MANILA – Agricultural production is seen to take a hit from the “mild” El Niño currently being felt in the country but its impact on rice inflation is seen to be mitigated by the Rice Tariffication Law.
The Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA) forecasts the dry spell to be greatly experienced from March to May this year.
In a report released Thursday, ING Bank Manila senior economist Nicholas Mapa said initial estimate on crop damage on the first month of the dry weather condition is estimated at around P464.27 million.
By comparison, the damage to crops of the strong El Niño episode from November 2014 to May 2016 was placed at about P8.7 billion, while cost of the moderate El Niño from July 2009 to April 2010 was pegged at around P6.42 billion, he said.
Mapa expects another weak performance for the agriculture sector this year as a result of the mild El Niño.
He explained that the manufacturing sector will also be affected “given the heavy weight of “food manufactures” in the overall sector (24 percent).”
Aside from dry spells, the weather phenomenon which is triggered by a rise in sea surface temperature in the central and eastern part of the Pacific Ocean also sets the right condition for typhoons, which he said, is “a bane to the already decelerating inflation.”
Amid these, the economist forecasts inflation this year to be within the 2 to 4 percent target band “given the primacy of the food basket in the overall CPI (consumer price index).”
“The ability to import rice however will mitigate the ill effects of El Niño on rice price inflation to some extent, but the damage to domestic rice production will be felt in lower incomes for farmers in this sector as well as on fruits, vegetables and meat products,” he said.
“Consumption, which we are counting on for the heavy lifting this year, will need to overcome the slight blip in inflation due to the dry spell,” Mapa added.
Rice tariffication was enacted into law after President Rodrigo R. Duterte signed the Congress approved-measure last February. The law took effect on March 5.
This law allows for unlimited rice importation, but investors must first secure a phytosanitary permit from the Bureau of Plant Industry and pay the 35-percent tariff for shipments from Southeast Asia.
This is expected to result in as much as P7 per kilo decline in the domestic retail price of rice. (PNA)