The Market Monitor Minding the Nation's Business
The United Nations Development Programme (UNDP) has reported that food security food security in the Philippines can be undermined as food prices rise due to higher costs of fuel, freight, and fertilizer.
The problem is blamed by the international agency to the effects of the war in West Asia, particularly the closure of the Strait of Hormuz.
The country, and even the rest of the world, gets most of its fertilizers from the Middle East.
“One of the most distinctive second-round price effects for the Philippines runs through fertilizer prices. The country is a net importer, and the nitrogen grades on which rice and corn depend are particularly exposed to a Middle East supply shock,” the UNDP said.
The UNDP said average granular urea prices rose by about 37% to P2,255 per 50-kilogram (/kg) bag in March-April from P1,650/kg bag in January-February.
“The burden of this price surge largely falls on the grades that rice and corn farmers use the most, making them the most vulnerable to a prolonged shock,” it added.
Rice-farming households derive about two-thirds of their income from agriculture, making them particularly vulnerable to higher input costs and supply-chain disruptions.
Meanwhile, it will be hard for the Philippines to recover from losses in human development gains as the country grapples with the effects of the Middle East conflict.
In a policy brief, the UNDP said the country is among the hardest hit in the region, as it depends on the Middle East for most of its crude oil supply and is a net importer of food and fertilizer.
“The shock has reached households through three reinforcing channels: energy imports, agricultural inputs, and labor migration and remittances. These channels converge on the country’s development trajectory: The UNDP estimates that the immediate impact of the crisis could set back the Philippines’ human development progress by the equivalent of 0.01 to 0.05 years, with losses compounding the longer the disruption persists,” it said.
The policy brief titled “Socioeconomic Impact of the Middle East Conflict on the Philippines” was prepared by Mohamed Shahudh, country economist for UNDP Philippines.
Since the Iran war began on Feb. 28, the Philippines’ macroeconomic conditions have weakened, as seen in the spike in inflation due to soaring pump prices, the peso depreciation, and a slowdown in economic growth.
“UNDP estimates that more than 35,000 Filipinos could fall below the lower middle-income poverty line of $4.20 a day from the initial effects of the war, with this figure rising significantly under a prolonged conflict,” it said.
The UNDP said this could raise the country’s post-crisis poverty rate to 17% from 16.9%, leaving about 20.146 million Filipinos living in poverty.
The estimate assumes a 28-day disruption followed by an eight-month adjustment period. If the adjustment period is limited to four months, the UNDP projects 14,408 Filipinos to be pushed into poverty.
Among the most exposed groups are informal workers, public-transport drivers, farmers, households dependent on remittances, women in low-paid service and care work, and young workers.
“The setback would run through all three dimensions of the Human Development Index, which combines a country’s income, health and education outcomes into a single measure: income first, as inflation and slower growth erode real household incomes, and health and education more gradually, as households under pressure cut back on food, postpone medical care and, if the strain persists, withdraw children from school,” the UNDP said.
According to the policy brief, a prolonged Middle East conflict could sharply reduce household incomes by disrupting remittance flows that account for about 20% of the Philippines’ total remittances.
“The UNDP notes that while short-term shocks may be absorbed, prolonged disruptions to Gulf labor markets can rapidly translate into income shocks for migrant-dependent families, potentially impacting household food security and educational continuity,” it added.