El Niño unlikely to dent growth this year — NEDA

MANILA, Philippines — The prevailing El Niño will not significantly impact on growth and inflation expectations this year as agriculture has a minimal contribution to the economy and rice importation is now liberalized, officials of the National Economic and Development Authority (NEDA) said.

Socioeconomic Planning Secretary Ernesto Pernia said due to the small contribution of the agriculture sector to domestic economic output, the effect of the dry spell to overall growth would also be minimal.

Owing to its weak growth of only 0.8 percent in 2018, the farm sector contributed only 0.1 percentage point to gross domestic product (GDP) as opposed to the more robust contribution of 2.3 percentage points of the industry sector and 3.8 percentage points of the services sector.

In terms of gross value added (GVA) to GDP, the agriculture sector only has a share of between eight to nine percent.

“Given the contribution of agriculture to GDP, the impact will be proportional to that contribution,” Pernia said in a briefing.

NEDA assistant secretary for policy and planning Carlos Abad said without interventions in place, the prevailing dry spell would shave off 0.2 percentage point from growth, which is already factored into the revised six to seven percent growth expectations by the economic team for this year.

He noted however, that with interventions already in place, the effect may be less.

“We also have less thunderstorms during El Niño and there might be some benefits later on because of this,” said Abad.

The liberalization of rice importation is also expected to blunt the inflationary effects of El Niño as rice supply is expected to remain stable, Pernia said.

“The implementation of the rice tariffication law is really very timely. Had we not done that, if we had been tardy in terms of doing that, then it would have been worse. The thing about inflation is that rice is a problem when there is a domestic shortage and if there is a problem in the timing of import,” he said.

“This time, the timing of imports will be right on the dot because importers are adept at responding to the perceptible shortages. They are better at estimating when it is profitable and when it is not,” he added.

The implementing rules and regulations (IRR) of the Rice Tarriffication Act is expected to be issued next week.

Pernia said despite the occurrence of this phenomenon, NEDA is confident the government can stick to the two up to four percent target range set for inflation this year.

“I think we can be confident that we can stay within the target range of two to four percent. Because we now expect it to hit three percent. So if there will be some impact on inflation it will still be below four percent,” he said.

NEDA assistant secretary for regional development Mercedita Sombilla said major rice producing regions were already able to harvest, thus contributing to domestic rice supply and helping keep prices stable.

“Major rice producing areas have more or less harvested their production so I don’t think we will experience really reduced rice production as a result of this El Niño. And if we note Pagasa’s report, it has already peaked actually and already weakening over the next couple of months,” she said.

“Rice prices are still relatively stable until now. And the rice tariffication law now effective we expect more private sector participation to get rice imports to beef up domestic supply,” she added.