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2 Poverty Trends From 2006 to 2015, the share of population living below the national poverty line fell from 26.6 percent to 21.6 percent. Despite this drop, as of 2015, 22 million Filipinos still lived in poverty. Three factors have held back poverty reduction in the Philippines: a pattern of growth that is slower and less pro-poor than neighboring countries; high inequality of income, wealth, and opportunities; and the adverse impacts of natural disasters and conflict. The country s annual growth rate for ranked 10th among East Asian countries. Agriculture, which employs most poor people, has seen minimal growth. Workers moving out of agriculture in the Philippines generally end up in low-end service jobs. This is contrast to the experience of countries like China, Indonesia, Malaysia, and Thailand, which generated larger numbers of manufacturing jobs to absorb those leaving the agriculture sector. The high concentration of income and wealth limit equality of opportunity and impede equitable public service delivery, which is necessary for inclusive growth. Moreover, the poor start life at a disadvantage. Malnutrition, limited resources, poor access to quality health care, and low education and skills, limit their lifetime earnings. Frequent natural disasters and persistent conflicts in parts of Mindanao continually push vulnerable groups into poverty and jeopardize long-term human capital development with the poor suffering disproportionately.

3 The Philippines experienced poverty reduction over the years. Percentage of population living below national poverty line 26.6% 26.3% 25.2% 21.6% But poverty remains high, with the Philippines lagging behind its peers. Annual decline in international poverty rate Philippines ( ) Vietnam ( ) Indonesia ( ) China ( ) In particular, the Philippines suffers through...slower and less pro-poor pattern of growth...high inequality...natural disasters and conflict

4 Who are the Poor? Household Members Nearly 1/3 of households with 6 or more members AAAAAA are poor Educational Attainment % of the poor live in households headed by individuals with less than high school education Location Rural poverty rate is 300% that of urban areas Over 50% of people in conflict areas such as ARMM are poor Primary Sources of Income Agriculture Government transfers Domestic Remittances

5 What drove poverty reduction? Increase in wage income and movement of employment out of agriculture Government transfers Remittances Every year, 1% less people work in agriculture 1.5M 15M people were lifted out of poverty thanks to Pantawid Pamilya households received domestic or foreign remittances

6 What can be done? 1 Facilitate the creation of more well-paying jobs. A significant share of the poor work in jobs with very low wages or are mired in involuntary underemployment. Support for the creation of more well-paying jobs, particularly semi-skilled jobs, for the majority of today s labor force who have less than a high school education, can help reduce poverty and address inequality through higher wage incomes. Important steps include improving the business environment to attract more investment, upgrading value chains to support strong and sustainable growth, and strengthening backward and forward linkages to build on the comparative advantages of skilled labor and create jobs for the unskilled. 2 Improve productivity in all sectors, especially agriculture. Compared with many countries in the region, the agriculture sector performs below its potential for contributing to growth, employment, and poverty reduction. Improvements in productivity, diversification, and value-addition are crucial, as well as progress in making agriculture more resilient to natural disasters and climate change. Supporting agribusiness through broader value chain development is another critical element in enhancing agricultural productivity.

7 3 Ensure that Filipinos acquire the skills they need for the 21st century economy. In recent years, the Philippines has made admirable strides in education. Critical advances have been the creation of both universal kindergarten and senior high school education, with the first cohort of grade 12 students graduating in Key challenges now include making sure students in school are learning, reducing high dropout rates for the poor, and developing socioemotional skills. This requires boosting learning in basic education, and developing socioemotional skills in addition to technical skills and cognitive skills. 4 Invest in health and nutrition. Although the Philippines has implemented universal health coverage, quality and access can still be improved. Rates of child malnutrition remain high and the country still faces obstacles in implementing its reproductive health policies. Aside from boosting the required knowledge and skills of the workforce, improved health services are also needed to improve the productive capacity of Filipinos to maximize their earning potentials. These efforts include boosting healthcare quality and equity, reducing child stunting, and fully implementing the Responsible Parenthood and Reproductive Health Law.

8 5 Focus poverty reduction efforts on Mindanao. Five decades of violence have depressed growth and poverty reduction. Economic progress and poverty reduction in the Philippines will depend on the success of development in Mindanao. This will mean drawing on the region s untapped potential, linking lagging areas to growth centers, and strengthening peacebuilding efforts in conflictaffected areas to break the cycles of insecurity. Increasing broad public investment and supporting efforts to resolve conflict and bring peace to Mindanao are of the highest priority. 6 Manage risks and protect the vulnerable. Poor people are more vulnerable to negative shocks. They are more exposed to risks through lack of resources, more sensitive to impacts due to an inability to cope with them, and lack the capacity needed to adapt to potential risks and therefore suffer repeated setbacks. Children from poor families are particularly vulnerable to not getting the needed education and health care. Providing targeted support to the poor and vulnerable to mitigate shocks, building up human capital, and providing an effective safety net are crucial. Improving natural disaster risk management systems, and strengthening social protection systems are important to protect the poor and vulnerable. For more information, visit worldbank.org/ph