I.

Introduction

People living under the poverty line are excluded from society. They are unable to

receive proper education and work, often due to their living status. Hence, their means of income

are insufficient, deeming them incapable of providing for themselves and their families. The

World Bank Organization mentions that those in poverty live a life of constant hunger, lack of

shelter, inability to seek needed medical attention, and limited to no access to education or a

decent, sustainable job (What Is Poverty?, n.d.). According to Balisacan (2007), the Philippines'

outstanding record of reducing poverty majorly stems from its inability to generate and sustain

an income growth that is significantly greater than that of the country's population growth.

Although economic growth directly benefits both the poor and non-poor, it is still insufficient as

international standards suggest that the Philippines' response to economic development, in terms

of reducing poverty, has been rather nominal (Balisacan, 2007). In the article, Balisacan asserts

that addressing the underlying issues of poverty in the Philippines requires a comprehensive

approach that would involve the implementation of economic, social, and government reforms

With this in mind, this study ultimately aims to pinpoint and reinforce that there is, indeed, an

indirect relationship between the Philippines’ economic development and the country’s poverty

incidence, particularly how income growth could decrease the country’s poverty rate or how the

decline in income would increase poverty incidence.

II. Growth Incidence Curve (GIC)

A Growth Incidence Curve (GIC) is a graphical representation that shows how distinct

demographics are affected by changes in income levels or economic growth. It also shows how

growth within a specific period benefits various population percentiles (Chronic Poverty
Advisory Network, 2016). In this case, the GIC framework will be utilized to examine how the

Philippines' economic growth affects the country’s poverty rate.

Figure 1. Figure

2.

Data on the Philippines' seventy-seven provinces indicate a long-term relationship

between income growth and poverty incidence. Figure 1 plots the change in percentage in family

income per capita and poverty rate between 1985 and 2003 (Balisacan, 2007). Here, it was

observed that as per capita income increased, poverty incidence gradually decreased. Hence,

there is, in fact, a strong correlation between local economic development and the rate at which

poverty is reduced (at a provincial level) (Balisacan, 2007). On the other hand, according to

López and Servén (2015), Figure 2 depicts that a 10% increase in the poverty incidence would

reduce the GDP per capita growth rate by 1%. In the figure, a decline in economic growth is

associated with a higher rate of poverty. With this in mind, the connection between a country’s

economic development and poverty incidence displays an indirect relationship, in which, when

one factor increases the other would decrease, and vice versa.
III. Data Presentation and Interpretation

According to Balisacan (2007), the root causes of poverty in the Philippines lie in the

country’s economic development and population growth. However, while the population rate has

increased at an annual rate of 2.3% for the majority of the past two decades, the country's

economic growth has severely lagged behind, barely exceeding this rate (Balisacan, 2007).

Needless to say, the Philippines' outstanding record of reducing poverty majorly stems from its

inability to generate and sustain an income growth that is significantly greater than that of the

country's population growth. Balisacan also noted the term “growth elasticity” of poverty

reduction, to which he related that an increase in the country’s income growth by 1% would

directly lead to an increase in the poverty reduction rate of an estimated 1.3 to 1.6% (Balisacan,

2007).

According to Reyes and Tabuga (2011), the Philippines' gross domestic product (GDP)

increased by an average of 4.6% from 2003 to 2009, with annual growth rates amounting to no

less than 4%. Yet, the percentage of people living under the poverty line had steadily increased,

from 24.9% in 2003, 26.4% in 2006, to 26.5% in 2009. The rise in the country’s poverty rate in

an era of rapid economic expansion was perplexing as even when the country experienced

nominal economic growth, poverty incidence still declined. It was later on found that significant

economic development occurred in areas that were remote from the impoverished. However, if

this was not the case, it may have occurred in areas where there were no evident redistributive

initiatives to support the impacts of economic growth, thus deeming these so-called “efforts”

ineffective in reducing poverty (Reyes & Tabuga, 2011).

mostly associated with agriculture. In fact, most residents who experienced a decrease in income

were involved in agriculture. Unfortunately, industries are highly prioritized, whereas the

agricultural sector is in decline. This sector's growth rate decreased to 3.3% from 2003 to 2006,

to 2.4% from 2006 to 2009. On the other hand, Central Luzon was responsible for over a tenth of

the surge in the number of impoverished individuals between 2003 and 2009. Although real

income growth contributed to a decrease in this region's poverty incidence at some point, the

income redistribution that resulted from this decline was counterproductive, which canceled out

the effects of economic growth on poverty (Reyes & Tabuga, 2011).

IV. Conclusion

In conclusion, the Philippines' outstanding record of reducing poverty majorly stems

from its inability to generate and sustain an income growth that is significantly greater than that

of the country's population (Balisacan, 2007). Balisacan noted the term “growth elasticity” of

poverty reduction, to which he related that an increase in the country’s income growth by 1%

would directly lead to an increase in the poverty reduction rate of an estimated 1.3 to 1.6%

(Balisacan, 2007). Using the growth incidence curve (GIC) framework, Figure 1 displayed that

poverty incidence decreases as per capita income increases, whereas Figure 2 exhibited that a

decline in economic growth is associated with a higher rate of poverty. Hence, the connection

between a country’s economic development and poverty incidence displays an indirect

relationship, in which, when one factor increases the other would decrease, and vice versa.
 However, this may not be the case in some circumstances. This would mainly result from

the fact that either (1) significant economic development occurred in areas that were remote from

the poor, or (2) may have occurred in areas where there were no evident redistributive initiatives

to support the impacts of economic growth, thus deeming these so-called “efforts” ineffective in

reducing poverty (Reyes & Tabuga, 2011).