‘Slow growth, high inflation pose challenge to poverty reduction’

MANILA, Philippines — Despite last year’s progress, weak growth and high inflation are complicating further poverty reduction efforts, making it harder to achieve the eight to nine percent poverty rate goal by 2028, according to economists.

Philippine Institute for Development Studies senior research fellow John Paolo Rivera said in a Viber message that last year’s lower poverty rate reflects significant improvement and suggests that employment, income growth and government interventions are leading to better household welfare.

“The challenge now is sustaining these gains, particularly because lower-income households are disproportionately affected by food, energy and transport inflation,” he said.

During the Development Budget Coordination Committee budget briefing at the House of Representatives on Monday, Department of Economy, Planning and Development Secretary Arsenio Balisacan said the poverty incidence, or proportion of the population considered poor, declined to 9.7 percent in 2025 from 18.1 percent in 2021, based on preliminary estimates.

“This means that 8.8 million Filipinos were lifted out of poverty over this period,” Balisacan said.

He said this reflects the recovery of incomes and employment, as well as the sustained implementation of social protection programs.

However, he said these gains remain vulnerable, particularly to high inflation, which places a heavier burden on poor and low-income households.

“The burden is even heavier when food prices rise faster than non-food prices, as food accounts for a much larger share of total consumption spending among low-income families than among high-income families,” he said.

If inflation remains elevated, he said it could slow or even reverse the country’s poverty reduction gains.

For Rivera, reaching the government’s eight to nine percent poverty rate target by 2028 remains achievable, but the remaining reduction is harder because of high inflation.

Headline or overall inflation eased to 6.2 percent in July from 6.4 percent in June.

Despite slowing in July, inflation remained above the government’s two to four-percent target range.

Apart from high inflation, University of Asia and the Pacific economist Marco Antonio Agonia said in an email that the country’s subpar growth may also undermine poverty reduction gains.

The economy grew by 2.3 percent in the second quarter, the weakest in five years, as the Middle East conflict pushed up prices that dampened consumption and investor sentiment continued to reel from a flood control controversy.

This brought average economic growth in the first half to 2.6 percent, below the government’s downscaled 3.5 to 4.5 percent growth target for the year.

“The Philippines may miss its single-digit poverty incidence target in the absence of new, diversified sources of growth,” Agonia said.

While inflation may normalize as shocks settle, he said the economy needs substantial, long-term growth drivers to facilitate poverty-reducing structural changes beyond household consumption.

Rivera said the government’s priority should be to protect purchasing power and create more productive, better-paying jobs, particularly in areas outside major urban centers.

Balisacan said the country would need to broaden the sources of its economic growth by strengthening investment and exports, as well as revitalizing agriculture and industry.