No threat to inflation seen from prolonged El Niño

The El Niño phenomenon may linger in the country longer than expected, but the Bangko Sentral ng Pilipinas (BSP) said this would not have an effect on inflation and put “negligible” pressure in the price of rice.

Bruce Tolentino, a member of the policymaking Monetary Board of the Bangko Sentral ng Pilipinas, said that even when a much longer drought would persist until 2020 as forecast by the state weather bureau, the affected areas were “not significant for rice,” adding that “rains have already come for Central Luzon and Cagayan Valley” where the bulk of the country’s rice production came from.

This means the impact of the El Niño especially in food production would not be drastic and any effects it would have on rice would be minimal.

The latest climate outlook from the Philippine Atmospheric, Geophysical and Astronomical Services Administration (Pagasa) said there was a 70-percent chance that dry and warm conditions would continue until the end of 2019 and persist until 2020 “but with high uncertainty.”

It expected 63 provinces to be hit by El Niño in varying degrees.

During the onset of El Niño, the agriculture sector incurred P7.96 billion in damages and losses—the majority of which were on rice and corn—but Agriculture Secretary Emmanuel Piñol said the figures represented only 1 and 4 percent of the country’s total rice and corn production, respectively.

So far, the effects of the climate pattern were not manifested in the country’s inflation rate during the first quarter, which averaged 3.8 percent.

Tolentino, also a former director of the International Rice Research Institute, said prices of rice in the market should continue to moderate especially with the deregulation of rice trade.

The crucial next item to monitor, he noted, would be the movement of international rice prices and any international supply and price shocks in countries where the Philippines would source its imported rice, including Thailand, Vietnam, Pakistan and Myanmar.

Economic managers said the influx of cheap imported rice should bring down the inflation rate by as much as 0.6 percentage point and provide fresh revenue to the national government in the form of import duties. —KARL R. OCAMPO