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Agri-food sector key to economic recovery

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Agri-food sector key to economic recovery

A recent Oxford Economics report cited key roles and contributions of the Philippine agri-food sector toward the country’s recovery roadmap during these challenging times of coronavirus disease 2019 (Covid-19) pandemic. It highlighted that it should be the policymakers’ top priority to provide favorable conditions for the said industry to successfully help rebuild the national economy.

In its report titled “The Economic Impact of the Agri-Food Sector in South East Asia” commissioned by Food Industry Asia (FIA), Oxford regarded the agri-food sector as a significant driver in the economic recovery of the Philippines, creating employment and putting food on the table at stable prices.

It noted, however, that supply and demand risks, fiscal measures and seemingly unending impacts of the Covid-19 pandemic could disrupt the recovery.

The report showed the Philippine agri-food sector contributed a total of P6.1 trillion to the country’s gross domestic product (GDP) in 2019, a 16-percent increase from 2015. The sector was also responsible for the 42.7 percent of the entire workforce with 18 million jobs, making it the single most critical source of employment in the economy. The agri-food industry also contributed a total of P829.5 billion in tax revenues.

Oxford pointed to food and beverage manufacturing as a key driver for the agri-food sector in the Philippines, which in contrast to many other Southeast Asian economies, outweighs the size of agricultural production by 46 percent of the total agri-food sector’s GDP contribution.

The report also showed the sector, undoubtedly impacted by the disruptions due to the pandemic, saw a 4-percent contraction in 2020, or a P262.1-billion drop in GDP contribution. It noted, however, that the scale of this impact was considerably smaller than what the economy endured as a whole, highlighting the essential nature of agri-food production and distribution.

Nonetheless, the sector can expect the pandemic to continue to present challenges in economic recovery, according to the Oxford report. In its Economic Recovery Matrix, the Philippines showed important vulnerabilities due to its dependence on tourism to revive its food industry.

To back this optimism, the Philippines ranked second worst across 10 countries when it comes to the sector’s expected economic recovery.

Government-industry cooperation

Given that uncertainties in international tourism continues into the near future, the agri-food industry will need to work closely with the government to identify other ways it can thrive in the new normal, said Elizabeth de Leon-Lim, chairman and president of the Philippine Chamber of Food Manufacturers Inc.

“With the agri-food industry being instrumental to the national economy, it is critical that both the industry and the public sector come together to sustain and uplift the agri-food sector as we move forward into the rest of this year,” de Leon-Lim said.

She cited the sector can provide over 18 million jobs and P6.1 trillion in GDP and is “undeniably an economic powerhouse and an important driver of local employment opportunities.”

Meanwhile, James Lambert, director of Economic Consulting Asia for Oxford Economics, said, “As the Philippines looks to emerge from the [Covid-19] pandemic stronger, it is important that policymakers provide the most conducive conditions for the agri-food industry to successfully rebuild itself, and that any fiscal policy implemented is carefully planned, designed and communicated. That will allow the industry to continue to provide the economic benefits it has delivered over recent decades.”

Lambert noted fiscal adjustments can include reducing public expenditure or raising tax revenues, which can pose a risk to the recovery of the Philippines’ agri-food sector, and subsequently the wider national economy.

The Fiscal Risk Assessment Framework of Oxford Economics report also found that the Philippines is among the most at risk in Asia from post-coronavirus fiscal adjustments, surpassing China, India and other higher-income Asia economies. This means that poorly crafted fiscal responses can have the potential of harming the agri-food sector’s recovery, impacting food security, income and employment, and economic opportunities as a whole.

The report recommended that governments develop successful fiscal responses that do not inhibit the recovery of the agri-food industry. To do this, it noted three conditions need to be met, specifically using education to influence behavior; favoring regulatory standards over taxes; and maintaining a constant conversation with the industry.

Furthermore, Matt Kovac, FIA executive director, stressed the need to also understand the current and future risk landscape before implementing measures to revive the economy in the post-coronavirus years.

“The report has highlighted a range of substantial short-term and long-term challenges facing the agri-food sector in the Philippines, and it is crucial for policymakers to recognize and work around these risks,” Kovac said.

“FIA will be utilizing the report’s insights to actively engage industry stakeholders, regulators and policymakers to facilitate constructive and collaborative discussions that would support the agri-food sector’s contribution toward the Philippines’ recovery roadmap, ensuring that gains made in the industry are not lost during these challenging times,” he added.