PH income below investment grade countries’ average

MANILA, Philippines – Despite achieving first investment grade rating of BBB- on Wednesday, March 27, the Philippines’ average income remains below the average, according credit rating agency, Fitch Ratings.

“The Philippines’ average income is low (US$2,600 versus ‘BBB’ range median of $10,300 in 2012,” Fitch said. Countries and corporates that are granted investment grade status are given BBB-, BBB, and BBB+ ratings. 

However, Fitch acknowledged that this findings does not account directly for the significant support to living standards from remittance inflows, which has supported the consumer economy considerably. Personal remittances reached $23.8 billion in 2012, funding education and other household expenses, as well as savings and investments. 

Remittances represented about 6.5% of the Philippines’ gross national income and 8.5% of gross domestic product, according to the Bangko Sentral ng Pilipinas (BSP).

Human development

Fitch also noted that the country’s level of human development (as measured in the United Nations Development Programme’s index) is less of an outlier against ‘BBB’ range peers. 

This is also reflected in the Human Development Index (HDI) released by the United Nations Development Program (UNDP) on Friday, March 15. The Philippines remained 114th globally for the 5th straight year.

The HDI is a key indicator of citizens’ state of health, education, and income, among others. In the 2013 Human Development Report titled “The Rise of the South: Human Progress in a Diverse World,” the UNDP stated that the Philippines’ HDI score has been improving in the past 30 years. But its score of 0.654 is still slightly below the East Asia and the Pacific regional average of 0.683.

According to the report, the country’s Gross National Income per capita level is $3,752 (computed using 2005 purchasing power parity) while around 18.4% of the population lived below $1.25 in the 2011-2012 period.

Estimates suggest that the informal economy in the Philippines is still quite large—it accounts for over 40% of total GDP and well over 70% of employment.

According to Ronald Mendoza, executive director of the Asian Institute of Management Policy Center, “this is the sector that barely feels any of the phenomenal growth the Philippines has witnessed during the better part of the last decade and past few years. This is also the sector that will continue to be left behind, if real structural changes are not pursued.”

“These practices deter investment, slow businesses down, weaken our economic competitiveness, and in due course, these kill jobs,” he added. 

While many sectors are rejoicing and embracing the country’s first investment grade rating, there is a large chunk of the population that won’t reap the benefits of this good news. – Rappler.com