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Philippines: Poverty gains at risk from rising inflation
Poverty reduction efforts are at risk from rising inflation and the government must implement immediate reforms to ensure that gains over the last few years are protected, the National Economic and Development Authority (NEDA) said on Tuesday
In its newly launched Socioeconomic Report 2017, the NEDA said that poverty as of last year likely improved from 2015’s 21.6 percent given sustained economic growth and a moderate rise in food prices.
Poverty incidence is determined using the Philippine Statistics Authority’s Family Income and Expenditure Survey, which will be updated this year and every year thereafter.
The government is aiming to lower poverty to 17.3-19.3 percent but the NEDA said “this target may be at risk in 2018, if inflationary pressures are not addressed effectively and immediately.”
Socioeconomic Planning Undersecretary Rosemarie Edillon explained that the NEDA expects consumer price growth to accelerate, albeit temporarily, following higher inflation in the first two months of the year.
Headline inflation hit 3.4 percent and 3.9 percent in January and February, respectively, due to higher food, beverage and tobacco prices.
“Looking at the inflation numbers, we saw that there was an uptick because of the increased prices in alcoholic beverages and tobacco, and the sweetened beverages due to Train (Tax Reform for Acceleration and Inclusion Law). These are actually not basic needs and so we are okay with that,” Edillon said.
“What we are more worried about is the increase in the price of staple, which in this particular case is rice,” she added.
Agriculture sector reforms. Edillon told reporters, are urgently needed to make it more productive.
“The biggest reform … still to happen… and that is the tariffication of rice,” she said.
In the report, the NEDA highlighted the need to amend the Agricultural Tariffication Act of 1996 as the country removes quantitative restrictions on rice.
Along with this, Edillon said the Department of Agriculture was coming up with a program to enhance the rice sector’s productivity with the proposed Rice Competitiveness Enhancement Fund.
“The fund will be coming from the proceeds from the tariff collected from rice,” she said.
Middle-income status seen
Poverty reduction concerns aside, meanwhile, the NEDA said the Philippines could achieve upper middle-income country status by the end of next year.
In the 2017 Socioeconomic Report, the agency said last year’s strong 6.7 percent economic growth had allowed the country to achieve a gross national income (GNI) per capita growth rate of 4.8 percent, higher than the target of 4.5 percent.
“This would make it possible for us to reach the upper middle-income country standard definition of just below $4,000 income per capita by end-2019,” the report stated.
The World Bank defines an upper middle-income economy as one with a GNI per capita between $3,956 and $12,235. The Philippines is currently in the list of lower middle-income economies or those with a GNI per capita between $1,006 and $3,955.
“Actually the target for the PDP (Philippine Development Plan) is that we will be an upper middle income country by 2022. But we think we will get to that status much-much earlier,” Edillon said.
She said the NEDA’s optimism was based on its assessment that growth drivers such as the government’s infrastructure program would have a significant impact.
“It will really propel our econmomic growth rate even faster and we will reach that upper middle income status.
The implication for that is it means our vision of being a high income country by 2040 is really within reach,” she said.
Sought for comment, Security Bank Corp.’s Treasury Group economist and Assistant Vice President Angelo Taningco, said he agreed with the NEDA’s view.
“Yes, I think there’s a chance for the Philippines to become an upper middle-income country by next year. This is for as long as the positive economic momentum continues with gross domestic product (GDP) and gross national income growth remaining solid; population growth steady; and peso depreciation to be modest,” he told The Manila Times.
Taningco also said that he expected both GDP and GNI to continue exhibiting robust growth with the drivers being the government’s tax reform and infrastructure programs and a healthy global economy that would boost Philippine exports and overseas Filipinos workers remittances.
Source: http://www.manilatimes.net/poverty-gains-at-risk-from-rising-inflation/390374/