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Euromonitor International’s Philippines Economy, Finance and Trade Country Briefing focuses on the country that was once called ‘the sick man of Asia’ but has emerged as one of the fastest growing economies in the region. In recent years, the country has been attracting large foreign investments, via its status as the global hub for business process outsourcing (BPO), thanks to its large pool of educated and fluent English-speaking populace. Additionally, a young demographic, a huge foreign exchange reserve, prudent economic reforms and a relatively stable political environment adds to its charm, making it an appealing destination for companies that are eyeing to set up businesses. However, despite the ongoing economic advancements, high poverty level prevails, which is indeed a major obstacle the country needs to overcome to become the next Asian Tiger economy. Although previous governments failed in addressing this issue, President Rodrigo Duterte’s stringent poverty reduction reforms, if implemented properly, should help alleviate lingering poverty.
Despite various pro-business reforms and increased infrastructural advancements that have helped buoy FDI and economic growth, there has been not much of a change in the Philippines’ poverty levels. The proportion of population living below the national poverty line stood at 25.8% in 2005, and has reduced only marginally to 24.6% in 2015. This figure is still one of the highest in the region. This can be attributed to high income inequality along with underemployment and growth being limited to few sectors such as the real estate, retail and BPO, leaving a sizable share of young Filipinos jobless. In addition, frequent natural catastrophes added to the country’s woes by further pushing people below the poverty line. On the whole, benefits from higher economic progression did not trickle down to the deprived. Nonetheless, since taking office in June 2016, President Rodrigo Duterte has vowed to reduce poverty to 17.0% of total population and transform the Philippines into an upper middle-income nation by 2022. To attain this, apart from concentrating on pro-business reforms, the new government’s economic agenda focuses on providing aid to small farmers (as the majority of the Philippines’ labour force is employed in the agriculture sector) so that they are able to boost productivity and market access. Additional poverty reduction actions comprise of tweaking the income tax system to make it more progressive and the expansion of the conditional cash transfer (CCT) scheme. With many more poverty reduction programmes in the pipeline, the government at present seems to be on the right trail. However, the success of this will clearly depend on the implementation of the aforementioned reforms and those in the pipeline.