How COVID-19 has Affected Poverty in the Philippines

COVID-19 Affected Poverty in the Philippines
The COVID-19 pandemic could push an additional 207 million people into extreme poverty based on predictions, bringing the total to over 1 billion by the year 2030, according to research from the United Nations Development Program (UNDP). COVID-19 has affected poverty in the Philippines, an archipelagic country in Southeast Asia, with no exception. The COVID-19 pandemic is significantly impacting the Philippines when it comes to the economy, jobs and poverty incidence. Here is some information about the effects of COVID-19 on poverty and how the government of the Philippines plans to address them.

Poverty Reduction

Prior to COVID-19, the economy of the Philippines made progress in delivering national, inclusive growth, as indicated by an impressive decline in poverty rates. Poverty rates declined from 23.3% in 2015 to 16.6% in 2018. The Philippines expected this trend to continue and impact household incomes throughout the country in a positive way, particularly wages from those of lower-income groups.

The COVID-19 pandemic had negative consequences for poverty reduction in the Philippines. The World Bank projected that the Philippines’ GDP would shrink by 8.1 % in 2020, from the previous forecast of 6.9%. Rong Qian, a senior economist with the World Bank, attributed the downgraded 2020 forecast to the GDP contraction of 11.5% during the third quarter of 2020. The third-quarter contraction came as a string of typhoons hit the country from October to November 2020.

Economic Effects of COVID-19

The COVID-19 pandemic has resulted in a contraction of economic growth driven by significant declines in consumption and investment growth. The pandemic has also led to profound disruptions in areas like manufacturing, agriculture, tourism, construction and trade throughout the country. This feeds into how COVID-19 affected poverty in the Philippines on different levels. The impact on the country’s economy has been severe, leading to the lowest consumption growth in over three decades. The effects on the economy began to take place in February 2020 with a considerable decline in the arrival of tourists, falling by 41.4%. Coupled with this, private consumption growth declined to 0.2% in the first quarter of 2020 from 6.2% in the previous year. Both the hotel and restaurant industries suffered considerably, shrinking by 15.4%.

The economic collapse in 2020 has also led to high unemployment throughout the country. The economy will lay off people with service jobs in several different fields. Many others will be on unpaid leave from their companies. Employment recovery can lag the country’s economic growth by six to 18 months. Estimates have determined that unemployment will remain at elevated levels, moving from 12.4% at the end of 2020 to 9% by June 2021.

Possible Financial Support

Prior to COVID-19, the government of the Philippines reduced poverty from 23.3% in 2015 to 16.6% in 2018. This was a result of steady economic growth, the creation of new jobs and social assistance programs. The COVID-19 pandemic will likely reverse the recent gains in addressing extreme poverty. COVID-19 related restrictions have cut off income for seasonal workers, entrepreneurs and low-end service jobs. They were the country’s drivers of poverty reduction in recent years. Achim Fock, the World Bank Acting Country Director for Brunei, Malaysia, the Philippines and Thailand hopes that offering “financial support to affected firms, especially small and medium enterprises, to prevent job losses and bankruptcy, can help ensure that the recent shocks do not cause permanent damage to the country’s productive capacity and human capital.”

Social Amelioration Program

The government of the Philippines introduced a social protection program during the country’s quarantine to address how COVID-19 affected poverty in the Philippines. The government provided emergency subsidies through its Social Amelioration Program (SAP). SAP covered 18 million poor households, making up 70% of the entire population that it granted coverage to. SAP beneficiaries include 4.4 million households enrolled in the safety net program Pantawis Pamilyang Pilipino Program along with other vulnerable Filipinos such as informal workers.

Projected Improvement

Economic managers assert the Philippines will remain under a less restrictive quarantine throughout the beginning of 2021. They are hoping the economy will open 100% once vaccination levels reach at least 60% of the population. The growth of the economy could still improve and poverty could reduce in the coming years as long as there is a rebound in consumption, a significant push in public investment and great strides in the recovery of global growth. Predictions have stated that economic growth will return to at least 6% in 2021 and 7% in 2022.

Elisabeth Petry
Photo: Flickr