Global trade war poses risk to Philippines’ poverty-reduction gains—World Bank

While the Philippines has made strides in reducing poverty, uncertainties wrought by the looming global trade war may reverse some gains, according to the World Bank.

“Employment indicators suggest continued poverty reduction since 2023. The unemployment rate fell to 3.8 percent in 2024 (from 4.4 percent in 2023), and over 500,000 and 260,000 jobs were added in transportation and construction, respectively, during 2024,” the Washington-based multilateral lender noted in a poverty and equity brief it disclosed on April 22.

Last year’s jobless rate was the lowest since at least 2005, when the Philippine government adopted its current employment metrics.

“Consequently, the share of the population living on less than $3.65 per day (2017 purchasing power parities or PPP) is projected to have fallen to 12.6 percent in 2024,” the World Bank added.

“However, the current global economic uncertainty means the extent of future poverty reduction is unclear,” the World Bank warned.

While the Philippines has closed almost a third of its well-being gap with high-income nations since the year 2000, the World Bank pointed out that average income in the country would need to grow by a factor of 4.4 to reach the daily prosperity threshold worth $25, citing its 2023 prosperity gap indicator.

Also, the World Bank lamented that even as the rising number of wage employees—many of whom used to work in the low-productivity agriculture sector—hiked poor households’ incomes quicker than before for a decade now, the country “remains one of the most unequal countries in the region, with substantial variation in well-being and opportunities across its provinces.”

This was despite the Philippines’ Gini index, which identifies high-inequality countries, declining beneath 40—settling at 39.3—for the first time back in 2023, according to the lender.

Citing the latest government estimates in 2023, the World Bank noted that 17.5 million Filipinos, or 15.5 percent of the population, are poor.

Among poor Filipinos, 4.8 million, or 4.3 percent of the total population, are food-poor—those who cannot afford the basic food basket, it added.

“These figures reflect a robust recovery from the disruptions of the Covid-19 pandemic, during which over 2.2 million people fell into poverty, pushing the poverty rate to 18.1 percent in 2021,” the World Bank said.

In 2017 PPP terms—which serve as a global poverty measure—the World Bank estimated that about 13.7 percent of the population subsisted on less than $3.65 a day, the international poverty line for lower middle-income countries like the Philippines.

To lift more Filipinos out of poverty—and prevent the vulnerable from sliding back—the World Bank said the Philippines should continue to prioritize resilience-building.

“As an archipelago comprising more than 7,600 islands on the Pacific’s Ring of Fire, the Philippines ranks among the countries most exposed to disasters globally. Over 60 percent of Filipinos are considered at high risk from climatic shocks. This reflects high exposure to climatic shocks, especially typhoons, while limited social protection systems and financial access leave most households vulnerable in the event of a shock,” the World Bank pointed out.

“Another source of risk for poorer households is food price inflation. Rice is especially important for those at the bottom of the income distribution, accounting for nearly a fifth of all spending made by the poorest 30 percent,” it added.

The World Bank nonetheless noted that prices of the Filipino staple food fell by 7.7 percent year-on-year last month, reversing the annual climb in rice inflation to 23.6 percent early last year.

The Philippine Statistics Authority (PSA) earlier attributed the drop in inflation for bottom 30-percent income households—to post-pandemic lows of 1.5 percent in February this year and 1.1 percent last March—to rice deflation, as food accounted for over half of the poorest households’ expenses.

According to a separate April 18 brief, the World Bank’s new country partnership framework for the Philippines for the period 2025 to 2028 would support further poverty reduction, as the soon-to-be-approved concessional financing pipeline aims to foster inclusive growth and jobs creation, accelerate digital transformation, as well as transition the country toward a climate-resilient and greener economy.

As Manila Bulletin first reported, the emerging country partnership framework covering the next four years targets four high-level outcomes: inclusive growth and jobs; strong human capital; resilient communities; and environmental sustainability.

This forthcoming lending plan coincides with the second half of the Marcos Jr. administration and a new Philippine president in mid-2028. It will also serve as the World Bank’s financing program as the country climbs to upper middle-income status later this year or early next year.

Once the Philippines becomes an upper-middle income country, it will eventually lose access to relatively lower interest rates attached to official development assistance (ODA), or cheap loans extended by multilateral lenders like the World Bank, the Manila-based Asian Development Bank (ADB) and the China-led Asian Infrastructure Investment Bank (AIIB), as well as its bilateral development partners such as Japan and South Korea, among others.

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