PHL on track to reach upper middle-income status

The Philippines is still on track to become an upper middle-income economy next year as long as the growth momentum continues, National Economic and Development Authority (NEDA) Secretary Arsenio M. Balisacan said.

“If growth this year is not dampened, [we] should be on track,” he told reporters on the sidelines of the BusinessWorld Economic Forum on Wednesday.

The administration of President Ferdinand R. Marcos, Jr. has set a target for the Philippines to reach upper middle-income status by 2025. An upper middle-income country means having a gross national income (GNI) per capita income range of $4,466 to $13,845.

The World Bank currently classifies the Philippines as a lower middle-income country with a GNI per capita of $3,950.

Mr. Balisacan said gross domestic product (GDP) growth must average 6.1% in the next three quarters to hit the government’s 6-7% growth target.

The Philippine economy expanded by 5.7% in the first quarter, slightly faster than 5.5% in the previous quarter.

“There are still three quarters out there. The good thing is inflation is manageable now. Even though we expected worse for the April [print,] it turned out better than expected. So, we hope that will continue,” Mr. Balisacan said. 

Inflation accelerated for a third straight month to 3.8% in April from 3.7% in March. Inflation averaged 3.4% in the January-April period, below the central bank’s 3.8% full-year forecast.

In the coming months, NEDA expects economic growth to be favorable as the Bangko Sentral ng Pilipinas (BSP) was “less hawkish” in its last policy meeting and has signaled a possible rate cut in August.

“If the BSP is not going to raise any further the interest rate, and in fact, the governor has indicated that they might start loosening, so that will improve expectations, and expectation drives consumption,” Mr. Balisacan told reporters.   

Last week, the Monetary Board kept its target reverse repurchase rate unchanged at a 17-year high of 6.5%.

The waning El Niño dry pattern and expected easing of rice prices may also improve the country’s GDP growth prospects, according to the NEDA chief.

“Since El Niño is tapering, we expect that world prices for commodities, including rice, are expected to moderate and start falling, especially for rice,” Mr. Balisacan said.

Rice inflation, which contributes nearly half to the overall inflation print, accelerated by 23.9% in April. However, this was slower than 24.4% in the previous month.

Security Bank Corp. Chief Economist Robert Dan J. Roces said that achieving upper middle-income status “is not just about hitting a specific threshold, but about building an equitable economy.”

“While the Philippines has made significant progress in recent years, driven by factors such as a young population, a thriving services sector, and increasing foreign investments, it is also crucial that the benefits of economic growth are more evenly distributed,” Mr. Roces said.

To increase its GNI per capita, the country must also ensure competitiveness across all sectors, address infrastructure gaps and challenges, and improve governance in all institutions, Mr. Roces said.

Since 1987, the Philippines has been classified as a lower middle-income economy, according to the World Bank’s earliest records.

“While the Philippines has strong growth prospects that suggest it could reach upper middle-income status in a few years, several challenges — like a potential global economic slowdown, infrastructure and education deficits, and the impact of natural disasters — could impede this goal,” Jonathan L. Ravelas, senior adviser at professional service firm Reyes Tacandong & Co., said.

The World Bank forecasts that the Philippines would be the fastest-growing economy in Southeast Asia this year with a 5.8% growth estimate.

For 2025, the multilateral lender hiked its growth forecast for the Philippines to 5.9% from 5.8%.

However, the World Bank’s growth forecasts for the Philippines still fall behind the government’s 6-7% target band.

Mr. Balisacan cited the need to “diversify” the country’s growth sources to ensure inclusive and sustainable economic expansion.

“So, what are the growth drivers? We are pushing on all fronts. Opportunities across the entire economy abound in enabling public infrastructure such as energy, water, and physical and digital connectivity, as well as social infrastructure such as schools, healthcare facilities, and housing,” he said.

The government is also looking to expand growth outside the National Capital Region (NCR), he added.

Source: Business World

Philippines records 22.4% poverty rate in first half

The Philippines’ poverty rate for the first half of 2023 decreased to 22.4% from 23.7% in the same period of 2021, the local statistics agency said.

The poor population declined by 895,260 to 25.242 million from 26.137 million in the January to June period of 2021, preliminary data from the Philippine Statistics Agency (PSA) showed. The poverty rate is a statistical measure that assesses the proportion of the population with income falling below the per capita poverty threshold.

The subsistence incidence, or share of the total population with per capita income lower than the per capita food threshold, fell to 8.7% from 9.9% two years ago.

This brings the estimated number of Filipinos whose income was not enough to buy basic food needs to 9.795 million, which is lower than the figures of 10.945 million in 2021 and 9.031 million in 2018, respectively.

National Economic and Development Authority Secretary Arsenio M. Balisacan said that the full reopening of the economy and the lifting of the pandemic restrictions since 2022 have helped the country recover from the impact of the public health crisis, leading to improved labor market conditions.

However, inflation partially offset the positive income growth on poverty, he noted.

“Had the inflation rate for the bottom 30 percent been at 4% in 2022, assuming the same increase in income, poverty incidence among the population would have been about 16% instead of the observed 22.4%,” said Mr. Balisacan.

