Page 1

PHILIPPI NE INSTITUTE FOR DEVELOPMENT STUDIES Surian sa mga Pag-aaral Pangkaunlaran ng Pilipinas

Vol. XXIX No.1

Editor's Notes With a new government in place and amid all the developments that have taken place in the past two years and that are happening at the moment, what prospects are in store for the Philippine economy in 2011? Dr. Josef T. Yap, PIDS president, in his usual review of the Philippine economy in the previous year and outlook for the year ahead, provides an analysis of what to anticipate based on outcomes and developments in the various economic sectors in 2010. Stressing the point about the sharp rebound in the Philippine economy in 2010, something that all initial and even revised forecasts for 2010 missed, Yap expressed the hope that the positive impact of factors that contributed to such rebound can and will continue in 2011 and the coming years. This, however, will depend on how the new administration will address the risks that will come its way from the potential higher inflation due to the expected higher food and fuel prices; the volatile capital inflows; and the continuing fiscal deficit. With rising poverty also remaining to be a major challenge, macroeconomic policies and programs, according to the analysis, should center not only in trying to achieve high (and sustained) economic growth but also in putting into effect redistributive efforts to contain poverty. The bottomline is that all these require a great deal of institutional strengthening and political will. This, in itself, is perhaps the biggest challenge. DRN

What's Inside 15

Financing development in a postcrisis world

DEVELOPMENT RESEARCH NEWS January - February 2011

ISSN 0115-9097

The Philippine Economy in 2010 and Prospects for 2011 Josef T. Yap*

A

fter slowing down in 2008 and 2009—owing primarily to the repercussions of the 2008 Global Financial and Economic Crisis—the Philippine economy grew rapidly in 2010. Gross domestic product (GDP) posted a growth of 7.3 percent in 2010 compared to only 1.1 percent in the previous year (Table 1). Economic growth is comparable to the 2007 figure, which is not surprising since election spending provided a boost to economic activity in both years. All initial forecasts missed the sharp economic rebound (Table 2). Even revised forecasts were lower than the actual outcome. This implies that analysts have overlooked factors that contributed to economic growth. Hopefully, the positive impact of these factors will continue in the near future. Policy issues in the medium term relate mainly to diversifying sources of economic growth. On the expenditure side, there must be more balance in favor of investment and away from consumption. On the production side, exports have to be more diversified and backward linkages to the domestic manufacturing sector have to be strengthened. This will allow greater employment in the more productive sectors of the economy. * President, Philippine Institute for Development Studies. The sections on economic performance in 2010 were largely lifted from Chapter 1 of the PIDS 2010 Economic Policy Monitor, which was coauthored by Ruperto M. Majuca, a Senior Research Fellow at PIDS. The excellent research assistance of Ms. Kris A. Francisco, Research Analyst II at PIDS, is gratefully acknowledged. Likewise, the author would like to acknowledge the excellent contribution of Aubrey D. Tabuga and Celia M. Reyes who wrote the Box on Poverty and Economic Growth. The usual disclaimer applies.


2

DEVELOPMENT RESEARCH NEWS

January - February 2011

Table 1: Selected macroeconomic indicators, Philippines Annual growth rates and share to GDP At constant 1985 prices, in percent unless otherwise stated 2005

2006

2007

2008

2009

2010

5.3 4.9

6.1 5.4

6.9 7.1

6.2 3.8

4.0 1.1

7.2 7.3

5.5 5.9

2.0 19.1

3.8 18.8

4.8 18.4

3.2 18.3

0.0 18.1

(0.5) 16.8

3.0

2.0 19.0

3.9 18.7

4.8 18.3

3.2 18.2

0.0 18.0

(0.3) 16.7

4.1 0.1

(3.9) 0.1

(0.4) 0.1

1.7 0.1

(4.5) 0.1

(34.4) 0.1

3.8 32.8

4.5 32.5

6.8 32.4

5.0 32.8

(0.9) 32.1

12.1 33.6

7.6

9.3 1.7

(6.1) 1.5

26.1 1.7

1.9 1.7

21.5 2.0

18.4 2.3

15.0

Manufacturing

5.3 24.2

4.6 24.0

2.9 23.1

4.3 23.2

(4.4) 22.0

12.3 23.0

7.0

Construction

(5.9) 3.8

7.3 3.9

23.7 4.5

7.8 4.6

9.8 5.0

10.5 5.2

7.5

2.5 3.1

6.4 3.1

6.7 3.1

7.3 3.2

(2.9) 3.1

8.5 3.1

6.8

6.8 48.1

6.7 48.7

8.1 49.2

3.3 48.9

2.8 49.8

7.1 49.7

5.7

7.3 8.7

6.3 8.7

8.3 8.8

4.2 8.9

0.6 8.8

1.9 8.4

3.0

Trade

5.6 16.8

6.1 16.9

8.3 17.1

1.2 16.7

1.0 16.7

10.7 17.2

6.5

Finance

13.6 5.3

11.4 5.6

12.9 6.0

2.5 5.9

5.9 6.2

6.5 6.1

6.0

Ownership of dwellings and real estate

5.3 4.7

5.7 4.7

5.8 4.6

5.7 4.7

(0.3) 4.7

6.8 4.6

6.5

Private services

7.5 8.3

6.9 8.4

8.4 8.5

4.9 8.6

6.4 9.1

8.8 9.2

7.0

Government services

3.0 4.4

4.7 4.3

2.6 4.1

5.5 4.2

6.1 4.3

1.7 4.1

3.0

4.8 78.3

5.5 78.3

5.9 77.4

4.7 78.1

4.1 80.5

5.3 79.0

5.5

1.6 6.3

6.1 6.4

11.6 6.6

3.2 6.6

10.9 7.1

2.7 6.8

3.0

Capital Formation (share to GDP)

(8.8) 17.6

2.7 17.2

14.9 18.4

1.7 18.1

(5.7) 17.0

17.0 18.5

12.0

Exports (nominal $) Imports (nominal $)

4.0 7.7

14.9 9.2

6.4 7.2

(2.8) 2.2

(21.7) (24.1)

33.7 27.1 1/

15.0 12.0

Inflation (2000=100) (average)

7.0

5.5

2.8

9.3

3.2

3.8

4.0

91-Day Treasury Bill Rate (average)

6.4

5.4

3.4

5.4

4.2

3.73

4.2

55.1

51.3

46.1

44.5

47.6

45.1

43.0

Gross National Product Gross Domestic Product Agriculture, Fishery and Forestry (share to GDP) Agriculture and fishery Forestry Industry Sector (share to GDP) Mining and quarrying

Electricity, Gas and Water Service Sector (share to GDP) Transport, communication and storage

Personal Consumption Expenditure (share to GDP) Government Consumption (share to GDP)

Nominal Exchange Rate (P/$ average)

Forecast 2011

1/ Figure for imports is for Jan–Nov 2010; Full year data for imports are still not available Source: National Accounts of the Philippines, National Statistical Coordination Board; Selected Philippine Economic Indicators, Bangko Sentral ng Pilipinas; National Statistics Office; Forecasts of J.T. Yap.


