Agriculture, the weakest link in the Philippine economy, is partly fueling the rise in the country’s inflation rate.
The inflation rate in May, as measured by the consumer price index, climbed to a 42-month high of 5.4 percent from 4.9 percent in April, with transport cost and food prices accounting mostly for the increase.
The rising cost of transportation is a given because of surging crude prices in the world market as a result of the geopolitical conflict in Eastern Europe.
But the increase in the prices of pork and fish is something that can be moderated in an agricultural setting like the Philippines.
Food inflation in May, per the report of the Philippine Statistics Office early this week, further rose to 5.2 percent from 4 percent in April due to the faster increase in the prices of vegetables, fish and meat.
Transportation fares are a major factor in the delivery cost of food items.
However, when the lack of supply is also causing prices to go up, something is amiss with the agriculture sector.
One factor that is leading to the rise in pork prices is the high cost of corn – a major feedstock for the livestock sector.
Corn inflation remained high at 24.4 percent in May due to a limited global supply and high prices.
The Philippines, according to the United States Department of Agriculture, may import 750,000 metric tons of corn from 2022 to 2023 as supplement to feed wheat, whose prices have soared amid the Ukraine-Russia war.
The volume is 250,000 MT is higher than the earlier projection of 500,000 MT of corn imports for the current market year.
Soaring fish prices are also unforgivable in the Philippines given its extensive coastline.
It is no wonder then that agriculture’s contribution to the gross domestic product has been on a decline.
Agriculture production accounted for just 10.2 percent of the total economic output in 2020 from 13.8 percent in 2010.
Agriculture’s performance is anomalous considering that a majority of the population live in the countryside.
Our incoming policy makers should take a hard look at the sector. It should be a major driver of the economy and an inflation stabilizer.