MANILA - A slower economic growth rate in 2010 will worsen poverty and existing development challenges in the Philippines, according to a recently released study by state-owned think tank Philippine Institute for Development Studies (PIDS).

The study, titled “Impact of the Global Financial and Economic Crisis on the Philippines,” authored by PIDS president Josef Yap, senior research fellow Celia Reyes and supervising research specialist Janet Cuenca, stated that if by 2010 growth recovers the social impacts will not be as large, but if economic growth will be slower, social impacts will be far and wide.

The study said due to the economic crisis alone, economic growth between 2009 and 2011 will average 5.5 percent. In fact, the paper stated that economic growth during the period 2008 to 2010 will average between 2 percent to 2.5 percent, after posting a robust 5.8 percent from 2005 to 2007.

This does not bode well for eradicating poverty. The Manila-based multilateral agency Asian Development Bank (ADB) has been saying, since 2004, that a sustained gross domestic product (GDP) growth of 7 percent to 8 percent for at least 10 years is necessary to post significant gains in eradicating poverty in the Philippines.

“The results so far suggest that if the economy recovers by 2010, the social impacts would not be very large. However, if the economy continues to slow down and even contract, then the economic impact would become more widespread, and lower school participation rate, lower health status and greater poverty should be expected,” the study stated.

“The crisis will definitely lead to lower economic growth during the period 2009-2011 compared with the 5.5-percent average assumed in the ‘low’ growth scenario,” the study added.

To cope with the negative repercussions of the crisis, the study reported that households have resorted to varying their spending pattern or the sources of financing for their expenditures.

A Community-Based Monitoring System survey was conducted for the study in 13 sentinel sites and includes seven barangays in the Philippines. These were classified into urban National Capital Region (NCR), urban outside NCR, and rural areas. 

The sample consists of 2,802 households representing a population of 11,935 persons.

The survey was conducted between March and July of 2009.

The results showed that around 22 percent reduced their spending and saved money, 11 percent used their savings to smooth consumption, 5 percent pawned assets, 2 percent sold assets, 36 percent borrowed money and 5 percent defaulted on debts.

“Households in the NCR tended to rely more on borrowing, pawning and selling of assets while those households outside NCR tended to rely more on using savings and defaulting on debts, in addition to borrowing money to tide them over,” the study stated.

Due to the lack of funds, households transferred children from private schools to public schools, while some withdrew their children from school. Households also reduced the allowance of the students, or resorted to secondhand uniforms, shoes and books.

The study said that adjustments were made by more urban households in the NCR and rural households compared with urban households outside the NCR. Around 25.2 percent of urban households in the NCR reduced the allowance of members who are studying.

Some 48.2 percent of rural households did the same thing while only 13.5 percent of urban households outside the NCR had a similar response.

The study said that one reason for this may be lower cost of living requirements in rural households than urban households.

In health, the study said the most common response of households was to resort to self-medication, or shifting to government health centers and hospital, buying generic drugs or using herbal medicine which are cheaper.

Unfortunately, the study said there is a possibility that some of these coping strategies may negatively affect the long-term health status of the affected households.

Meanwhile, the results showed that the direct effects of the crisis on households were minimal. The study stated that not too many households with overseas Filipino workers (OFWs) were affected by the crisis, saying that only 16 percent of OFW households or 162 households who reported that an OFW returned, came back to the Philippines due to retrenchment.

In terms of domestic employment, around 77 households reported job loss of at least one of their members representing 2.8 percent of the 2,802 households surveyed.

Around 2.5 percent of households had a member who experienced a reduction in wages in the past six months.

Some 2.2 percent of households surveyed reported reduction in working hours, and less than half of a percent of households reported reduction in benefits during the past six months.

Meanwhile, in terms of domestic entrepreneurial activities, only 2 percent of surveyed households engaged in new entrepreneurial activities in the past six months totaling to 53 new businesses set up in all the barangays.

However, some 46.4 percent of the households surveyed derived income from at least one entrepreneurial activity and eight of these, or 0.6 percent, closed their business as a result of the economic downturn.