wonder WB has had no real success in growing the world’s economy.