Agriculture will remain among the “top concerns” of the economy in the next few years, as woes in the sector tend to spill over to other economic indicators, such as inflation and growth.
The Department of Finance (DoF) said the sector will be among the main worries of the Duterte administration for the rest of its term, as the government should find ways to fulfill its goal of raising farm productivity and rural incomes.
This will, in turn, prevent a repeat of the supply problems in rice and other major food items that led to the elevated inflation rate in the second half of 2018.
Inflation for the year peaked at 6.7 percent in September and October, owing largely to rising prices of food items—particularly rice during the period.
According to Philippine Statistics Authority (PSA) data, rice was the No. 1 contributor to inflation in September 2018, while food items in the consumption basket accounted for more than half of the inflation rate in the same month.
“We will focus on agriculture in the coming years. We know that the major reason for the inflation this year has been the logistics problems we have had in agriculture, as well as production problems,” Finance Secretary Carlos G. Dominguez III said during a recent business forum.
The Bangko Sentral ng Pilipinas (BSP) also expressed concern on the local banks’ reluctance to lend to the agricultural sector to improve its productivity.
“Despite its significant impact and contributions, the agricultural sector’s access to credit remains a key challenge: most lenders consider it a high-risk market due to its vulnerability to weather conditions and natural disasters, productivity and capacity issues, and inadequate borrower information and infrastructure, among other factors,” the BSP said.
“The reluctance of financing institutions to lend puts smallholders at a disadvantage and hinders them from effectively integrating into higher value markets,” it added.
To date, the average share of agricultural loans stands only at 2.4 percent, significantly lower compared to the share of consumer loans at 17.5 percent and real-estate loans at 19.92 percent.
The DoF said woes in the agricultural sector worries the private sector.
Dominguez recalled that improving agricultural output and raising farmers’ incomes through education and the use of new farm technologies emerged as the No. 1 actionable recommendation of the private sector in the four “Sulong Pilipinas” events held last November. “This shows that even the business community recognizes the importance of the farm sector in sustaining the economy’s high growth rate,” the DoF said.
Agriculture currently employs approximately 11 million Filipinos, but accounts for only 9 percent of the country’s GDP.
Image credits: Nonie Reyes