The Philippine Development Plan for 2023-2028 unveiled by the National Economic and Development Authority (NEDA) at the start of the Marcos Jr. administration in July 2022 contained an enticing target: to reduce poverty incidence in the country to single-digit level by 2028.
Who wouldn’t want to see a drastic cut in the number of poor Filipinos who constitute a sizable chunk of the total population?
The question, however, is whether this is a realistic target.
A prominent economist believes this is a realizable goal, but subject to certain conditions, chief among which is that the Gross Domestic Product (GDP) should grow to at least 8 percent.
Bernardo Villegas, Director for Research of the University of Asia and the Pacific (UA&P) Center for Research and Communication, is confident that if the economy maintains its six to seven percent growth trajectory over the next 4 to 5 years, this should be enough to achieve single-digit poverty incidence by 2028.
In the second quarter of this year, the Philippine economy expanded by 6.3 percent, driven by increased government spending and strong investments, marking the fastest expansion seen in four quarters. This brought average first-semester GDP growth to six percent, well within the government’s six- to seven-percent target for this year.
At the same time, the poverty rate declined to 15.5 percent in 2023 from 18.1 percent in 2021 as the average income of a Filipino increased.
Villegas cites three strategic areas crucial for economic expansion.
One, the government must rectify the neglect of rural and agricultural development over the years. Agricultural productivity should grow by three to four percent every year. But our agricultural production, which contributes about a tenth to economic output, has actually declined by 3.3 percent in the second quarter due to the drop in the value of crops and livestock production. This was also the biggest drop since the 3.4 percent contraction in the first quarter of 2021.
Second, the government should increase the investment to GDP ratio.
The usual investment to GDP ratio in East Asia is between 25 to 40 percent. Korea has 40 percent, China has 40 percent. The Philippines stands at a low 20 to 22 percent. The economy should be able to attract $15 billion to $20 billion worth of foreign direct investments (FDIs) by 2028. Government data show that FDI net inflows for the first seven months rose by 7.5 percent to $5.256 billion from $4.888 billion a year ago. With this, the central bank expects to record FDI net inflows of $10 billion by the end of the year.
And third, to boost economic development efforts, the Marcos administration should conduct an honest-to-goodness campaign to curb corruption.
“Corruption leads to leakage of P800 billion a year,” Villegas said. “If we can reduce that, then that will add up to the 8 percent growth.”
Can the Marcos Jr. administration hack it in the remainder of its six-year term?