Although the poverty threshold in the first semester of 2021 to 2023 rose by 14.2%, income increased substantially higher, National Statistician Claire Dennis S. Mapa said.

Poverty incidence across the country fell in 14 out of 17 regions in the first semester of 2023.

The only three regions that posted an increase were Western Visayas, with a poverty incidence of 26% (up from 25.3%); Zamboanga, with a poverty incidence of 38.2% (up from 37.4%); and Davao, with a poverty incidence of 27.2% (up from 19.4%).

“The decline in Philippine poverty in the first half of 2023 likely stemmed from economic recovery, government programs, and a comparison with a high 2021 baseline,” said Security Bank Corp. Chief Economist Robert Dan J. Roces in a Viber message.

Similarly, China Banking Corp. Chief Economist Domini S. Velasquez said in a separate Viber message that the improvements in economic activity “have led to better employment figures, thereby positively impacting Filipino families.”

The subsistence incidence among families recovered to 5.9% from the 7.1% in 2021.

Meanwhile, the poverty line or poverty incidence threshold, which measures the minimum amount needed by a family to supplement basic food and non-food needs, reached P13,797 per month for a family of five. This is higher than the P12,082 in 2021.

On the food threshold, P9,550 per month for a family of five was needed on average to meet basic food needs. This is higher by 18.10% from the P8,393 in 2021, as food-driven inflation pushed prices of commodities higher.

Despite the decline across poverty metrics, the figure remained far from the government’s goal of bringing down poverty to a single digit by 2028.

Moreover, Mr. Roces said that “the rapid decline might not be sustainable without long-term economic improvements.”

Inflation and global uncertainties remain a threat to the progress in lowering poverty, he also said.

“To achieve the ambitious target set by the Marcos administration of reducing poverty incidence to 9.0% by 2028, it is evident that more concerted efforts are needed,” Ms. Velasquez said.

Poverty data by the PSA were derived from the Family Income and Expenditure Surveys conducted every two years.

Source: Business World

Compensation top hurdle for OFWs' return to PH

More overseas Filipino professionals are looking to relocate back home within the next five years as they look to care for aging parents and be closer to family, according to a survey by a global recruitment specialist.

Results of a recent poll by Robert Walters showed that 62 percent of overseas Filipino professionals are keen to relocate back home within the next five years due to personal reasons, higher than the 54 percent registered in the 2021 survey.

Robert Walters noted that the disparity in compensation and benefits offered locally and a perceived lower standard of living conditions are however making these professionals think twice about relocating back.

According to the survey, 56 percent of those who are willing to come back cited the desire to take care of their aging parents and family as the top reason for wanting to return to the Philippines. This was followed by those (44 percent) who retained a strong emotional, social and cultural connection to the country.

In addition, 65 percent of overseas Filipinos surveyed said they considered the current economic situation as a factor when deciding whether to relocate back to the Philippines.

Survey results also showed that 46 percent of the respondents who expressed a positive outlook on returning cited confidence in the Philippines’ economic stability, growth prospects, and opportunities for entrepreneurship or business projects as encouraging factors for their desire to return.

In contrast, 30 percent of overseas Filipino professionals expressed no intention of returning to the Philippines.

Survey findings also showed that 38 percent of the respondents expressed reluctance to return due to economic concerns.

“A significant majority of them (80 percent) believe that the economy is more stable overseas. Other factors contributing to this hesitancy included a more favorable salary-to-cost-of-living ratio abroad (60 percent) and better government initiatives and incentives in foreign countries that are provided (47 percent),” Robert Walters said.

Survey results also showed that salaries in the Philippines continue to be a significant concern, with 75 percent of respondents hesitant to return emphasizing the differences in compensation and benefits as a major issue, and 56 percent of them highlighting a lower standard of living in the Philippines, based on public facilities, security concerns and community resources.

In addition, 33 percent of all respondents said they would only accept a Philippine compensation package that is market-aligned for their experience and the role being offered.

As the number of overseas Filipino professionals returning home continues to grow, Robert Walters Philippines director Alejandro Perez-Higuero said this presents a valuable opportunity for local employers.

“These returning professionals often possess enhanced technical skills and a more adaptable mindset, honed through their experiences in diverse international environments. Their agility in responding to the changing business landscape can provide a significant advantage to organizations as they are able to come up with innovative strategies to help achieve business objectives,” Perez-Higuero said.

“As business priorities undergo continuous transformations, it becomes imperative to address the ongoing shortage of highly skilled talent in the country. Hiring managers should explore creative strategies to secure talent that aligns with their organisation’s needs,” he added.

Robert Walters said they offer a solution to identify and secure Filipino talent returning from overseas, catering to specific timelines through its Balik Bayan program.

“We also provide support in managing candidate expectations, ensuring a seamless recruitment from start to finish. This program serves as a valuable resource connecting returning Filipino professionals with suitable job opportunities, aligning their skills with the needs of local businesses,” he added.

The poll was conducted among over 120 overseas Filipino professionals across various industries, including banking and financial services, information and communication technology, consumer and retail, manufacturing, digital and e-commerce.

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Source: Robert Walters Philippines