DEVELOPMENT RESEARCH NEWS

Expenditure sector Global trade regained its vitality as the world economy recovered from the recession in industrialized economies. As a result, Philippine merchandise exports registered an average monthly growth rate of 34.1 percent between December 2009 and November 2010, a sharp reversal from the average monthly decline of 26 percent from October 2008 to October 2009 (Figure 1). Increased exports constituted the main source of the economic recovery in 2010. Merchandise exports grew by 33.7 percent in 2010 (Table 1). Electronic products, which represent about 60 percent of the merchandise exports, led the way with a monthly average growth rate of 42.6 percent during the same period. Meanwhile, garment exports, the second largest category, had been registering monthly declines even in 2007, which suggest that the Philippine competitiveness in garment exports was eroding even before the global recession. However, garment exports still managed to increase between March and November of 2010 as part of the economy-wide increase in exports. The economic recovery also prompted firms to increase their investments, as shown by the significant expansion of capital formation (Table 1). In particular, durable equipment investment soared by 25.7 percent while the construction sector posted 12 percent growth in 2010. Government construction activities also expanded, partly as a result of rebuilding the damage wrought by the typhoons that hit the country in the latter part of 2009. The investment-GDP ratio averaged 15.7 percent in 2010. This is the first significant increase after a persistent decline from 2000 to 2009. Based on the experience of its East Asian neighbors, the Philippines’ investment-GDP ratio has to surpass 25 percent for an extended period of time in order for it to achieve sustained high economic growth. Proposed macroeconomic policies should therefore center on this condition. Meanwhile, personal consumption expenditures registered 5.3 percent growth, buoyed

3

January - February 2011

Table 2. Comparison of 2010 GDP growth forecasts Initial Forecast (%) Updated (%)

DRN 2009

ADB

IMF

World Bank

4.0

3.8

3.6

3.5

-

6.2

7.0

6.2

Note: Actual 2010 GDP growth is 7.3 percent based on the January 2011 National Income Accounts. Sources of Data: ADB Asian Development Outlook, IMF World Economic Outlook, and World Bank East Asia Economic Update.

Figure 1. Philippine exports (Year-on-year growth)

Source: NSO

by steady remittance inflows (Table 1 and Table 3). Private consumption, capital formation, government consumption, and net exports contributed positively to economic growth in 2010. The policy agenda should center on diversifying the sources of economic growth, in which, as indicated earlier, investment has to play a greater role. Production sector Since manufactures dominate the export sector, the latter’s strong recovery led to a 12.3 percent growth of the manufacturing sector in 2010. The electricity, gas, and water sector likewise rebounded with an 8.5 percent growth. Meanwhile, both the construction and mining sectors continued to expand, with the mining sector receiving a steady stream of investments since it was liberalized through Republic Act (RA) 7942 or the Philippine Mining Act of 1995, and the construction sector driven by the recovery of private construction activities in 2010, reflecting brighter prospects for the Philip-


4

DEVELOPMENT RESEARCH NEWS

January - February 2011

Table 3. Remittances of overseas Filipinos, 2007–2010 (in thousand USD) 2007

Growth

2008

(%) TOTAL

Growth

2009

(%)

Growth

2010

p/

(%)

Growth (%)

14,449,928

13.2

16,426,854

13.7

17,348,052

5.6

18,762,989

8.2

Jan

1,099,354

19.9

1,264,036

15.0

1,265,515

0.1

1,372,788

8.5

Feb

1,085,544

25.4

1,258,638

15.9

1,320,032

4.9

1,413,127

7.1

Mar

1,304,847

26.4

1,427,807

9.4

1,471,482

3.1

1,553,492

5.6

Apr

1,191,540

32.6

1,410,210

18.4

1,441,741

2.2

1,520,200

5.4

May

1,237,140

8.4

1,429,832

15.6

1,482,175

3.7

1,578,938

6.5

Jun

1,115,753

1.0

1,450,838

30.0

1,498,737

3.3

1,623,638

8.3

Jul

1,096,558

4.6

1,366,796

24.6

1,494,038

9.3

1,616,778

8.2

Aug

1,206,942

10.6

1,332,023

10.4

1,369,084

2.8

1,502,887

9.8

Sep

1,139,845

12.4

1,332,912

16.9

1,446,917

8.6

1,600,554

10.6

Oct

1,388,459

17.1

1,434,726

3.3

1,531,294

6.7

1,673,725

9.3

Nov

1,186,970

3.8

1,311,322

10.5

1,459,162

11.3

1,612,744

10.5

Dec

1,396,976

5.9

1,407,714

0.8

1,567,875

11.4

1,694,118

8.2

Preliminary Source of data: Bangko Sentral ng Pilipinas p/

pine economy. At the peak of the economic slowdown, the construction sector benefited from the government stimulus packages, as reflected in the increase in public construction growth in 2009. Electrical machinery posted the highest growth rate among the manufacturing subsectors. This is a result of the strong rebound of electronics exports. Meanwhile, the furniture sector posted robust growth from the fourth quarter of 2009 to the fourth quarter of 2010. This reflects the ability of local furniture makers to adapt to increasing competition through innovation and better designs. The services sector, which comprises the largest production sector of the economy, grew by 7.1 percent in 2010. Wholesale and retail trade—perhaps the sector benefiting the most from election spending—increased by 10.7 percent. Real estate activities also rebounded from the decline in 2009, similarly influenced heavily by expectations of economic agents. Remittances from overseas Filipino workers (OFWs) also contributed significantly to the expansion of the real estate sector. Other services sectors, meanwhile, grew steadily between 2009 and 2010.

Communication is the biggest disappointment among all sectors in 2010. The average growth rate of this sector was only 0.3 percent. Industry analysts attribute the poor performance to increased competition in the sector that resulted in significantly lower prices. The major concern is that the lower profitability may discourage investment which would adversely affect the quality of communication services in the future. Agriculture, on the other hand, contracted by 0.5 percent in 2010 due primarily to the adverse impact of the El Niño weather phenomenon. During the first half of 2010, the agriculture sector was also still recovering from the devastation wrought by typhoons Ondoy and Pepeng. This sector, however, experienced strong growth in the last quarter of 2010. Overall, the rebound of the industrial sector as well as the stronger performance of the services sector propelled the growth from the supply side in 2010. It would be interesting to see if the services sector can be the main driver of the economy in the future. This will deviate from historical experience wherein manufacturing has been the engine of transformation for almost all economies


