RP unemployment, poverty higher in 2009–WB

Friday Jan 02nd

RP unemployment, poverty higher in 2009–WB
Top News
Written by Cai U. Ordinario / Reporter
Thursday, 11 December 2008 00:24

AS the effects of the global economic slowdown in the Philippines and in the world reach their height in 2009, the World Bank (WB) expects more Filipinos will become unemployed or underemployed and fall below the poverty line next year.

In a briefing after the presentation of the results of the latest East Asia and Pacific Update, World Bank senior economist Eric Le Borgne said the Philippines should expect higher unemployment and underemployment rates, as well as poverty-incidence level in 2009.

Unemployment in the July round of the Labor Force Survey periodically released by the National Statistics Office was pegged at 7.4 percent, and underemployment at 21 percent. The 2006 poverty-incidence level in terms of population, according to National Statistical Coordination Board data was pegged at 32.9
percent.

The WB, in an earlier report, said the Philippines’ poverty-incidence level was at 22.6 percent in 2006
at a poverty threshold of $1.25 a day.

However, Le Borgne said due to the “high uncertainty” of the situation next year, he could not give an estimate of how high the country’s unemployment and underemployment or the poverty-incidence level will be.

“Employment prospects are tightening, unemployment and underemployment could rise significantly and the strong flow of remittances will likely be more challenging to sustain,” Le Borgne said. “Escaping poverty will be extremely difficult in 2009.”

Le Borgne said the increase in unemployment and underemployment might be rooted in the expected slowdown of new investments next year and the possibility that more overseas Filipino workers (OFWs) will be laid off from their jobs abroad and be forced to return home in 2009.

With this, World Bank East Asia Region lead economist Ivailo Izvorski said the nominal amount of remittances might decline. But he expects migrant workers, especially OFWs, to struggle to maintain the steady flow of remittances to their families in the Philippines.

Izvorski said that in terms of remittance flows, the Philippine experience is “paradoxical” and goes against the general trend. He said that at a time when remittance should have slowed down, the government announced a 17-percent growth in OFW inflows.

“Remittances will be slow but migrant workers will struggle to maintain [inflows] steady,” Izvorski said in a videoconference with reporters from East Asia.

Vikram Nehru, World Bank Poverty Reduction, Economic Management and Private and Financial Sector Development regional chief economist in the East Asia Region, said the impact of the crisis on the country will be most likely seen in employment, wages and poverty incidence.

However, Nehru said there may be some reprieve for the poor in the Philippines, considering that the government is now extending conditional cash transfers conditional to the poorest families. This can contribute in the efforts to sustain domestic demand in 2009.

He said that despite the volatility of the current economic environment, no multinational firms have pulled out their investments from countries like the Philippines.

This is crucial for the Philippines, considering that a lot of Filipinos depend on multinational firms who outsource some of their business processes to the country through business-process outsourcing firms to earn a living.

Nehru said, however, that the uncertainty in the global economic environment still makes pulling out investments an option for multinationals, especially those who are based in the United States.

“They have every intention to continue [their existing investments. However, there is reluctance for new investments. At the moment, I don’t see multinationals moving out, but I don’t know [how they will react in the near future to the rapidly changing economic environment],” Nehru said.

However, Le Borgne said that despite these challenges, the Philippine economy would be resilient in 2009. The World Bank projected in the East Asia Update that the Philippines will grow by 4.3 percent in 2008 and 3 percent in 2009.

With this, the World Bank is urging the national government to see the crisis also as an opportunity to establish or strengthen its safety nets to protect the poor and boost domestic demand to enhance the country and region’s chances of weathering the global slowdown.

“The report expects the Philippine economy to remain resilient and stresses that the direct impact on the Philippine banking system from the turmoil has been marginal. Overall exposure to structured products is estimated at about 2 percent of banking assets,” the bank said in a statement.

Le Borgne said the country needed to protect the sustainability of its fiscal sector to allow for better and more capital and social expenditures next year. He also said that the appropriate monetary policy to control inflationary pressures may be necessary to be balanced next year to protect the poor.

Overall, the report stated that the risks to East Asia are substantial in the near term but countries will be better positioned to deal with the crisis if they are able to maintain macroeconomic stability, shift exports to faster growing regions in the world, substitute external with domestic demand, and continue with structural reforms to strengthen competitiveness.