Gains vs poverty needs more reform

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Poverty reduction in the Philippines is gaining momentum and will benefit from continued fiscal reforms, the World Bank said.

In its latest Philippine Economic Update, the Washington-based multilateral institution noted that growing fiscal space was being targeted toward priority areas such as social services.

“As a result, the country today has a world-class conditional cash transfer (CCT) program that replaced a corrupt patronage system of subsidies. The public education system now provides 13 years of free schooling,” it said.

Universal healthcare coverage was close to being achieved, the Bank said, while a larger budget for community-driven development and bottom-up budgeting programs was giving people a direct voice in development interventions.


It also noted that infrastructure spending, while slow, had been ramped-up with the aim of reaching 5 percent of gross domestic product (GDP) by 2016.

“These spending reforms were made possible by better tax administration and the passage of the ‘sin tax’ law, both of which created significant fiscal space of around 1.9 percent of GDP, and by better transparency and accountability of public spending,” the World Bank said.

The multilateral pointed out that poverty had trended downward since 2012, although recent data showed a slight uptick.

After declining by three percentage points between the first half of 2012 and 2013, poverty incidence rose by about one percentage point between the first half of 2013 and 2014. The increase was attributed to Typhoon Yolanda and artificially high rice prices due to importation lags.

Poverty incidence was at 25.8 percent as of the first half of 2014 up from the 24.6 percent a year earlier.

“Even though poverty increased slightly, the overall downward trend still suggests that growth is becoming more inclusive. Apart from higher growth in recent years, the expansion of the conditional cash transfer program in 2014 is credited for raising the poor’s income,” the World Bank said.

It said poverty reduction would continue if the country maintained the speed and quality of growth achieved in recent years. With robust growth, the multilateral said government transfers to poor households would grow.

“Although government spending was reduced overall in 2015, government transfers to poor households were not impacted and are being ramped-up,” it noted.

The World Bank said the poor could benefit even further if excise taxes on petroleum products were raised and revenue redistributed in the form of better social services.

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