5

DEVELOPMENT RESEARCH NEWS

January - February 2011

Table 4: Employment status 2009 Jul

2010

Jan

Apr

Oct

Jan

Apr

Jul

Oct

Unemployment

7.7

7.5

7.6

7.1

7.3

8

6.9

7.1

Underemployment

18.2

18.9

19.8

19.4

19.7

17.8

17.9

19.6

/p /p

Source: BLES Note: p/ Estimates for October 2010 are preliminary and may change

in the world. The government needs to address this issue after the necessary background studies have been made. Employment The unemployment rate was generally lower in 2010 compared to 2009. Election-related activities contributed to the decline of the unemployment rate to 7.3 percent in the first quarter of 2010, compared with the 7.7 percent level in the previous year. However, in the second quarter of 2010, unemployment increased to 8.0 percent compared with 7.5 percent during the same period in 2009. It was not until the third quarter of 2010 that the employment sector overcame the effects of the crisis, with the unemployment rate declining to 6.9 percent from 7.6 percent of the same period in the previous year (Table 4). Underemployment, on the other hand, showed some improvement in the middle quarters and was steady in the last quarter.

the same time, however, the separation rate also increased to 11.1 percent as compared with 9.0 percent a year ago. As such, the labor turnover rate was -0.9 percent. This was the only time, though, that the labor turnover rate turned negative in the period between the first quarter of 2009 and the second quarter of 2010. This is consistent with the observation that the Philippine economy was not severely affected by the 2008 crisis. One reason perhaps is that the government was able to put in place active labor market interventions in terms of job creation, skills training, and employment services. A concrete example of these interventions is the Comprehensive Livelihood and Emergency Employment Program (CLEEP), which was implemented “to protect the most vulnerable sectors (poor, hungry, returning expa-

The data on labor turnover rates reveal the dynamics and details of job creation and job losses (Table 5). Labor turnover rate is the difference between the hiring rate and the separation rate. As defined in the Labor Turnover Survey of the Bureau of Labor and Employment Statistics (BLES), hiring rate refers to the total additions to employment during the quarter divided by the total employment. Separation rate, on the other hand, is the total number of separations or terminations of employment that occurred during the period, divided by the total employment. The figures are reported on a quarterly basis and refer to large enterprises in Metro Manila. In the first quarter of 2010, the hiring rate increased marginally to 10.2 percent, from 9.3 percent in the first quarter of 2009. At

Election-related activities contributed to the decline of the unemployment rate in the first quarter of 2010. Photo: Jamila Bracamonte


6

DEVELOPMENT RESEARCH NEWS

January - February 2011

Table 5a: Statistics on labor turnover rates in large enterprises in Metro Manila by industry, 2009 (in %) SECTOR

Accession Separation

3RD QUARTER

2ND QUARTER

1ST QUARTER Percent

Accession Separation

Percent

Accession Separation Percent

Rate

Rate

Difference

Rate

Rate

Difference

Rate

Rate

Difference

All Sectoral Groups

9.29

9.02

0.27

9.74

7.53

2.21

9.99

9.62

0.37

Agriculture, Fishery, and Forestry

3.64

1.57

2.07

3.21

4.53

-1.32

7.35

5.87

1.48

Agriculture, Hunting, and Forestry

3.22

2.09

1.13

2.76

3.13

-0.37

9.96

7.31

2.65

Fishing

4.04

1.07

2.97

3.57

5.64

-2.07

5.07

4.62

0.45

Industry

13.41

10.02

3.39

14.67

10.8

3.87

13.93

14.85

-0.92

Mining and Quarrying

17

14.63

2.37

19.31

12.23

7.08

15.98

14.46

1.52

9.82

11.2

-1.38

12.73

10.49

2.24

12.32

12.22

0.1

Electricity, Gas, and Water Supply

3.05

3.57

-0.53

3.7

2.05

1.65

2.32

1.73

0.58

Construction

23.16

8.19

14.98

21.88

13.55

8.33

21.1

25.6

-4.5

Services

8.13

8.8

-0.67

8.33

6.58

1.75

8.89

8.16

0.72

Related Services

16.69

16.38

0.31

10.26

9.65

0.61

9.74

1.39

2.52

Hotels and Restaurants

9.09

5.76

3.33

10.66

8.68

1.98

8.99

6.22

2.76

Communications

3.26

4.88

-1.63

3.63

3.42

0.21

4.29

3.62

0.67

Financial Intermediation

2.9

3.25

-0.36

3.62

2.85

0.78

2.6

2.78

-0.17

7.82

9.61

-1.79

10.76

7.92

2.84

11.79

11.16

0.63

1

1.28

-0.28

10.4

5.97

4.42

2.57

1.69

0.88

4.95

3.74

1.21

4.45

5.17

-0.72

5.5

3.95

1.55

12.25

11.61

0.64

15.23

6.96

8.28

15.09

13.02

2.06

Manufacturing

Wholesale and Retail Trade and

Transport, Storage, and

Real Estate, Renting, and Business Activities Private Education Services Health and Social Work (Private) Other Community, Social, and Personal Service Activities

Notes: Details may not add up to total due to rounding of figures

triates, workers in the export industry, outof-school youth) from the threats and consequences of reduced or lost income as a consequence of the global economic crisis.” The manufacturing sector, the sector hardest hit by the crisis, experienced an increase in its separation rate to 24.5 percent in the first quarter of 2010, from the 11.2 percent mark in 2009. The labor turnover rate for this sector in the first quarter of 2010 was -6.41 percent, marking the third time in the past five quarters that the number for this sector turned negative. In the second quarter of 2010, the turnover rate for the manufacturing sector turned positive. The construction sector, however, recorded a -8.1 percent net turnover rate for the period, as the separation

rate increased for this sector to 17.5 percent from 13.6 percent rate a year ago (Table 5). In terms of the quality of employment, the BLES data show that for the first quarter of 2010, the proportion of those who worked “full-time” increased to 65.4 percent, from 63.0 percent in the same period in 2009. This is also higher than the rate in the first quarter of 2008, which was 64.3 percent (Table 6). In the second quarter of 2010, although the ratio of full-time workers increased to 62.6 percent from the 58 percent ratio of the second quarter of 2009, this ratio was marginally lower than the ratio for the second quarter of 2008, which was 63.4 percent. In the third quarter of 2010, meanwhile, the proportion of full-time workers reached 64.8


7

DEVELOPMENT RESEARCH NEWS

January - February 2011

Table 5b: Statistics on labor turnover rates in large enterprises in Metro Manila by industry, 2010 (in %) 2ND QUARTER

