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Poor Filipino families worst hit by rising July 2018 inflation

Research group IBON said that faster inflation largely due to rising food prices hits poor households the worst.

The group also said that the Duterte administration’s proposal to increase food imports is short-sighted, and that the best defense against rising food prices and high inflation is to increase domestic food supply through long-term solutions that correct long-standing government neglect of agriculture.

The Philippine Statistics Authority (PSA) reported that July 2018 inflation rose to 5.7 percent from 5.2 percent the previous month.

This was mostly driven by worsening inflation in food and non-alcoholic beverages with higher rates among nine out of 11 commodity items in the index.

Prices rose fastest for vegetables (16 percent), corn (13 percent), and fish (11.4 percent).

IBON said that this increasingly expensive food is particularly problematic for poor families because food takes up a greater portion of their expenditure compared to higher income families.

According to the latest available data from the 2015 Family Income and Expenditures Survey, 59.7 percent of the expenditures of families in the bottom 30 percent income group was spent on food compared to just 38.8 percent for families in the upper 70 percent income group.

Rising prices will push more families into hunger and poverty, the group said.

The Duterte administration is proposing to arrest escalating food prices and inflation by lowering tariffs on food to increase their importation.

IBON however said that while this could give some immediate relief it is only a short-sighted measure and the government is still failing to come up with long-term solutions to rising domestic food prices.

The much-needed long-term solution is to increase domestic agricultural, fisheries and livestock productivity, said the group.

Yet the Duterte administration is proposing to increase food imports while cutting the Department of Agriculture (DA)’s proposed budget for 2019 by Php862 million, making it 1.7 percent lower than in 2018.

Domestic producers lacking government support are at risk of being undermined or displaced by cheap food imports.

IBON said that additional food imports should only be for a short time until prices stabilize.

 

Suspending the Tax Reform for Acceleration and Inclusion (TRAIN) Law will also greatly reduce inflationary pressures.

 

The group stressed that measures to increase farm productivity should immediately be implemented including providing irrigation, production and storage facilities, extension services, subsidized credit and marketing support, among others. #

Crisis of PH agriculture drives high inflation and economic slowdown

Research group IBON said that the recently released second quarter 2018 growth figures confirm the fundamental reason for rising food prices: underdeveloped agriculture from government neglect.

IBON said that while the Tax Reform for Acceleration and Inclusion (TRAIN) law is the most proximate driver of inflation within the Duterte administration’s control, the agricultural sector’s underdevelopment is the long-term reason for rising food prices.

The sector is in deep crisis with slowing growth, massive job losses, and domestic food supply insufficient for the growing population, the group added.

The Philippine Statistics Authority (PSA) reported drastically slowing growth in agriculture to 0.2 percent in the second quarter of 2018 from 6.3 percent in the same period last year.

First semester growth has correspondingly been dragged down to just 0.7 percent in 2018 from 5.6 percent in the first semester last year.

IBON noted that agricultural growth today falls far behind estimated population growth of 1.6 percent in 2018 and is well below the seven-decade historical average of 3.0 percent since 1948.

The agricultural slowdown is also reflected in massive job losses in the sector.

Agricultural employment collapsed by a huge 723,000 to just 9.8 million in April 2018 from 10.5 million in the same period in 2017, the group observed.

“The Duterte administration only gives lip service to improving agricultural productivity amid this severe crisis of agriculture in the countryside,” IBON executive director Sonny Africa said.

He said that the 2019 budget for Department of Agriculture (DA), for instance, is even proposed to be cut by Php862.3 million or a 1.7 percent decline to Php49.8 billion from Php50.7 billion in 2018.

These are comparable figures using the cash-based equivalent for 2018 with the cash-based budget for 2019.

“The administration also continues long-standing government neglect of the sector,” Africa added.

“The combined agriculture and agrarian reform budget is only 3.7 percent of the total proposed cash-based budget for 2019. This is less than the 3.8 percent share under the obligation-based budget for 2018 and even lower than the historical range of about 4 to 6 percent since the mid-1980s,” he explained.

According to Africa, proposals to increase food imports may be necessary but should only be a short-term emergency measure used with restraint if it has been established that there is a shortage.

It is possible for more food imports to lower prices but only if traders do not exploit tariff cuts just to increase their profits, he said.

“With importation, uncompetitive domestic producers not given enough support by the government will be displaced if trade protection for them is removed. Importation could also tend to worsen the trade deficit and add to pressures for the peso to depreciate,” Africa warned. # (IBON.org)

 

Rice tariffication to impoverish Filipino farmers more, Congress warned

Research group IBON raised concern over the current move by the House of Representatives (HOR) to lift the quantitative restrictions (QR) on rice imports and instead apply a 35 percent tariff on unlimited rice importation.

This will practically decrease farm gate prices, said IBON, but not necessarily lower retail rice prices as government claims.

Rice prices have increased for six straight months in 2018 – by Php2.53 from Php37.83 to Php40.36 for regular milled rice and by Php1.61 from Php42.58 to Php44.19 for well milled rice.

Consequently, government called for additional importation ahead of the schedule for the minimum access volume (MAV), a commitment under the World Trade Organization (WTO), and for Congress to rush the rice tariffication bill to lower the price of rice and ensure support for farmers.

IBON however said that as it is, the prevailing farm gate price of Php21 does not provide sufficient income from the farmers’ average production cost of Php12 per kilo.

Computing the average yield of 80 cavans of palay from one hectare, which is equivalent to 4,000 kilos, the rice farmer earns only Php36,000 until the next cropping.

Each cropping commonly lasts for six months, which means that the farmer’s average monthly income of Php6,000 is 76 percent short of the estimated monthly family living wage (FLW) of Php25,454 for a family of five.

If higher importation will decrease farm gate prices, the already insufficient income of farmers will fall further, IBON said.

Retail prices, on the other hand, will not likely automatically go down with increased rice imports that supposedly stabilize supply.

The years of highest importation are also the years of highest price increases, IBON observed.

For instance, when rice retail prices increased by Php7.99 per kilo during the rice crisis in 2008, the country was already importing an average of 1.8 million metric tons (MMT) for three years, an unprecedented volume since 2000s.

When the country imported even more at a yearly average of 2.2 MMT from 2008-2010, retail prices continued to increase by an annual average of Php1.20 until 2016.

The farmers are themselves rice consumers, IBON said, and will be affected badly by lower income yet continuously increasing rice retail prices.

The group added that Congress may be misguided for placing hopes on unlimited rice importation for stabilizing supply and prices while the rice industry remains dominated by an alleged trading cartel that dictates rice prices. #