Metro Manila (CNN Philippines, December 13) —The unfolding El Niño episode will hurt consumer prices more than growth prospects for next year, the head of the Philippines’ central economic planning agency said on Wednesday.
National Economic and Development Authority (NEDA) Secretary Arsenio Balisacan said while droughts and dry spells could hit 65 provinces until the first half of 2024, authorities are moving to “preposition services” and interventions, like food stamps, to soften the blow on farmers and vulnerable households.
“The difference between 1997 and now is the relative share of agriculture in the economy which is now much smaller. Our agriculture is something like 10% of the economy,” Balisacan said.
The country’s dams are also operating at full capacity, thanks to recent rains, he said.
While lower farm output could hardly drag the economy next year given its size relative to gross domestic product, weaker agricultural yield can squeeze food supply and therefore stoke consumer prices.
El Niño’s impact can be viewed from that lens and that’s what economic managers watch out for, Balisacan said.
“So with respect to growth and the effect on the economy, I don’t think it will make a dent, a big impact. The channel will be probably more on the prices,” the NEDA chief explained.
He continued: “Because if food prices will pick up then the gains we have made in licking inflation will be reversed. And we don’t want that. And we go back again to the old cycle of high inflation, high interest rates, low demand, low growth. We don’t want that.”
Economic managers will also meet with President Ferdinand Marcos Jr. on Thursday to convene the NEDA Board, and tabled for discussion is the proposed extension of Executive Order No. 10 that cut the tariff on imported pork, corn, and rice.
It is one of the steps the economic team earlier contemplated to keep inflation at bay.
The interagency Development Budget Coordination Committee (DBCC) is set to reassess the macroeconomic assumptions on Friday — their last meeting for the year after a June review.
When asked if there will be changes to the 2024 growth target range of 6.5% to 8% given the increasing headwinds, especially from the external front, Balisacan said the upper end of that band is already “out.”
He also said that 6.5% growth for 2024 is “very reasonable” as the Philippine economy’s expansion averaged 6.3% from 2019.
Supporting that 6.5% growth outlook would be the sustained performance of the services sector, especially tourism and the IT-BPO industries, he explained. The construction sector will also get a boost from the Marcos administration’s housing program that will create more jobs, he added.