1ST QUARTER SECTOR

Accession Separation

Percent

Accession Separation

3RD QUARTER Percent

Accession Separation Percent

Rate

Rate

Difference

Rate

Rate

Difference

Rate

Rate

Difference

All Sectoral Groups

10.23

11.11

-0.88

13.52

10.66

2.86

12.11

7.88

4.22

Agriculture, Fishery, and Forestry

4.94

4.82

0.12

5.16

4.35

0.81

5.11

6.92

-1.81

Agriculture, Hunting, and Forestry

2.71

1.61

1.10

1.61

0.99

0.62

5.01

6.51

-1.51

Fishing

5.63

5.80

-0.18

6.13

5.26

0.86

5.15

7.07

-1.91

Industry

14.75

19.66

-0.49

14.20

15.16

-0.97

16.34

12.43

3.91

Mining and Quarrying

23.94

9.92

14.02

21.62

16.05

5.57

20.32

24.24

-3.91

Manufacturing

18.11

24.52

-6.41

16.11

15.01

1.10

16.35

13.71

2.64

Electricity, Gas, and Water Supply

3.10

3.23

-0.13

2.77

1.77

1.00

2.26

1.23

1.03

Construction

5.07

8.12

-3.05

9.42

17.51

-8.09

17.91

9.13

8.78

Services

9.07

8.88

0.19

13.42

9.72

3.70

11.25

6.92

4.33

Related Services

6.42

8.32

-1.90

8.78

7.17

1.61

8.48

6.30

2.18

Hotels and Restaurants

7.41

9.83

-2.42

12.26

12.99

-0.73

13.01

10.98

2.02

Communications

4.45

3.32

1.13

5.58

4.11

1.47

6.05

3.57

2.47

Financial Intermediation

1.26

2.88

-1.62

3.22

2.36

0.86

3.66

2.87

0.79

Activities

15.46

13.60

1.86

21.74

15.15

6.59

17.02

9.61

7.41

Private Education Services

1.67

2.38

-0.71

9.69

7.40

2.30

5.42

2.42

3.00

Health and Social Work (Private)

5.13

5.96

-0.82

6.11

4.96

1.14

5.89

4.20

1.69

9.59

9.64

-0.06

10.50

8.89

1.63

9.79

8.74

1.06

Wholesale and Retail Trade and

Transport, Storage, and

Real Estate, Renting, and Business

Other Community, Social, and Personal Service Activities Source: BLES

percent, almost the same ratio as that of the same period of 2008 (Table 6). From the data on unemployment rate and full-time employment, it can be concluded that the recession still had residual effects until the second quarter of 2010. The first quarter of 2010, on the other hand, appears to have benefitted from election-related activities. Inflation, interest rates, and asset prices Interest rates had shown a general decline in response to the looser policy stance of the Bangko Sentral ng Pilipinas (BSP) which started to cut policy rates on December 18, 2008 that reached a cumulative total of 200

basis points (Table 7). Based on BSP definition, repurchase (RP) rate refers to the rate when BSP uses its RP facility to lend to banks to accommodate their temporary liquidity requirements. Reverse repurchase (RRP) rate, on the other hand, refers to the interest rate applied when BSP is allowed to siphon off liquidity from the banking system on a relatively temporary basis. As of September 2010, when the rates for the RP and RRP facilities stood at 6.0 percent and 4.0 percent, respectively, the average lending rate stood at 7.5 percent and T-bills rate at 4.3 percent. The relatively subdued inflation—which averaged 3.8 percent in 2010—indicates that a relatively loose monetary policy can be maintained for the time being.


2007 Number of hours worked

2008

2009

2010p

Ave

Jan

Apr

Jul

Oct

Ave

Jan

Apr

Jul

Oct

Jan

Apr

Jul

Total employed persons

33,560

34,089

33,693

33,535

34,593

34,533

35,061

34,262

34,997

35,509

35,477

35,992

35,411

36,285

At work

33,098

33,593

33,283

32,702

34,253

34,133

34,490

33,686

34,157

35,160

34,958

35,552

34,673

36,002

Worked less than 40 hours 12,254

11,938

11,877

11,954

11,709

12,211

12,945

12,452

14,333

12,115

12,881

12,307

12,958

12,683

37.0

35.5

35.7

36.6

34.2

35.8

37.5

37.0

42.0

34.5

36.8

34.6

37.4

35.2

Less than 20 hours

4,321

4,212

4,325

4,288

3,942

4,292

4,671

4,577

5,115

4,354

4,636

4,533

4,615

4,253

20–29 hours

3,951

3,780

3,764

3,775

3,778

3,801

4,122

3,922

4,725

3,792

4,047

3,865

4,193

4,040

30–39 hours

3,982

3,947

3,788

3,891

3,989

4,118

4,154

3,953

4,493

3,969

4,199

3,908

4,150

4,390

Worked 40 hours and over 20,844

21,655

21,407

20,748

22,544

21,922

21,545

21,234

19,824

23,044

22,076

23,245

21,716

23,319

63.0

64.5

64.3

63.4

65.8

64.2

62.5

63.0

58.0

65.5

63.2

65.4

62.6

64.8

40–48 hours

13,243

13,831

13,754

12,991

14,385

14,195

13,665

13,483

12,644

14,442

14,089

14,603

13,956

15,519

49 and over

7,601

7,824

7,653

7,757

8,159

7,727

7,880

7,750

7,180

8,602

7,987

8,642

7,760

7,800

With a job, not at work

462

496

410

833

340

400

571

575

838

350

520

439

738

283

Mean hours work

41.4

41.8

41.6

41.6

42.5

41.6

41.2

41.3

39.8

42.5

41.3

42.3

41.2

41.7

As % of those ‘At work’

January - February 2011

*in thousands, except hours worked Source: BLES

8

As % of those ‘At work’

DEVELOPMENT RESEARCH NEWS

Table 6. Employed persons by number of hours worked, Philippines


9

DEVELOPMENT RESEARCH NEWS

January - February 2011

Table 7: Interest rates

2008

T-bills (All

Average Lending

Maturities)

Rate

RP

RRP

6.4

8.8

7.8

5.4

Jan

5.0

8.6

N.T.

5.2

Feb

5.3

8.2

7.0

5.0

Mar

N.T.

8.5

N.T.

5.0

Apr

5.9

7.8

N.T.

5.0

May

6.9

8.5

N.T.

5.0

Jun

6.7

8.5

N.T.

5.2

Jul

6.4

8.6

N.T.

5.5

Aug

6.9

9.0

N.T.

5.8

Sep

6.6

9.1

N.T.

6.0

Oct

6.4

9.5

8.0

6.0

Nov

6.8

9.4

8.0

6.0

Dec

6.3

9.3

8.0

5.9

4.5

8.5

6.6

4.4

5.0

10.2

N.T.

5.5

Feb

4.6

8.6

N.T.

5.0

Mar

2009 Jan

4.7

9.5

6.8

4.8

Apr

4.5

8.6

6.8

4.6

May

4.5

8.6

N.T.

4.5

Jun

4.6

8.4

N.T.

4.3

Jul

4.3

8.6

6.3

4.1

Aug

4.2

7.0

N.T.

4.0

Sep

4.3

8.5

N.T.

4.0

Oct

4.2

8.6

N.T.

4.0

Nov

4.3

7.9

6.0

4.0

4.3

8.2

N.T.

4.0

4.0

N.A.

6.0

4.0

Jan

4.2

8.0

6.0

4.0

Feb

Dec 2010

4.3

7.6

N.T.

