THE further depreciation of currencies among developing economies, including the Philippines, could worsen the global food and energy crisis, according to the World Bank.
While the prices of most commodities declined, the depreciation of most currencies against the US dollar increases the cost of purchasing these goods, said the World Bank’s latest Commodity Markets Outlook report.
Majority or 60 percent of oil-importing emerging-market and developing economies saw higher domestic pump prices while almost all or 90 percent of these economies saw more expensive wheat prices.
“The combination of elevated commodity prices and persistent currency depreciations translates into higher inflation in many countries,” said Ayhan Kose, Director of the World Bank’s Prospects Group and EFI Chief Economist, which produces the Outlook report.
“Policymakers in emerging market and developing economies have limited room to manage the most pronounced global inflation cycle in decades. They need to carefully calibrate monetary and fiscal policies, clearly communicate their plans, and get ready for a period of even higher volatility in global financial and commodity markets,” Kose added.
The Philippine peso is the worst performing currency among the Asean-5, depreciating by around 13.48 percent, according to recent data shared by the Bangko Sentral ng Pilipinas (BSP).
The data showed the Malaysian ringgit depreciated by 11.73 percent; Indonesian rupiah, 7.95 percent; and the Vietnamese dong, 6.66 percent.
Net oil, food importer
The Philippines is also a net oil and food importer. The country’s food self-sufficiency ratio is not at 100 percent for all commodities, which the Philippine Statistics Authority (PSA), “indicates inadequacy of food production to cope with the demand of the population.”
“Although many commodity prices have retreated from their peaks, they are still high compared to their average level over the past five years,” said Pablo Saavedra, the World Bank’s Vice President for Equitable Growth, Finance, and Institutions.
“A further spike in world food prices could prolong the challenges of food insecurity across developing countries. An array of policies is needed to foster supply, facilitate distribution, and support real incomes,” he added.
The World Bank report noted that while global rice prices declined 4 percent in the third quarter, it remained 6 percent higher than a year ago.
The report said the US Department of Agriculture expects global rice production to decline 2 percent in 2022 to 2023, reflecting lower crop yields in China due to dry conditions and to lower planted area in India.
The Washington-based lender said these shortfalls may be compensated by Thailand and Vietnam, which are expected to raise production by 1.2 percent each; India, Thailand, and Vietnam are the world’s three dominant rice exporters.
However, as global rice consumption is expected to remain broadly unchanged, the supply shortfall will reduce the stocks-to-use ratio for rice to 0.34, marginally lower than the past two seasons but considerably higher than the low of 0.18 in 2006.
“Rice prices have been broadly stable during the past five quarters since retreating from a seven-year high in 2021Q1 [first quarter of 2021] amid heightened pandemic-related concerns about global supplies and discussion of export restrictions, most of which did not materialize,” the report stated.
“This is in contrast to the sharper and more sustained price spike of 2010-11, which resulted from trade restrictions by key exporters (notably India and Thailand) and aggressive buying by major importers (Indonesia and the Philippines),” it added.
The World Bank said since the outbreak of the war in Ukraine, energy prices have been quite volatile but are now expected to decline. After surging by about 60 percent in 2022, energy prices are projected to decline 11 percent in 2023.
Despite this moderation, energy prices next year will still be 75 percent above their average over the past five years.
The price of Brent crude oil is expected to average $92 a barrel in 2023—well above the five-year average of $60 a barrel. Both natural gas and coal prices are projected to ease in 2023 from record highs in 2022.
However, by 2024, Australian coal and US natural-gas prices are still expected to be double their average over the past five years, while European natural gas prices could be nearly four times higher.
Coal production is projected to significantly increase as several major exporters boost output, putting climate-change goals at risk.
Identified solutions
Meanwhile, Department of Agriculture (DA) Senior Undersecretary Domingo F. Panganiban said interagency solutions have been identified by the International Monetary Fund (IMF), the World Bank (WB), the International Fund for Agricultural Development (IFAD), the World Food Programme (WFP), and the World Trade Organization to address these concerns.
Among these solutions are providing immediate support to the vulnerable by strengthening the safety nets of vulnerable households, as well as facilitating trade and supply of food by releasing stocks based on agreed rules and doable diplomatic solutions to address food availability and affordability in the short run.
Panganiban also cited: boosting production by providing affordable farm inputs and identifying the private sector as the primary actor and working capital; as well as investing in climate-resilient agriculture by supporting resilient investments in agricultural capacity and developing climate-smart technologies.
The DA official attended the 50th Session of the Committee on World Food Security (CFS) in Rome on October 10-13, 2022. The CFS, established in 1974 and reformed in 2009, is the foremost inclusive international and intergovernmental platform for all stakeholders to work together to ensure food security and nutrition for all.-
Image credits: Nonie Reyes