Gains made toward rice self-sufficiency in the last five years have insulated the Philippines from the effects of possible spikes in commodity prices abroad, keeping the country’s inflation in check despite the significant amount households spend on food every month.
In a report this week, financial giant Standard Chartered noted that from being one of the most affected by higher international food prices in 2008, the Philippines was now one of the least-sensitive countries to cost spikes in Asia.
“Improved food security, particularly rice, makes us more optimistic that food inflation will remain subdued,” the bank said.
The bank cited statements by Agriculture Secretary Proceso Alcala in July, which stated that the Philippines was 98-percent self-sufficient in rice as of the end of 2012.
In August, Alcala also said the country was on track to achieve self-sufficiency this year, despite some damage from the typhoons that recently hit the country. He said rice damage so far this year was only 200,000 tons, “way below” the annual provision for damage of 600,000 tons.
At the same time, rice production increased by 1.3-percent year-on-year in the first half, compared to the slight drop in production previously predicted.
“Self-sufficiency would be a significant structural shift for the Philippines, given that it was the world’s largest rice importer as recently as 2010,” Standard Chartered said.
“We believe that the targets set by the Philippines’ Department of Agriculture are having an impact,” it added.
The bank said the country had achieved rice self-sufficiency due to investments in irrigation and post-harvest facilities, the introduction of more affordable and certified seeds from seed banks, increased cropping intensity and providing farmers access to capital.
Due to these gains, Standard Chartered said the Philippines was now one of the least-sensitive to food price increases in Asia, next only to Singapore and India.
Standard Chartered, however, said the Philippines was not completely out of the woods yet in terms of the impact of food prices on overall inflation. It said there were upside risks, albeit limited, to inflation from meat, dairy and vegetables over the next year.
“Meat and dairy inflation has been quite stable in the past five years. Vegetable inflation is subject to seasonal shocks, but they usually have limited impact. In our view, fish prices represent the greatest upside risk to food inflation at present,” it said.
Inflation for the month of August, which is scheduled to be released Thursday, is expected by the central bank to settle between 1.9 percent and 2.7 percent. This comes from an inflation rate of 2.5 percent in July and a year-to-date average of 2.9 percent.