4.0

Mar

4.2

8.0

N.T.

4.0

Apr

4.1

7.7

N.T.

4.0

May

4.1

7.8

N.T.

4.0

Jun

4.2

7.7

N.T.

4.0

Jul

4.3

7.7

N.T.

4.0

Aug

4.3

7.7

N.T.

4.0

Sep

4.3

7.5

N.T.

4.0

Oct

4.1

7.8

N.T.

4.0

Nov

2.9

7.2

N.T.

4.0

Dec

1.89

N.A.

N.T.

4.0

Source: BSP, NSCB * N.T. - No transaction; N.A. -Not available


10

DEVELOPMENT RESEARCH NEWS

January - February 2011

Figure 2. Philippine stock exchange index

Source: PSE

Table 8: Global economic outlook (output growth in percent) 2008

2009

2010

2.8

-0.6

5.0

4.3

4.2

4.4

4.5

US

0.0

-2.6

2.8

2.9

2.3

3.0

2.7

Japan

-1.2

-6.3

4.3

1.8

1.5

1.6

1.8

Euro Zone

0.5

-4.1

1.8

1.3

1.5

1.5

1.7

China

9.6

9.2

10.3

9.6

9.6

9.6

9.5

World

2011

a

2011

b

2011

c

2012

Notes: a - July 2010 forecast b - October 2010 forecast c - January 2011 forecast Source: IMF World Economic Outlook Update, January 25, 2011.

The Philippine stock market reflected the developments in the global economy. After the subprime crisis erupted in the United States (US), the Philippine stock exchange index (PSEi) fell sharply and bottomed in the first quarter of 2009 (Figure 2). But it staged a strong recovery thereafter, reaching a historical high of 4,397.30 on November 4, 2010. Apart from the global economic recovery, the Philippine stock market, along with those of other emerging market economies, benefited from a surge in capital inflows. Meanwhile, the exchange rate appreciated by an average of 5.5 percent in 2010. This is a phenomenon across emerging markets as they cope with the quantitative easing in the US. In case currencies appreciate too sharply, though, regional monetary cooperation would be required since measures at the in-

dividual country level to counter unwarranted appreciation are difficult to implement. For the Philippine peso, for instance, while its appreciation has been relatively mild compared with other economies in East Asia, it should be noted that the BSP nonetheless has limited resources to intervene in the foreign exchange market in case the situation would warrant it. Global economic outlook Recovery from the global recession in 2009 was fairly robust. World economic output is estimated to have expanded by 5 percent in 2010 after contracting by 0.6 percent in the previous year (Table 8). Timely stimulus packages, especially in the advanced economies, and appropriate policy responses to the fiscal and financial crises in the periphery of the euro area contributed significantly to the recovery.


DEVELOPMENT RESEARCH NEWS

11

January - February 2011

In the US and Japan, private consumption expenditure has responded to the stimulus packages while growth in domestic demand in Germany offset the slowdown in the periphery of the euro area. Stronger-than-expected economic growth in 2010 has led to better prospects for 2011. Forecasts were initially downgraded in October 2010 but were revised upward in January 2011 (Table 8). Nevertheless, it is only the US where output growth in 2011 is predicted to be higher than in 2010. One reason growth is expected to pick up in the US is the second round of quantitative easing (QE2), wherein the Federal Reserve will purchase $600 billion in longerdated US Treasuries from November 2010 to June 2011. The injection of liquidity is expected to lower both nominal and real long-term interest rates. This will then encourage both consumption and investment expenditures. The larger supply of US dollars will also weaken the currency providing a boost to exports. However, the US economy is still fragile with a high unemployment rate and lingering uncertainty with regard to the foreclosure process in the housing market. The resulting balance sheet problems on households will continue to be a drag on economic growth and GDP growth in 2012 is expected to be lower than in 2011. In Japan, the sharp appreciation of the yen has adversely affected net exports. Moreover, increased consumption demand in 2010 was largely a result of frontloading of expenditures in anticipation of an increase in cigarette taxes and the phasing out of the government subsidy for fuel-efficient cars. Aggregate demand is also constrained by the general deflationary trend, as economic agents delay expenditures in anticipation of lower prices. Output growth in 2011 and 2012 is projected to be less than half of the growth rate in 2010. The euro area has the greatest downside risks in terms of output growth. Countries at the periphery are still struggling with sovereign debt issues and there is therefore little fiscal space to support expansion. The IMF also explains that “the risk of financial turmoil spreading from the periphery to the core of

Higher food and fuel prices that will lead to higher inflation is one area where the Philippines may face downside rsisks.

Europe is a by-product of continuing weakness among financial institutions in many of the region’s advanced economies, and a lack of transparency about their exposures. As a result, financial institutions and sovereigns are closely linked, with spillovers between the two sectors occurring in both directions.” Economic growth in 2011 and 2012 is expected to be lower than in 2010 as advanced economies continue to consolidate their fiscal positions and address vulnerabilities. Meanwhile, China is expected to continue with its rapid economic expansion. In 2010, China overtook Japan to become the second largest economy in the world. Forecast for 2011 Recent events indicate that the Philippine economy has downside risks from three areas: 1) higher food and fuel prices that will lead to higher inflation; 2) volatile capital flows; and 3) lack of a credible program to tackle the fiscal deficit. Food prices are rising mainly from the effects of extreme weather. Meanwhile, the rapid growth of emerging markets has resulted in price booms in many commodities,


DEVELOPMENT RESEARCH NEWS

12

January - February 2011

Given the downside risks and the absence of election spending this year, GDP growth will be lower in 2011 compared to 2010. However, there will be a recovery in the agriculture sector and manufacturing growth will remain robust due to external demand. Food manufacturing should experience higher growth in 2011 due to the better performance of the agriculture sector. Remittances will continue to provide a steady source of income, which will contribute to slightly higher growth in consumption.

including fuel. The latter has also been reacting to events in the Middle East. In 2009, the United Nations Conference on Trade and Development (UNCTAD) criticized what it described as the financialization of commodity markets wherein excess global liquidity led to speculation in commodities, including those considered as basic. Hence, QE2 in the US may have also contributed to rising global inflation. Inflation in January 2011 was recorded at 3.5 percent which is lower than the figure a year ago, which was 4.3 percent. However, a turnaround is expected soon as the relatively low inflation in the first quarter of 2011 is due to the high base last year. For 2011, inflation is forecast at 4 percent, higher than the average of 3.8 percent in 2010. As of February 2011, the stock index has been on a downward trend (Figure 2). The average exchange rate in the first 45 days of 2011 was 44.06, which is higher than the 43.96 average in December of 2010. The reversal in the stock prices and exchange rate from the trend in the last few months of 2010 is evidence of the volatility of international capital flows. Addressing this volatility may hamper the BSP’s ability to effectively implement its inflation targeting program. A major reason for the relatively low investment rate in the Philippines is the lack of fiscal space that would enable policymakers to address supply side constraints. The primary example of a supply side constraint is poor physical infrastructure. Recently, the government launched the Public-Private Partnership (PPP) program. Through this contractual arrangement, the private sector can provide financial support and expertise in implementing government projects more efficiently while the government can focus

