SMALL purchases, bad roads, and low access to credit are among the factors that make poverty expensive in the Philippines and in other countries in the Asia and the Pacific region, according to the Asian Development Bank (ADB).
At the launch of the Key Indicators for Asia and the Pacific report on Thursday, ADB Economic Research and Development Impact Department Statistician Arturo Martinez Jr. said the poor pay a poverty premium which makes goods and services about 20 percent more expensive compared to the country average.
In the Philippines, poor households have a penchant for buying “tingi” or small quantities which are cheaper, but in the long run turn out to be expensive as they need to buy more to meet their needs. More affluent households, however, have greater financial resources and are able to buy in bulk, which turns out cheaper as this prevents them from buying as frequently as poor households do.
“The report alludes to income-constrained people who may prefer buying in small quantities while people with higher incomes have the option to buy in bulk if they desire. In some cases, quantity premiums may be substantial in the long run. This is just one example of how the poverty premium manifests,” Martinez told BusinessMirror in an email.
Other examples of poverty premiums have to do with bad roads which make transportation costlier for poor households. Since many poor Filipinos live in areas with poor infrastructure facilities, they must pay more to access economic opportunities or participate in economic activities.
Martinez also said poor households do not have many of the conveniences of affluent households such as access to cheap electricity and appliances like refrigerators, which affect the products they consume and their ability to purchase goods in bulk.
He said expensive electricity prompts poor households to resort to buying coal, firewood, and other forms of biomass which often are more expensive for them. One example, he said, was kerosene, which other studies found is more expensive for poor people.
Payday lenders
The limited finances of poor households make them prey to “payday lenders” who often charge exorbitant interest rates, Martinez also said. This eventually exacerbates the dire financial position of these households and sinks them deeper into debt and poverty.
“Other examples alluded to in the report include how geographic location may make goods and services more expensive in some areas where there are large pockets of poverty. These inequalities need to be addressed if we are aiming to meet SDG (Sustainable Development Goal) 1 by 2030,” Martinez told this newspaper.
Martinez said lower-income households experienced faster inflation over the past decade in the Philippines, Hong Kong and Taipei.
In July, the inflation experienced by all households nationwide reached 4.7 percent but for the Bottom 30 percent, inflation was higher at 5.2 percent.
Even when inflation peaked at 8.7 percent among all households in January this year, the increase in prices experienced by the poorest Filipinos was higher at 9.7 percent.
Based on the Philippine Statistics Authority (PSA), the Consumer Price Index (CPI) for the Bottom 30 percent of households showed they spend more on food as well as electricity, gas and other fuels.
The PSA data showed 51.38 percent of Filipinos’ income is spent on food alone while 10.11 percent on electricity, gas and other fuels. This represents the weight of these commodities in the CPI for the Bottom 30 percent.
These are also higher than the CPI of all households where food has a weight of 34.78 percent and electricity, gas and other fuels, 6.74 percent.
“In addition to reducing poverty, it is also important to amplify the resilience of Filipinos. Bringing poor people to just above the poverty line may not be enough if they can be easily pushed back below it if another crisis hits,” Martinez told reporters.
“As alluded to in the Key Indicators report, strengthening socioeconomic resilience through enhanced social protection coverage that goes beyond crisis, and complemented by programs that address systematic inequalities such as investing in infrastructure that help bring socioeconomic opportunities closer to where poor Filipinos are, should be part of policy strategies that aim to reduce poverty,” he added.
ADB said poor households may also be forced to live in informal settlements where they are exposed to greater health hazards, increasing their health care costs, and they may have longer and less convenient commutes.
Further down into poverty
MEANWHILE, ADB expressed concern that the increased cost-of-living crisis sparked by surging inflation last year, combined with the lingering effects of the Covid-19 pandemic, continues to push people in Asia and the Pacific into extreme poverty.
An estimated 155.2 million people in developing Asia and the Pacific, or 3.9 percent of the region’s population, lived in extreme poverty as of last year, according to Key Indicators for Asia and the Pacific 2023, released today.
The number is 67.8 million greater than it would have been without the pandemic and the increased cost of living crisis, according to the report. Extreme poverty is defined as living on less than $2.15 a day, based on 2017 prices and adjusted for purchasing power and inflation.
Image credits: Roy Domingo
Poor pay ‘poverty premium’ in PHL, AsPac–ADB report
Source: News Paper Radio
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