Food prices, calamities put 7.45-M Pinoys at risk of becoming poor

By Cai U. Ordinario, BusinessMirror

Posted at Aug 23 2014 09:17 AM | Updated as of Aug 23 2014 05:17 PM

MANILA - Some 7.45 million Filipinos were considered vulnerable of becoming poor due to high food prices and natural and man-made disasters, according to the latest estimates from the Manila-based Asian Development Bank (ADB).

In its report, titled “Key Indicators for Asia and the Pacific 2014,” the ADB said this estimate is as of 2010 and did not consider the impact of recent disasters like Super typhoon Yolanda.

Yolanda alone, the ADB added, may have directly caused 0.6 percent to 1.5 million Filipinos to become poor and another 4 million to fall deeper into poverty.

“Using vulnerability-adjusted poverty lines, the poverty rates and the number of poor can be calculated,” the ADB said.

“The number of vulnerable is found to amount to 348.08 million people in 2005, 394.93 million in 2008 and 417.99 million in 2010 for the region as a whole. Clearly, the number of vulnerable individuals increases over time,” it added.

The ADB used the parameter called coefficient of constant relative risk aversion. This is computed using information from the Gallup World Poll, the European Social Survey and the World Values Survey.

Meanwhile, apart from computing the number of those vulnerable to falling into poverty, the ADB also adjusted their computation of the poverty rate and number of poor using a new poverty threshold.

Using a $1.51-a-day poverty line, higher than the internationally accepted but Africa-based $1.25-a-day poverty line, the ADB found more impoverished people in the region.

“Altering the poverty line did not change poverty trends for the region or individual countries, nor did it signify any change in people’s actual living standards. It just raises recognition of how many people in the region remain impoverished,” the report stated.

The ADB estimated that using this computation, the Philippines’s poverty rate increased to 30 percent, from the initial estimate of 22.2 percent in 2005, and to 26.4 percent, from the earlier estimate of 18.4 percent in 2010.

This, the ADB said, translates to 26.41 million poor Filipinos in 2005; some 25.19 million in 2008; and 25.12 million in 2010.

The ADB found that these estimates are complementary to its 2008 findings that for every 10-percent increase in food prices, there is a 4.2-percent reduction in Filipinos’ per-capita spending.

Higher food prices also widens inequality with the poor suffering the most and the rich suffering the least.

“A majority of poor households tend to allocate a much higher share of their consumption expenditures to food during periods of price escalation,” the ADB explained.

The ADB data showed that for every 10-percent increase in food prices, the Philippines’s Gini coefficient, a measure of inequality, increases by 0.6 of a percentage point. The Gini coefficient, also known as the Gini index or Gini ratio, is a measure of statistical dispersion intended to represent the income distribution of a nation’s residents.

Based on the government’s 5th Progress Report on the Millennium Development Goals, the Philippines’s Gini was at 0.47 in 2012, which is on the high side since perfect inequality is 1 and perfect equality is zero.

Data from the first-semester 2013 poverty statistics showed that the reduction in the country’s poverty incidence rate to 24.9 percent was largely due to the increase in the incomes of the bottom 10 percent.

The government explained that the incomes of the first decile, or the bottom 10 percent, increased by 12.3 percent to P33,683 in the first six months of 2013. This is higher than the P29,993 posted in the same period in 2012.

The second-highest increase was recorded by the sixth decile, or those that could be part of the middle class, with a 9.5-percent rise in incomes. Incomes of Filipinos in this decile increased to P95,014 in the first semester of 2013, from P86,751 in the first six months of 2012.

The third-highest increases were in the incomes of the second and third deciles, which each posted a growth of 8.4 percent. It can be noted that together with the bottom 10 percent.

The income of the second decile increased to P45,922 in the first semester of 2013, from P42,363 in 2012. The income of the third decile, meanwhile, increased to P55,634 in 2013, from P51,330 in 2012.