on its core responsibilities such as project prioritization. However, significant reforms in tax administration are still required to generate adequate resources that will help address the supply-side constraints. This strategy requires a great deal of institutional strengthening and political will. The new President won handily on an election campaign anchored on anticorruption. He should thus use the strong mandate to implement tough reform measures. In the medium term, poverty alleviation will be the main focus of economic programs. The higher poverty incidence in 2006 and 2009 compared with 2003 should be a major cause of concern. This issue is discussed in more detail in Box 1. Given the downside risks and the absence of election spending this year, GDP growth will be lower in 2011 compared to 2010. However, there will be a recovery in the agriculture sector and manufacturing growth will remain robust due to external demand. Food manufacturing should experience higher growth in 2011 due to the better performance of the agriculture sector. Remittances will continue to provide a steady source of income, which will contribute to slightly higher growth in consumption. There will be a marked slowdown in the services sector, mainly due to the “election effect.” The growth rate is expected to drop to 5.7 percent in 2011 compared to 7.1 percent in 2010. Finally, the overall GDP growth is forecast at 5.9 percent in 2011. This is lower than the target of the National Economic and Development Authority (NEDA) which is 7–8 percent but higher than the forecasts of IMF, Asian Development Bank, and the World Bank. DRN


13

DEVELOPMENT RESEARCH NEWS

Box 1.

January - February 2011

Poverty and economic growth

P

overty incidence in the Philippines has been continuously rising in recent years. The 2009 official estimates of the National Statistical Coordination Board (NSCB) put the poverty headcount ratio at 26.5 percent, higher than that of 2006 (26.4%), and 2003 (24.9%).1 This represents a major setback in the country’s effort to reduce poverty as part of its commitments in the Millennium Development Goals (MDGs). The rise in the poverty rate, particularly between 2003 and 2006, was decomposed by Reyes et al. (2010) to determine which factor—growth or redistribution—led to the poverty rate increase. The growth component refers to the change, in percentage points, in the poverty rate that is attributed to changes in the mean income while holding the income distribution constant. The redistribution component, on the other hand, refers to the change in the poverty rate that is attributed to changes in the income distribution while holding the mean income constant. The study found that the rise in the poverty rate was due to the combined effects of the lack of real growth and worsening income distribution, with the growth component being the more dominant of the two factors. Table B1 shows the results of the decomposition analysis. The main focus is for the period 2003 to 2006 when the poverty rate rose by 2.847 percentage points. It is shown that the change in poverty incidence of 2.849 points came from a growth component of 2.388, a redistribution component of 0.343, and an interaction term of 0.118, which accounts for the changes not exclusively attributable to either of the two factors. Three main points arise from this result. First is that real income did not grow but instead shrank and therefore contributed to the increase in poverty rate. Table B1. Decomposition of poverty by component, 2000–2006 a/ Period

Change in

Growth

Redistribution

Interaction

Poverty Incidence

component

component

component

-3.052

-0.573

-2.575

0.096

2003–2006

2.849

2.388

0.343

0.118

2000–2006

-0.203

1.719

-2.057

0.135

2000–2003

a/ Real income data are based on 2000 prices; uses the old methodology of poverty estimation but nevertheless has the same trend as that of the new estimatesSource of basic data: Family Income and Expenditure Survey (FIES), National Statistics Office

Table B2 shows that the mean income in all deciles declined between 2003 and 2006. On average, the mean per capita income of the population went down by 4.53 percent. Second, income distribution changed in a way that left the poor worse off. Lastly, between the two factors, the lack of growth was the dominant factor that led to the poverty increase in 2006. These results are rather intriguing because the National Income Accounts data showed that between 2003 and 2006, real GDP grew by 5.4 percent annually. Between 2004

1 These refer to new estimates released by the NSCB using the improved methodology on poverty measurement. The old series has a trend that is similar to this. In the decomposition analysis of poverty discussed in this Box, the old poverty estimation methodology was used.


14

DEVELOPMENT RESEARCH NEWS

January - February 2011

Table B2. Growth rate of mean per capita income by decile (Base year=2000) Income Decile

2003

2006

1

1.76

-0.50

2

5.84

-3.68

3

6.94

-4.77

4

6.24

-5.16

5

6.23

-5.99

6

5.94

-5.68

7

5.32

-5.55

8

3.49

-4.19

9

2.10

-2.64

10

-3.93

-4.93

Total

1.07

-4.53

and 2007, GDP growth averaged nearly 6 percent and yet poverty incidence in 2003 was lower than in 2006 and 2009. Reyes et al. (2010) provide several insights that help explain why this had happened. They point out that although overall output growth has been significant, said growth was more in the nonagricultural sectors and not in agriculture where the bulk of the poor can be found. The agriculture sector’s inability to grow and increase productivity resulted in relatively lower per capita income among agricultural households. Thus, the benefits of economic growth may not have reached the poor. Data also indicate that among the categories of factor income, net operating surplus has a higher share in total GDP than compensation of employees. The shares also remained fairly constant from 2004–2009, an average of 54 percent for net operating surplus and 28 percent for compensation of employees. Moreover, the investmentGDP ratio declined continuously between 2000 and 2009. This implies that firms did not translate the stable profit stream into investments and therefore a significant portion of increased output growth did not accrue to households. The results of the decomposition analysis underscore that economic growth is a necessary but not sufficient condition for poverty reduction. At the same time, effective redistributive efforts are critical because the absence of these interventions further worsen poverty in the extreme case where there is no real income growth as what happened in 2003–2006. Therefore, policies that aim to effectively reduce poverty must complement economic growth with effective and targeted redistributive efforts. Meanwhile, high population growth rate has always been another dimension left unsolved in the fight against poverty. At the current rate, an estimated 1.7 million mouths to feed are added to the population every year. It has been shown empirically that poverty incidence is higher among larger-sized families. As long as population continues to grow at this high rate, efforts in reducing poverty will be overshadowed and improving the well-being of the poor will continue to be just another goal in the government’s development plans. ○

Continued on page 20


DEVELOPMENT RESEARCH NEWS

15

January - February 2011

Financing development in a postcrisis world By Dennis M. Arroyo*

H

ow could the world community finance development in a milieu much scarred by the Global Financial Crisis? Many papers on this concern were presented in the 12th annual conference of the Global Development Network (GDN) held at Bogota, Colombia. The Universidad de los Andes hosted the conference which lasted from January 13– 15, 2011, with President Juan Manuel Santos of Colombia and former President Ernesto Zedillo of Mexico formally opening the event. The gathering also honored winners of its annual competition on research and development projects. “Innovation is needed and options are on the table to help make the financial system work for development…We need to understand clearly the feasibility of the proposals,” stated Gerardo della Paolera, GDN President, and George Mavrotas, GDN Chief Economist, in their opinion piece. Discussions took off from the following backdrop. While the worst of the Global Recession had passed, the crisis left many nations in a deep bind. Enormous deficit spending morphed into a debt burden for the western world. As such, many donors could not fulfill their aid commitments. Flows of external capital were very volatile, and they tended to concentrate on certain emerging markets. *Dennis M. Arroyo is a Fellow at the Social Weather Stations.

