Basic Economic

problems in
Economic and
political
Challenges
The Philippine economy has grown
by about 5 percent a year on average
over the last ten years, significantly
higher than in the previous two
decades. Yet the number of people
living below the poverty line has
actually increased.
A system designed against
government
⊹ Structural Problems: The roots of underdevelopment
lie in the underlying structure of the Philippines’
economy, which is mostly rural, agricultural, and suffers
from low productivity.
⊹ Regulations: Commercial, regulatory, and labor market
distortions have prevented a similar transition from
taking place in the Philippines. High minimum wages
and regularization policies that prevent companies from
firing employees apply only to the formal commercial
sector, hobbling its growth.
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A system designed against
government
⊹ Land Reforms: While the government has transferred
land to poor Filipinos, the recipients are prohibited from
selling their land or buying additional land.
⊹ “Legalism” Not the Answer: Additional laws and
regulations would do little to solve the paradox of the
Philippine government, which does both too much and
too little to promote growth. Instead, policymakers
should identify which rules are productive and crucial to
development and jettison those that are not.

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POLITICAL LEADERSHIP A
CATALYST FOR REFORM
⊹ Public Support: Approval ratings have held steady at
46 percent, compared to roughly 32 to 35 percent in the
Ramos and Estrada eras.
⊹ Empowering Votes: The conditional cash transfer
(CCT) programs have had the added benefit of freeing
poorer voters from the influence of local officials and
elites.
⊹ Mixed Results on Peace Process: The Aquino
administration has succeeded in gaining the trust of
some of the country’s insurgent groups, but at the same
time, it has seen the peace process with others. 5
POLITICAL LEADERSHIP A
CATALYST FOR REFORM
⊹ Anti-corruption Efforts: Most controversially, the
Aquino government has launched high-profile
prosecutions of members of the Arroyo administration
⊹ Beyond the Election Cycle: Observers will have to
look beyond the fanfare of the election media coverage
to monitor the progress of ―belowtheradar structural
reforms.

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Basic economic problems
⊹ Poverty
a state or condition in which a person or community
lacks the financial resources and essentials for a
minimum standard of living. Poverty means that the
income level from employment is so low that basic human
needs can't be met.
The Philippines is lagging behind in meeting the targets
on access to primary education, maternal mortality rates,
and access to reproductive health care.

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Poverty
⊹ The Philippines has a fairly high poverty rate with more
than 16% of the population living 
below the poverty line. 
⊹ Because of the many people reliant on agriculture for an
income and inequality in wealth distribution, about 17.6
million Filipinos struggle to afford basic necessities.
 From 2015 to 2020, the rate of poverty declined from
21.6% to 16.6%. 

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main characteristics of
poverty:
⊹ The majority live in rural areas and work in the
agriculture sector, mostly as farmers and fishers.
⊹ In the urban areas, they are found in slums and the
informal sector.
⊹ They have large families (six members or more).
⊹ In two-thirds of poor families, the head of household
has only an elementary education or below.
⊹ They have no or few assets and minimal access to
credit.
⊹ A major income source of the poor is from enterprise
income (informal sector activities).
⊹ A significant segment of the poor households are 9
Main causes of poverty
⊹ The number of people entering the job market has been
greater than the number of jobs created.
⊹ The rural-urban migration increases due to employment
opportunities.
⊹ Low to moderate economic growth for the past 40 years.
⊹ Low growth elasticity of poverty reduction.
⊹ Weakness in employment generation and the quality of
jobs generated.
⊹ Failure to fully develop the agriculture sector.

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Main causes of poverty
⊹ High inflation during crisis periods
⊹ High levels of population growth
⊹ High and persistent levels of inequality which dampen
the positive impacts of economic expansion; and
⊹ Recurrent shocks and exposure to risks

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Basic economic problems
⊹ Unemployment
Unemployment is a term referring to individuals who
are employable and actively seeking a job but are unable to
find a job.
Interestingly, people who have not looked for a job in
the past four weeks but have been actively seeking one in
the last 12 months are put into a category called the
“marginally attached to the labor force.” Within this
category is another category called “discouraged workers,”
which refers to people who have given up looking for a
job. 12
Types of unemployment:
⊹ Demand deficient unemployment
When companies experience a reduction in the demand
for their products or services, they respond by cutting back
on their production, making it necessary to reduce their
workforce within the organization.
Or cyclical unemployment, occurs as a result in a
decline of overall economic activity of an economy leading
to a decrease in the demand for labor.

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Types of unemployment:
⊹ Frictional unemployment
Even in a country where there is technically full
employment, there will always be some frictional
employment, simply because employees change jobs
occasionally. It is sometimes called search unemployment.
Frictional unemployment refers to those workers who
are in between jobs.

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Types of unemployment
⊹ Structural unemployment
It happens when the skills set of a worker does not
match the skills demanded by the jobs available, or
alternatively when workers are available but are unable to
reach the geographical location of the jobs.
It is the term economists use to describe unemployment that
happens because of a mismatch between the skills workers
have, and the jobs that are actually available. Structural
unemployment usually happens because of 
technological change.
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Types of unemployment
⊹ Voluntary unemployment
Happens when a worker decides to leave a job because
it is no longer financially compelling.
Voluntary unemployment is a part of the population of
unemployed people who choose not to work. In other words,
they deliberately choose to be unemployed even though jobs
are available. Two main reasons are low wages or
incompatibility with open positions.

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Effects of unemployment
⊹ Unemployment causes workers to suffer financial
hardship that impacts families, relationships, and
communities.
⊹ Unemployment results in reduced demand,
consumption, and buying power, which in turn causes
lower profits for businesses and leads to budget cuts and
workforce reductions.
⊹ High unemployment rates in certain areas often lead to
higher poverty rates and poorer neighbourhoods that
amplify the societal impact of unemployment.
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Basic economic problems
⊹ Poor quality of infrastructure
Infrastructure that fails to meet these standards of
efficiency, safety, and economic sustainability may be less
expensive in the short term but imposes huge costs on future
growth and development. All economic growth relies upon
consistent quality infrastructure, and in many ways, low-
quality infrastructure is worse than no infrastructure at all.

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Poor quality of infrastructure
⊹ It should utilize the best available technology to be
reliable, economically and environmentally efficient,
and adherent to internationally accepted safeguards and
standards. More than that, quality infrastructure
investments should align with long-term country
strategies for economic development in a way that
improves the flow of services, builds local capacity, and
drives job creation.

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Basic Economic Problems
⊹ Income inequality
Income inequality is how unevenly income is
distributed throughout a population. The less equal the
distribution, the higher income inequality is. Income
inequality is often accompanied by wealth inequality, which
is the uneven distribution of wealth.
Income is a major determinant of quality of life,
affecting the health and well-being of individuals and
families, and varies by social factors such as sex, age, and
race or ethnicity.
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Effects of Income inequality
⊹ A high level of economic inequality means a higher
level of poverty. 
⊹ Wealthy citizens maintain disproportionate political
power compared to poorer citizens
⊹ Unequal income distribution increases political
instability, which threatens property rights, increases the
risk of state repudiated contracts, and discourages
capital accumulation.
⊹ A widening rich-poor gap 

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Thank you!

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