Monday, May 07, 2012

The Effect of the Growing Population in the Philippine Economy

Population vs. Economy
Population vs. Economy
The Aquino administration must have been deluding themselves by believing that our country's rising population is a boon rather than a bane in our economy.
It is no wonder, President Aquino did not pressure his allies  in the Lower House to push for the passing of the RH Bill. Just like the pasts administrations, our government has no backbone on population issue compared on the hard opposition from the Catholic Church hierarchy.
I'm not an economist, so my knowledge on the effects of high population growth on economic development is solely based from the research I have done, and it clearly oppose the government's stand.
While it is true that high population could translate to an increase in demand for goods and services and it can spur domestic-demand driven economy, so is the fact that people don't have the money to spend.
The Philippines per capita income of $2,050 is very low compared to our Southeast Asian neighbors like Indonesia and Malaysia that has per capita income of $2,580 and $7,900 respectively.
For the government to claim that high population is more favorable to our economy, they should address first three key factors that directly affects the spending power of Filipinos.

  1. Corruption - Well, a credit was due to Aquino government for the increase of Philippines' Corruption Perception Index (CPI) by the global watchdog Transparency International of 0.2 from 2.4 in 2010. But the government should work harder in eliminating corruption because we are still lagging behind Vietnam with 2.9 CPI, Indonesia with 3 CPI, Thailand with 3.4 CPI and Malaysia with 4.3 CPI.
  2. Unemployment - High population means an increase labour supply. With so many able-bodied worker but very low job opportunities, the unemployment rate rocketed. The Philippines has one of the highest unemployment rate at 7% amongst Southeast Asian countries.
  3. Poverty - Poverty incidence in the Philippines is very high at 26.50% compared to Indonesia with 13.33% and Malaysia with only 3.6%.
To summarize, if the country has high CPI rating, more foreign investors will likely invest in the Philippines. More investments translate to more job opportunities which can lower unemployment rate. With low unemployment rate, naturally means lower poverty incidence.
The link between high population and economic development is more likely to have a negative impact rather than a boosts to our economy.
The increase of 15% on DepEd's budget is not a guarantee to drive domestic-demand driven economy in the near future. Indonesia is a good example for this as their government only spends 1.2% on education, a 1.9% lower compared in the Philippines. Instead, they focus on reducing their population growth rate which is 0.83% lower than the Philippines at 1.069%. They also invest more to create more job to increase per capita income which is $530 higher than the Philippines at $2,580.
Many developing countries have also learned that lower population growth rate is more beneficial to their economy. Malaysia, with 1.576%, and Thailand, with 0.566%, has long been addressing their population growth, thus lowering their poverty rate to 3.6% and 9.6% respectively.
This comparisons clearly shows the links between population, poverty and good governance. Malaysia is a good example on all three counts. Malaysia's CPI which was at 4.3, coupled with low population growth rate, results in economic growth and poverty reduction. While Vietnam, with also low CPI score at 2.9 clearly implies that low population growth rate at 1.077% significantly reduce their poverty rate to 9.6.

My Verdict

With all this data I have mentioned here, it was very clear to me that high population has a clear negative impact in a country's economy. But if the Aquino government believe otherwise, I might suggest our beloved president to marry and have lots of children to help spur our economy even long after he step down from power.
Reactions:

12 comments:

  1. I don't understand why some people don't wan RH Bill which will solve the growing population of the Philippines, If they don't want the bill then they must find a way on how to control this. Humans are imperfect being of God and Temptation is everywhere..

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  2. @Papabear well, I reiterate the same old entrenched position of the church regarding that matter.

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  3. I can't understand why the church is scared. May RH Bill man or divorce o wala, pareho pa din naman ang state ng "morality" natin. Walang batas or kahit ano pa man ang magpapabait sa mga tao.

    Anyway, ang theory ko diyan, di naman magbabago ang spending ng tao kung mababawasan ang population. Based naman yan sa umiikot na pera. Naisip ko kung halimbawa 1million ang umiikot na pera, mas konti ang tao = mas dadami ang share. I know this is a very simplistic analogy. Pero that seems to be the case. Countries with a lower population compared to their land area have higher quality of life.

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  4. @Rae a simple but a good analogy. So papaano pararamihin ang umiikot na pera? Its by creating more job and it will have a domino effect to uplift our economy. Kung magagawa lng ng ating gobyerno yung 3 key factors, I'm sure malalampasan pa natin ang Indonesia.

    ReplyDelete
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