The 12th Annual Conference of the Global Development Network (GDN) was held at Bogota, Colombia on 13–15 January 2011. Attending the Opening Ceremony are (L-R): Colombian Finance Minister Juan Carlos Echeverry; GDN Board of Directors Chairman Ernesto Zedillo; Colombian President H.E. Juan Manuel Santos; Universidad de los Andes Colombia President Carlos Argulo Galvis; and GDN President Gerardo della Paolera. Source: www.gdnet.org.

Remittances and private capital flows were falling for some nations. The development finance system had become more complex: donors proliferated, and a new group of donors with new aid modalities emerged. Fragmentation problems also remained in the aid scene. How then could the nations of the world finance development in this setting? How


DEVELOPMENT RESEARCH NEWS

16

January - February 2011 tem. Roberto Steiner, Director of Fedesarrollo in Colombia, said that developed nations should comply more strictly with the rules set by the IFIs.

Was aid fading away in importance, dwarfed by other financial flows? Not quite in the Asian case, according to Prof. Kaoru Hayashi of Bunkyo University, Japan. Photo: Ma. Aileen Garcia

could they still support the Millennium Development Goals (MDGs)? The GDN Conference thus scanned the environment and looked into various problems and solutions. What follows is a tour of the issues discussed. Rich supply of finance, but reckless lending Take the issue of supply of finance—that in itself is not a problem. According to Francois Bourguignon, Director of the Paris School of Economics, financing has become widely available for the developing world over the past few years. The main concern now was how to allocate it: find the most appropriate finance scheme to get nations to avoid the poverty trap and to maximize their social return. Indeed, the rich supply of finance could be problematic in its own way. Asli DemirgucKunt of the World Bank deplored the phenomenon of reckless expansion of access to financing. An “important lesson from the recent crisis,” she noted, was that “irresponsible expansion of access can be very costly.” For the sake of sustainability, the State must formulate and enforce regulation, she added. The international financial institutions (IFIs) in turn would be crucial in the regulation and sustainability of the financial sys-

Foreign aid still matters An issue related to supply was official development assistance (ODA) or foreign aid. Was aid fading away in importance, dwarfed by other financial flows? Not quite in the Asian case, according to Prof. Kaoru Hayashi of Bunkyo University, Japan. Speaking in the session handled by the East Asia Development Network, he noted that aid had lost its significance only in a few nations like Thailand and Malaysia. The importance of ODA in Asia differed according to the level of development of the recipient countries. Aid was much needed in Vietnam, Laos and Cambodia. To a lesser degree, it was still needed in the Philippines and Indonesia. Hayashi elaborated on the subject via his model of how countries graduated from aid. Aid is really about geopolitics The economists in the conference benefitted from a political perspective on the issue. Prof. Helen Milner of Princeton probed ODA through the lenses of geopolitics. She stressed that aid was an integral part of countries’ foreign policy. For example, France and Japan remitted the most aid to former African colonies and to Asia due to their geopolitical interests. Changes in the global political arena were now transforming aid, she reported. An ‘international aid regime’ was created by the ‘traditional donors’ (USA, Japan, Western Europe) during the last two decades via agreements such as the DAC principles, the Paris Declaration, the Monterrey Consensus, the MDGs, and the Accra Agenda. But new donors emerged like China, Brazil, and India, and they did not seem to comply with these guidelines. Another speaker challenged the stereotype of the emerging donors. “Emerging donors have tended to be portrayed as blatant, unrestrained seekers after their own short-term interests, in stark contrast to traditional donors who have elaborated an edifice of institutional self-restraint,” noted Jin Sato of the University of Tokyo. However, he found that


DEVELOPMENT RESEARCH NEWS

17

January - February 2011

the new donors bore many similarities with the old ones. And from the point of view of the recipients, the emerging set provided healthy competition to the traditional donors. Getting creative in raising funds Despite the ample supply of finance, creative measures were mentioned for raising more funds for development. Ernest Aryeetey of the University of Ghana discussed a menu of innovative options. An environmental tax to address the true costs of externalities, for one, could yield some $50 billion. In the process, the world would enjoy a double dividend: lower carbon emissions and more funding for the MDGs. Second was the famous Tobin tax, or a levy for global currency transactions. The interest here was more for raising revenues than for lowering volatility. The Tobin tax should net $28 billion. Third, reintroduce a development focus to the Special Drawing Rights (SDRs) of the International Monetary Fund (IMF). That should yield $38 billion, but the move would raise a few questions: who would pay for the interest for SDRs, and what would the effects be on the macro economy? Fourth, there was the British suggestion to frontload aid into a fund. Fifth, there were huge private donations available for development goals. The challenge then was how to increase private aid while ensuring that it conformed to what governments wanted. Sixth, a novel alternative was the lottery, a fast-growing phenomenon, which might yield $6 billion. The trick was to refocus lotteries toward global events. It might be possible to thus ride on national lotteries. Remittances are helpful, but channel them to investment Finally, in Aryeetey’s list, there were remittances from migrant workers. These showed much potential, as rising remittances appeared correlated with falling poverty. The concern here was that remittances were often channeled to household consumption

Professors Alvin Ang and Jeremaiah Opiniano, from the University of Santo Tomas Research Cluster on Culture, Education, and Social Issues, were declared the winner of the Japanese Award for Outstanding Research on Development for their proposal on how to invest overseas remittances. Source: www.gdnet.org.

and so, one should find ways to redirect the flows into investment. Worker remittances helped fund growth, according to a study on Asian countries over the period 1988–2007. “A 10 percent increase in remittances as a share of gross domestic product (GDP) leads to a 0.9–1.2 percent increase in GDP growth,” reported Guntur Sugiyarto of the Asian Development Bank. How can remittances be turned to investment rather than to consumption? To address that, a team from the University of Santo Tomas in Manila proposed a project that would uncover and publish local investment opportunities in the migrant workers’ home provinces. The proposal won in the GDN competition for development projects. Must increase access to finance Access to finance was discussed as well. Guillermo Perry, Colombia’s former Minister of Finance, said that financial development lowered inequality as financial services reached small firms as well as large, poor households as well as rich. Perry noted that the usual indicators of financial access such as the size of the financial sector or the size of capital inflows might be misleading. A huge financial sector might just be funneling credit to just a few firms.


