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Philippine poverty can be expected to rise by at least three
percentage points because of rising food prices in the past two
years.
This projection is based on studies by the
World Bank of a study of eight developing countries.
“As a result of the rise in food prices,
total world poverty may have increased by 73 million to 105 million
people,” said the World Bank in a paper, entitled “Double
Jeopardy: Responding to High Food and Fuel Prices,” published July
2. Of that, 30 million will come from Africa alone.
The bank made the poverty estimates assuming a
pass-through rate of the increase in world market prices of 0.66.
The effect is a 4.5 percentage-point increase in the $1 per day
poverty headcount ratio or an additional 105 million estimated to be
in poverty.
Since the worldwide $1 per day poverty
headcount ratio has declined by an average of 0.68 percentage point
per year, “this potentially translates into almost seven lost
years of progress in poverty reduction,” the bank points out.
In the case of the Philippines, the impact on
poverty of rising world food prices is greater.
Even without the global food price surge and
despite the best economic performance in a generation, poverty
incidence has worsened from 24.4 percent of total families in 2003
to 26.9 percent in 2006.
Out of every 100 Filipinos, 33 were poor in
2006, up from 30 in 2003, a 10 percent worsening.
Now comes the food crisis and the fuel crisis.
A three percentage-point decline in poverty translates into 2.7
million more Filipinos becoming poor or earning less than $1 a day
this year.
Food is more than 71 percent of the household
expenditure of the bottom 30 percent of Filipinos. The national
average food consumption is 55 percent of total expenditures.
Governor Joey Salceda of Albay is urging the
government to take drastic steps and allocate as much as P414
billion for poverty alleviation measures to help the poor.
He thinks government technocrats and
bureaucrats have not fully grasped the gravity of the food and fuel
crisis and the recent deterioration in macroeconomic fundamentals
such as the significant loss of jobs even while the economy was
growing.
The World Bank says that “for the first time
since 1973, the world is being hit by a combination of record oil
and food prices. Such record oil and food prices are a destabilizing
element for the global economy because of their potentially severe
growth, inflation and distributional effects.”
In terms of their impact on income
distribution, inflation and poverty, “high food prices are of
greater and more immediate concern than high fuel prices.”
Crafting appropriate policy responses to the
food crisis, the bank point out, “is made much harder in a context
of rising oil prices and ensuing fiscal and balance of payments
pressures.”
“The next few months will be critical for
stemming this joint crisis and avoiding any potential ripple
effects,” warns the bank.
Compared to the earlier price increase in oil
that occurred between 2003 and 2005, the World Bank says
“developing countries are more vulnerable to the recent
increases.”
The terms-of-trade effects of the combined food
and energy price increases since January 2007 are in excess of 10
percent of GDP in more than 15 countries and the room to maneuver on
the macroeconomic front is limited.
Continued high and volatile food and fuel
prices will aggravate inflationary pressures, constrain fiscal
expenditures for vulnerable groups and further endanger the poor,
says the bank.
The G8 finance ministers have said high food
and energy prices pose a serious challenge to global economic
stability and growth, and risk reversing years of progress in many
poor countries.
The international community is facing an
unprecedented test: The question is whether we can act swiftly
enough to help those most in need.
Nowhere is that more true than in the
Philippines.
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