Introduction

While economic growth in most East and Southeast Asian countries has been remarkably rapid during the past 25 years, the same cannot be said for the Philippines. The country's economic growth has barely exceeded the population growth rate, which has continued to expand relatively rapidly at 2.04% a year so far in the current decade (2000–2009). Economic growth quickened in the first half of the decade, but questions linger about its sustainability. Even at the 2004–2006 pace (5–6% per year), the Philippines has not come close to the growth trajectories of its neighbors. Thus, serious students of Philippine development contend that shifting the economy to a higher growth path—and keeping it there for the long term—should be first and foremost on the development agenda.

The country's disappointing performance in poverty reduction mirrors its growth performance. This is not unexpected. Every country that has chalked up significant achievements in poverty reduction and human development has also done quite well in securing long-term economic growth. Such a correlation is expected: economic growth is an essential condition for generating the resources needed to sustain investments in health, education, infrastructure, and good governance (law enforcement, regulation, etc.).

That achieving economic growth should be in the forefront of the policy agenda does not imply that nothing else can be done to lick the poverty problem. On the contrary, cursory evidence indicates that much can be done to enhance the poverty-reducing effects of growth.