More than 40 percent of the population is living in poverty, while the GINI coefficient (0.44), a measure of income equality and distribution, is among the worst in the Southeast Asian region. Additionally, the Philippines has one of the highest rates of population growth in Asia. Unemployment rates are also among the highest in the region, while underemployment is in double-digit territory. Real wages have practically stagnated in the last three decades, while food and oil inflation – predominantly determined by movements in the volatile global commodity markets – continues to depress income growth, pushing many low-income families below the poverty line.
The only way for the Philippines to reverse these structural trends and tackle its huge youth bulge is to maintain robust levels of annual GDP growth – probably something around 7 percent. However, there are major obstacles to attaining and sustaining such levels of growth.
In recent years, the Philippines has experienced robust rates of growth while improving its overall competitiveness. However, according to the Global Economic Competitiveness Index, the country is still the least competitive economy in the Asia-Pacific region. The country scored very poorly on research and development (R&D) and infrastructure. This reflects a systemic problem in the Philippine economy. Unless the country develops its workforce, science and technology sectors, along with infrastructure, it won’t be able to attract investment and establish a vibrant economy. On top of this, corruption is still a huge problem. These factors, for instance, explain why the Philippines has been consistentlyoutperformed by its peers in the region in terms of attracting Foreign Direct Investment (FDI).
In fact, recent growth has been highly dependent on remittances from overseas Filipino workers, retail industry, real estate, and business process outsourcing (BPO). Moreover, this growth can also be attributed to a ‘rebound’ – thanks to an earlier economic stimulus – from a low-base in 2009, when the Philippines was hit by the global financial crisis. The problem with over-reliance on remittances and services is two-fold: the growth isn’t followed by a significant increase in decent and secure employment opportunities for the majority of the population, and the country will remain vulnerable to cyclical changes in international markets. As a result, the Philippines might not be able to considerably reduce unemployment rates and sustain high rates of growth that could reverse staggering poverty and inequality levels in the country.
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