Income inequality in the Philippines remained one of the highest rates in East Asia despite important gains in poverty reduction following recent strong economic performance and improving access to employment, the World Bank reported.
In a World Bank report titled “Overcoming Poverty and Inequality in the Philippines: Past, Present, and Prospects for the Future,” it said that the Philippines has made important gains in poverty reduction.
Despite that, the bank noted that income inequality remained high with top one percent of earners together capture 17 percent of national income, and only 14 percent being shared by the bottom 50 percent.
“With an income Gini coefficient of 42.3 percent in 2018, the Philippines had one of the highest rates of income inequality in East Asia,” the World Bank said.
Ndiamé Diop, World Bank Philippines country director attributed the country’s high rate to opportunity inequality and low mobility across generations that wasted human potential and slowdown innovation.
“Unequal opportunities, slow access to tertiary education among low-income households, inequality in returns to college education, and social norms putting the heavier burden of childcare on women has slowed down the narrowing of inequality in the Philippines,” the bank said.
However, World Bank said poverty fell by two-thirds—from 49.2 percent in 1985 to 16.7 percent in 2018. Given that, the middle class had expanded to nearly 12 million people and the economically secure population had risen to 44 million.
The reduction in poverty incidence was driven by high economic growth rates and the expansion of jobs outside agriculture, the bank said.
“The Philippines aims to become a middle-class society free of poverty by 2040, but we know from global experience that no country has managed to make this transition while maintaining high levels of inequality,” Diop said.
Moreover, World Bank Covid-19 pandemic has also partly reversed decades-long gains in reducing poverty and inequality in the Philippines after it halted growth momentum in 2020, and unemployment shot up in industries that require in-person work.
In 2021, the national poverty rate rose to 18.1 percent despite government assistance.
“Recovery in the Philippines is uneven across the income distribution and the poorest who suffered the most from Covid have yet to fully recover their incomes. With food prices going up, many families coped by reducing their consumption, including eating less,” World Bank.
“These coping strategies can have serious consequences on the health and nutrition of children in these vulnerable households,” it warned.