The Economic Status of Regions in the Philippines: Focusing on the Poorest


(Part 2)

2021 was unquestionably the year of recovery from the pandemic. GDP grew by 5.7% in 2021, compared to a decline of 9.5% in 2020. With agriculture, forestry and Ifshing (AFF) as the only exception, all major economic sectors posted positive growth in 2021, led by human health and social work activities at 14.1%, construction at 10% and information and communication. communication at 9.2%. Manufacturing was not far behind with growth of 8.8%, driven in particular by food and beverages. Despite strict confinements during the IfIn the first half of 2021, the hospitality industry (accommodation and food services) managed a respectable growth of 7.2%, partly explained by the weak base in 2020. Education grew at a faster rate than the average of 8.3%, primarily explained by a proliferation of non-formal and informal means of upskilling, retraining and retooling workers for changing workplace demands. Formal education has had to suffer with the decline in enrollment in degree courses, particularly in private educational institutions. Real estate and home ownership slowed to a miserable 2.2% reflcausing a glut, especially in the most expensive housing units (more than 10 million pesos per unit).

On the expenditure side, the expenditures with the highest growth rates were gross capital formation at 20.3%, imports of goods and services at 13% and exports of goods and services at 8%. Household final consumption expenditure was moderate at a growth rate of 4.2%. With the “revenge consumption” that manifests itself everywhere in 2022, starting from the period of Holy Week from April 11 to 17, we can expect a strong recovery in this item of expenditure for the whole of year 2022, despite higher inflation rates which will average 4.5% for the whole year.

Despite the overall slower regional growth rate of the National Capital Region (NCR), it is no surprise that in terms of regional service performance in 2021, Metro Manila recorded a whopping 42 .4% of the total due to its huge population. Calabarzon* and Central Luzon follow with 10.7% and 8.3% respectively. Regarding the industrial sector (manufacturing, mining, utilities and construction), Calabarzon is king, accounting for 25.1% of the total value, followed by the NCR (19.6%) and central Luzon (15 .4%).

Central Luzon is still the country’s food hub, accounting for 13.5% of the AFF sector, with Northern Mindanao and Western Visayas following close at 10.5% and 9.6%, respectively. Central Luzon’s strategic role in the agribusiness sector should prompt the national government and respective LGU officials in this region to formulate a comprehensive plan to significantly improve the productivity of agricultural resources in this region, combining a shifting agricultural activities away from the urbanization areas of Pampanga and Tarlac to the farm-rich provinces of Nueva Ecija, Nueva Vizcaya and Aurora and the development of agribusiness manufacturing and logistics centers in the Clark-Subic and Bataan regions . There is already a perceptible shift in sugar production from Pampanga and Tarlac to Nueva Ecija, particularly under the impetus of the Luisita group. Much can also be done to reverse the poor performance of the AFF sector if the regions of Calabarzon, NCR and Central Luzon can combine their forces to embark on high value agriculture of vegetables, fruits and livestock which can be produced with appropriate advanced means. technology even in highly urbanized areas.

An encouraging sign regarding poverty reduction can be read in IfHousehold spending figures by region.

In 2021, household spending grew fastest in Caraga** (at 10.6%), Eastern Visayas (10.2%), Cagayan Valley (9.0%) and Administrative Department of the Cordillera (CAR; 8%). These regions have been the regions with the highest incidence of poverty in the past. these IfThe numbers stand out further against a near-zero growth rate in consumer spending in the National Capital Region, which posted only a 0.4% increase compared to the national average of 4.2%. . these IfThe numbers may also be evidence of the effectiveness of the Duterte administration’s efforts to focus poverty programs on the poorest regions during the pandemic. If this assumption is true, then it can be said that the huge government borrowing during the pandemic was well worth it.

If these trends can be reinforced by the next administration, it will not be difficultIfcult to reduce the national incidence of poverty from the current high level of 23% resulting from the pandemic, to 16% or even lower than what we have already reached before the pandemic. In fact, the goal of the next administration should be to reduce the incidence of poverty to single digit levels of 5-9% by the end of its term.

This hypothesis of a focus on poorer regions during the pandemic is further reinforced by public expenditure data from the Philippine Statistics Authority (PSA) report. While the national average for government expenditure growth was 7.1% for the whole of 2021, it was 12.6% for Bangsamoro Autonomous Region in Muslim Mindanao (BARRM) and 11.6% for the Cagayan Valley. Other similar predominantly rural regions have received the same emphasis on public spending. This resulted in the highest real GDP per capita growth rate for CAR at 6.6%, Caraga at 6.1%, followed by Central Luzon and Calabarzon at 5.7% each.

There is no doubt that the fight against poverty in the Philippines cannot be left to market forces alone. There is limited “trickle down” into the open market. In the countryside, the greatest contribution to poverty alleviation comes from the construction of roads to markets, irrigation systems, post-harvest facilities and the provision of essential services to farmers, farm workers and fishermen with the necessary credit, training, and digital assistance to improve their productivity.

In some provinces of Mindanao, the incidence of poverty can reach 30-40% of the population. Following the positive results of the massive investments in public works in the Caraga and BARRM regions, the next administration should redouble its efforts to provide the country’s second largest island with better infrastructure. The whole island has the potential to be the agribusiness hub of not only the whole country, but also a major contributor to the food security of our neighboring countries in northeast Asia. , such as China, Taiwan and South Korea thanks to the export of larger volumes and more diversified fruit and vegetable products beyond bananas and pineapples.

We should resume talks with the Chinese government regarding the construction of the railway system for all of Mindanao. Improved transportation and communications in the island will go a long way to opening up vast tracts of land that can make the Philippines a positive net exporter of agricultural products that will be crucial to Northeast Asia’s food security goals. . This possibility should be all the more reason for the next administration to work as soon as possible for the Philippines’ definitive membership of the Regional Comprehensive Economic Partnership Agreement which will facilitate our trade with these food-strapped economies in our north.

* A portmanteau of the names of the southern Luzon provinces of Cavite, Laguna, Batangas, Rizal and Quezon.

** The region includes five provinces: Agusan del Norte, Agusan del Sur, Dinagat Islands, Surigao del Norte and Surigao del Sur.

Bernardo M. Villegas holds a doctorate. in Economics from Harvard, is Professor Emeritus at the University of Asia and the Pacific and Visiting Professor at IESE Business School in Barcelona, ​​Spain. He was a member of the Constitutional Commission of 1986.