Incoming President Ferdinand “Bongbong” Marcos Jr.’s resolve to prioritize and boost agriculture will be carried out through immediate and long-term actions, as governments worldwide brace for a looming food crisis, said incoming Press Secretary Trixie Cruz-Angeles.
Meanwhile, Albay Rep. Joey Sarte Salceda warned that the country’s economic recovery could be undermined by a “massive disinflationary effort” in the United States to arrest rising prices of goods and bring liquidity levels to its pre-pandemic trajectory.
Several overlapping crises have created a “perfect storm” for a worldwide food crisis, according to the World Bank, World Trade Organization (WTO), and the June-September 2022 Hunger Hotspots outlook by the Food and Agriculture Organization (FAO) of the United Nations and the World Food Programme (WFP).
The FAO and WFP warned of an “acute food insecurity.”
“The lingering effects of COVID-19, weather extremes, economic shocks, conflict, the rising cost of fuel and energy, public debt burdens, and disruptions in supply chain brought about by the war in Ukraine have been identified as factors exacerbating the strain on food security, which has now become a race against time,” Angeles said.
“Organized violence and conflict remain the primary drivers for acute hunger… Moreover, weather extremes such as tropical storms, flooding, and drought remain critical drivers in some regions,” global experts said.
“Ripple effects of the war in Ukraine have been reverberating globally against the backdrop of a gradual and uneven economic recovery from the COVID-19 pandemic, steadily increasing food and energy prices, and deteriorating macroeconomic conditions,” they added.
Since the Ukraine-Russia war began in February, shipments from Ukraine’s Black Sea harbors have halted and those of the Russian Federation reduced in volume, thereby increasing the cost significantly especially on countries dependent on food imports.
“Disruptions to Ukrainian agricultural production, logistics, and food processing caused by active fighting and input shortages already affect global food supplies. Additionally, already high fertilizer costs—exacerbated by market uncertainties caused by the war—have reached record levels.”
According to Morgan Stanley, Russia and Ukraine export 28 percent of fertilizers made from nitrogen and phosphorus.
Wheat exports from the two countries accounted for about 29 percent of international exports.
Citing the outlook and an earlier statement by the Philippine Chamber of Agriculture and Food, Inc. (PCAFI), Angeles said food protectionism plus the need to control domestic prices amid spikes in worldwide prices and the expected food crisis may prompt exporting countries to limit or ban food and other exports.
This happened during the 2007-2008 food crisis.
“That will be a challenge for the incoming Marcos administration, as we are currently dependent on some food importations, including rice,” Angeles said.
“It will require an immediate response, even as President-elect Marcos stresses the long-term solutions should be simultaneously underway,” she added,
During the campaign period, Marcos underscored the need to propel the Philippines towards achieving food security and, eventually, food sovereignty—putting control back in the hands of the community and the people, directly linking farmers to consumers and limiting the number of hands in the value chain; implementing subsidies; limiting importation; adopting modern techniques and incentivizing research and development to promote innovation.
In April, he explained that efforts to boost the local agriculture sector will not be immune to “intervening factors” that are beyond control, such as rising fuel prices in the world market.
Pump prices soared anew in June due to increasing demand in northern hemisphere nations now experiencing summer, and a ban on Russian oil by the European Union.
“Mayroon tayong methodology kung paano gawin, pero madaming factors na wala tayong control, wala tayong influence—hindi natin ma-i-influence world events that affect our farmers directly,” Marcos said at a news conference.
Marcos stressed that he remains committed to his aspiration to achieve food security and food sovereignty.
“We have to watch out. The United States will, at some point, have to undertake larger disinflationary efforts than the 75 basis points in policy rate hikes that it conducted last week. It appears that the US will have to undertake measures similar to what it undertook in the early 80s under Fed Chair Paul Volcker, which brought prices back to more normal levels, but also hit the global economy hard,” Salceda said.
“I think it is the biggest forward risk to the Philippine economy. And we need coordinated fiscal, and monetary policies, as well as efforts in both the financial and the real sectors of the economy, to mount a strong defense,” Salceda added.
“I am particularly concerned about two things: One, US May inflation rates were the highest since 1981, at the height of Volcker-era policies to combat inflation. Second, the US has added USD 6.3 trillion in liquidity since January 2020. In other words, about a third of all liquidity circulating in the US economy was created just during the pandemic.”
“That is the fastest money ever grew in US history. And it is causing massive demand spikes without the corresponding growth in productive capacity, raw material, or technology and innovation. Of course, it was bound to cause price hikes.”
“For mature economies like the US, the bedrock of the economy is price stability. So, they will be forced, at some point, to kill that new money, to siphon it off of circulation.”
Salceda, chair of the House Committee on Ways and Means, recalled that due to Volcker-era policies in the US in the 1980s, US economic growth was negative, causing the slowest Philippine growth in ten years, at just 3.4% in 1981, presaging the eventual economic difficulties of the mid-1980s.
“It’s going to cause a global storm, because you will probably need to kill around 20% of all financial assets in the US economy. That is the largest definancialization the global economy will experience, in nominal terms, ever,” Salceda warns. “And that kind of money murder will certainly affect at least some assets in the country, and will also make borrowing harder for our private sector, which has around USD 43 billion in external debt.”
“My point is, this is going to be a global storm. Our house is very strong due to comprehensive fiscal reforms and investment and trade liberalization reforms. Q1 growth levels prove that. But an economic super typhoon like this will still hit us. And that will have implications on growth, investment, borrowing costs for the economy. No matter how strong the house is, or how clean the living room is, or how good the cooks are. We will still be flooded outside,” Salceda said.