DEVELOPMENT RESEARCH NEWS

18

January - February 2011

Moreover, noted Perry, opening up to international financial markets did not help reduce inequality nor fuel growth because sometimes, only the large firms had access to financial services. Financial integration could indirectly increase access if it helped develop a broad domestic financial system. However, integration depended on the quality of the existing financial institutions and the strength of the domestic financial sector when economies were opened. Hence, premature financial integration might lead to a smaller financial sector.

poorer clients. The social transfers and financial instruments should complement each other to improve the saving behavior of low-income groups.

Community banks could be helpful in expanding access, added Iftekhar Hasan, Director of the International Center for Financial Research. They brought financial services to small and medium enterprises (SMEs) and loans to various population groups. Using statistical analysis, Hasan found that “relatively healthy small banks are associated with better overall economic performance.”

However, speakers posed a few caveats. One problem was that clients faced high levels of uncertainty due to complex procedures and high operating costs, according to Prof. Victor Murinde of Birmingham University. “The regulations play a vital role in the development of the microfinance sector and can determine the nature of the social protection provided by the sector,” he said.

Using cash transfers to enhance financial access An interesting means to improve people’s access to finance was floated by Fabrizio Coricelli of the Paris School of Economics. It was to connect social cash transfer programs (like conditional cash transfers) to financial services. That would slash administrative costs for the banks, thereby making it more attractive for them to do business with the

The impact of microfinance also varied by subpopulation, said Dean Yang, Associate Professor at the University of Michigan. His research on microfinance in South India found that those who already had businesses invested in durables and scrimped on their consumption. But those who did not have nor want a business tended to spend more on consumption. Yang also saw the need to explore other kinds of financial services to cater to a wider segment of society. Savings schemes, insurance, and remittances might offer opportunities.

Microfinance can use some tweaking Microfinance is a key intervention for widening access to finance. The conference has noted its ability to raise the incomes of the poor, to empower them, and to give them more freedom. It offers social protection and stops people from falling back into poverty traps.

The state should also take care about imposing its heavy hand on microfinance. This lesson was learned from the present crisis in microfinance in the Indian state of Andhra Pradesh. An enforced process of lending resulted in growing numbers of borrowers being unable to repay their loans. According to Prof. Stefan Klonner from the South Asia Institute, the government thus mandated a moratorium on repayments in October 2010. Major microfinance companies reacted by halting new loans and choosing to operate instead in other states of India. Microfinance is a key intervention for widening access to finance. The conference has noted the ability of microfinance to raise the incomes of the poor, to empower them, and to give them more freedom. Source: www.gdnet.org.

The papers and presentations can be downloaded at the website of the Global Development Network: www.gdnet.org. DRN


DEVELOPMENT RESEARCH NEWS

19

January - February 2011

PIDS Policy Notes in 2010 The Policy Notes are observations/analyses written by PIDS researchers on certain policy issues. The treatise is holistic in approach and aims to provide useful inputs for decisionmaking. The Notes are circulated to the highest levels of decisionmakers in the country. The following titles were released in 2010:

PN 2010-01 How Do Philippine Provinces Fare in Terms of Human Development? PIDS Research Information Staff

Lever for Better (or Worse) Equity in the Future Orbeta, Aniceto Jr. C.

PN 2010-02 Why Cement Prices Remain High despite Zero Tariffs Aldaba, Rafaelita M.

PN 2010-10 (Policy Brief) Localizing Child Protection: Does the Local Council for the Protection of Children Matter? Cuenca, Janet S.

PN 2010-03 Examining Recent Trends in Poverty, Inequality, and Vulnerability Albert, Jose Ramon G.,Ramos, Andre Philippe

PN 2010-11 Addressing Constraints to Agricultural Finance to Boost Food Production Llanto, Gilberto M.

PN 2010-04 (Policy Brief) Hilots Getting on Board Facilitybased Deliveries Lavado, Rouselle F.

PN 2010-12 Weather and Climate-related Disasters: the Cost of Inaction Israel, Danilo C.

PN 2010-05 (Policy Brief) Is PhilHealth’s Sponsored Program Reaching the Poorest of the Poor? Lavado, Rouselle F.

PN 2010-13 Investing in Local Roads for better Mobility of People, Goods, and Services Llanto, Gilberto M.

PN 2010-06 (Policy Brief) Children Suffer from Multiple Dimensions of Poverty Reyes, Celia M,Tabuga, Aubrey D. PN 2010-07 (Policy Brief) A Glimpse at the School Dropout Problem Orbeta, Aniceto Jr. C. PN 2010-08 (Policy Brief) Proliferation of Street Children: a Threat to the MDGs Cuenca, Janet S. PN 2010-09 (Policy Brief) Schooling Disparities: an Early Life

PN 2010-14 Supporting Innovative Small and Medium Enterprises: New Ideas from Taiwan and Korea Llanto, Gilberto M. PN 2010-15 How Are DOH Hospitals Funded? Lavado, Rouselle F., PN 2010-16 Understanding the Recent Rise in Poverty Incidence: a Look at Growth and Income Distribution Effects Tabuga, Aubrey D.,Mina, Christian D.,Reyes, Celia M.,Asis, Ronina D.,Datu, Maria Blesila G.


20

DEVELOPMENT RESEARCH NEWS

STAFF BOX

January - February 2011

DEVELOPMENT RESEARCH NEWS is a bimonthly

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January - February 2011

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Box 1. Poverty.....from p. 14 Moreover, more effective interventions are urgently needed. There has not been a large-scale poverty reduction program implemented during the period 2003–2006, so to speak. The Kalahi Prototype Projects, which focused on asset reform, improvement of basic amenities, resettlement, and help for conflict areas, are mostly relevant only to the chronic poor. The poor at any point in time are not a homogenous group; they consist of the chronic poor (those who are consistently poor) and the transient poor (those who were previously nonpoor). There are significant movements in and out of poverty, suggesting the vulnerability of certain segments of the population to shocks. This highlights the importance of safety nets to help vulnerable populations from falling into poverty. This suggests that different strategies should be implemented toward helping the chronic poor and the transient poor. In summary, what matters in poverty reduction is not just economic growth but the nature of expansion that takes place. To effectively reduce poverty, an inclusive growth coupled with effective redistributive efforts is necessary. Increasing rural incomes by improving nonfarm income opportunities is a key to reducing poverty in the rural areas. Ensuring income security of families for them to weather effects of economic shocks is one important policy option. Provision of safety nets like health and crop insurance will help the poor from falling deeper into the poverty trap and the nonpoor into becoming poor in times of crises. DRN Source: Reyes, C.M., C.D. Mina, A.D. Tabuga, R.D. Asis, and M.B.G. Datu. 2010. Understanding the recent rise in poverty incidence: a look at growth and income distribution effects. PIDS Policy Notes No. 2010-16. Makati City: Philippine Institute for Development Studies.

The Philippine Economy in 2010 and Prospects for 2011  

15 Financing development in a postcrisis world P HILIPP I NE I NSTITUTE FOR D EVELOPMENT S TUDIES Josef T. Yap* The bottomline is that all t...

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