What are the challenges to inclusive economic growth?

Metro Manila (CNN Philippines) — Achieving inclusive growth has been a tough challenge for the Philippine government over the past years.

The country's gross domestic product (GDP) has been growing by an average rate of about 5.4 percent since 2006. At the same time, the poverty incidence rate has barely changed:

  • 2006: 28.8 percent
  • 2009: 28.6 percent
  • 2012: 27.9 percent
  • 2015: 26.3 percent

That's why President Rodrigo Duterte has an ambitious plan to cut the poverty rate to 17 percent before 2022.

His economic team said this was possible through massive infrastructure investments, among other things.

"We're looking to launch hundreds of infrastructure projects over the next few years," said Finance Secretary Carlos Dominguez.

For his part, Department of Public Works and Highways Secretary Mark Villar said that the Philippines "will experience a golden age in infrastructure" in the coming years.

Greater spending on social services such as education and health will also help alleviate poverty. The administration will be focusing on large tax payers to generate more revenue.

But for Morgan Stanley Investments Management Chief Ruchir Sharma, the government must prioritize infrastructure spending over social service.

To achieve high economic growth, a fourth of the economy must be composed of hard investments. Sharma said the Philippines has only around 20 percent, which is well below the global average.

"You need to first focus on spending on infrastructure before you can focus on spending on welfare and subsidies," he said.

He explained that infrastructure projects create more revenue, while providing social services was more costly. He said that the agriculture sector, which employs a third of the labor force, should also sustain growth.

According to figures from the Philippine Statistics Authority, agriculture sharply declined by more than four percent during the previous quarter.

  • Q2 2015: -0.1%
  • Q3 2015: -0.1%
  • Q4 2015: -0.2%
  • Q1 2016: -4.4%

The President's economic team is making a lot of promises and facing a lot of problems at the same time. But they said that with enough political will like that of the President, things might just happen.