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Soaring food prices threat across Asia

 

THE Asian Development Bank (ADB) on Tuesday warned that rising global food and oil prices could push more Filipinos into “extreme” poverty and cut the country’s economic growth in the next two years.

In a report titled, “Global Food Price Inflation and Developing Asia,” the Manila-based lender said that a 10-percent rise in domestic food prices in the Philippines could push an additional 1.37 million into poverty or 1.26 per 1.37 million into poverty or 1.26 percent.

At 20-percent jump in food prices, the number of poor Filipinos will increase by 3.2 percent, or 2.75 million.

According to the National Statistical Coordination Board (NSCB), the number of poor Filipinos reached 28.5 million in 2009, from 27.6 million in 2006.

The ADB said that domestic food inflation in many regional economies in Asia has averaged 10 percent in early 2011.


Data from the National Statistics Office (NSO) showed that about 42.6 percent of expenditures of an average Filipino family were on food in 2009.

For families in the bottom 30-percent income group, the percentage was much higher at 60 percent, while for families in the upper 70-percent income group, it was 40.5 percent.

“Therefore, an increase in food prices will significantly lower consumer purchasing power, especially among the poor,” the ADB said.

The country’s peso purchasing power fell to P0.58 in March from P0.61 in the same period last year because of rising inflation.

Purchasing power

In Metro Manila, the purchasing power is at P0.59 and P0.58 for areas outside Metro Manila.

Average Filipino families earned P206,000 yearly, while families in the bottom 30-percent income group, which may be considered as poor families, had an average of P62,000 yearly.

The NSCB said that the latest official poverty data indicate that a Filipino needed P974 in 2009 to meet his/her monthly food needs and P1,403 to stay out of poverty

Changyong Rhee, ADB chief economist, said that for poor families in developing Asia, who already spend more than 60 percent of their income on food, higher food prices further reduce their ability to pay for medical care and their children’s education.

“Left unchecked, the food crisis will badly undermine recent gains in poverty reduction made in Asia,” Rhee added.

The ADB said that many any who were poor before the price increases may now be on the verge of hunger and malnutrition, and those who were barely above the poverty line may have slipped back into poverty.

An earlier report by the World Bank (WB) showed that the Philippines was 10 percent behind its target to achieve the Millennium Development Goal of eradicating extreme poverty by 2015.

The WB report said that if the global food and oil price hikes seen in early 2011 persist in the remainder of the year, economic growth in the region could be reduced by up to 1.5 percentage points.

In the Philippines, GDP (gross domestic product) growth is also estimated to slow down significantly, by 1.2 percentage points in 2011 and 0.9 percentage points in 2012 since the country is a large net importer of both food and Brent crude oil.

GDP is the total value of goods and services produced in a country in a year.

The Philippines is targeting a 7 percent to 8 percent economic growth this year and up to 2016.

Socioeconomic Planning Secretary Cayetano Paderanga said that the 7 percent to 8 percent target this year would be “difficult” to attain because of the crises in the Middle East and North Africa as well as in Japan.

While the 7 percent to 8 percent target this year is “still attainable,” the same goal would be “easier” to attain next year, he added.

The ADB said that fast and persistent increases in the cost of many Asian food staples since the middle of last year, coupled with crude oil reaching a 31-month high in March, are a “serious setback” for the region that has rebounded rapidly and strongly from the global economic crisis.

Benjamin Diokno, an economist and Budget secretary during the Estrada administration, told The Manila Times that the ADB study calls for immediate top-level action.

“Worse case: A 30-percent increase in both oil and food prices. Poor are highly vulnerable. Not only is poverty incidence high but the Philippines has a very high food weight (46.58) in the CPI [consumer price index]. A big chunk of the poor man’s budget goes to food,” he said.

Ledac meeting

“If I were (President Benigno Aquino 3rd), I’ll call for a weekly Ledac meeting preparatory to the May 9th session. I may even consider calling for a special session starting May 2nd to address the twin problems of higher food and oil prices,” Diokno added.

Ledac is the Legislative Executive Development Advisory Council.

The Fifteenth Congress reconvenes on May 9.

Diokno, now with the government-run University of the Philippines, recommended specific actions such as adoption of flexible value-added tax (VAT) for oil and oil products.

Another is automatic reduction of VAT from 12 percent to 10 percent if world crude costs reach $120 per barrel.

Diokno proposed immediate release of the balance of the 20 percent IRA (internal revenue allotment) for development purposes for areas that are heavily agricultural, use of a big chunk of the President’s Social Fund for job-creation program in the countryside and the release of funds for the government’s schoolbuilding program.

The program is seen to create jobs in rural and urban areas.

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Today’s Front Page January 21, 2020

Today’s Front Page January 21, 2020