Lack of P2.8 trillion stimulus package worsens GDP projected at negative 4-6% growth for 2020, worsening plight of 4.1 million rural folks

July 13, 2020

The private sector lamented government’s lack of fund to finance a P2.8 trillion proposed stimulus package that worsens COVID 19 crisis’s economic impact, sending yearend GDP to a negative growth of 4-6%, further adversely affecting 4.1 million food-poor rural people.

   After having hit a negative 0.2% GDP (gross domestic product) in the first quarter, the economy is projected to further decline by a negative GDP growth of 8-10% in the second quarter, 4-6% in the third quarter, and 2-4% in the fourth quarter – putting the economy into a state of recession

   “My rough estimate is we will have a negative 4-6% percent GDP growth for the whole year of 2020. Assuming a negative 5% growth due to COVID 19 plus the 7% lost (original GDP growth projection without COVID 19), we will have lost 12% less in GDP,” said PCAFI President Danilo V. Fausto in a webinar hosted by the Procurement and Supply Institute of Asia (PASIA).

   Such GDP loss is equivalent to P2 to P2.2 trillion  based on the Philippine Statistics Authority’s (PSA)  $356.8 billion  GDP as of 2019 at P50 to P51 to a dollar conversion, said Fausto, an economist and entrepreneurial founder of DVF Dairy Inc.

   Unfortunately, the worst impact will be on those recorded even as of 2018 to be of the highest subsistence level –farmers consisting of 11.5% of the Philippine population.  Those in the highest subsistence incidence also include fishers, 8.3% and individuals residing in rural areas, 8%.

    The already food-poor people as of 2018 totals to 4.1 million rural residents, 3.2 million children and 2.7 million women.

   PCAFI noted that the nominal wage rate in agriculture was P276.03 per day as of 2018. But adjusted for purchasing power due to inflation, this is equivalent to a real wage of just P191.69 per day.

   In response to COVID 19’s economic impact, Congress proposed a P2.8 trillion stimulus package consisting of the P1.3 trillion Accelerated Recovery and Investment Stimulus for the Economy of the Philippines (ARISE) and P1.5 trillion for Economic Reduction and Economic Stimulus (CURES).

   “Apparently, this cannot be funded since economic managers can only allow a maximum of 9% on the deficit this year, and the current deficit of P1.613 trillion is already equivalent to 8.4% of GDP,” said Fausto.

Fishery wastage observed at fish ports of Bulan in Sorsogon, Masbate Pass, Masbate Bay, Ticao Pass, Burias Pass, and Sibuyan Sea due to COVID 19 lockdown

   Nevertheless, PCAFI looks forward to sustained positive impact of some reforms in agriculture implemented particularly the easing of credit access for small farmers by the Land Bank of the Philippines (LBP). 

   This easier credit access enabled LBP to raise agriculture lending  to P236.31 billion in 2019 compared to only P183.4 million in 2017.

    Fausto noted LBP’s reforms including simplification of loan application form to one document from 3 documents that are now easier to be filled up through tick boxes. 

   LBP also cut requirements to only the filing of loan application form and barangay clearance.  It shortened loan processing from 10 days to 1 day.  It has expanded loan workforce, recruiting more than 1,000 credit specialists deployed throughout towns to directly help farmers.  

   Still, many banks failed to comply with the Agri-Agra law that mandates banks to allocate 15% of loan portfolio to agriculture and 10% for agrarian reform-related projects.

   This deprives the agriculture sector of P734  billion in mandated accessible loan.

   Even government’s guarantee program is very limited, making the figure a minuscule 5% compared to the P180 billion guarantee for the real estate sector under the Home Guarantee Corp.  

   Here are concerns in agriculture that should be addressed in order to raise production and uplift livelihood levels of farmers:

  1.   Address farm size fragmentation by managing small farms into larger operating units to overcome liability of “smallness” from land preparation to sourcing of inputs, product processing and transport, and marketing.
  2. Achieve economies of scale through strengthening of farmers’ associations and irrigators’ associations, expanding contract growing, and raising success of agrarian reform.

“With contract growing, the corporate integrator programs the production schedule, be assured of his raw materials, and the farmer gets to sell all the produce he was contracted for at a fair market price,” Fausto said.

  • Address lack of productivity by enhancing linkages of primary producers to markets that will solve these problems.

“Supermarkets, fast food outlets, and convenience stores are taking business away from the traditional wet markets, carinderias, and sari sari stores,” said Fausto. 

   These similar problems should be resolved– seasonality of farm produce (the bulk comes to the market at the same time, sending price to collapse); lack of prior marketing arrangements between farmers and buyers; lack of agronomic practices (for flowering, harvesting) to make harvest year-round; and poor schedule of seeding, fertilization and irrigation in order to meet market timing needs.

   Fisheries sector also faces huge development deficiencies.

   “We have 220 million hectares of territorial waters including our exclusive economic zone (EEZ), 750,000 hectares of inland waters (lakes, rivers, reservoirs), and a coastline of 17,460 kilometers,” said Fausto.

  The Department of Agriculture (DA) proposed a P280 billion budget for 2021, a 333% jump from the P64.7 billion in 2020.

   It includes budget for Plant Plant Plant, rice  buffering by the National Food Authority, upscaling of Kadiwa ni Ani at Kita, distribution of seeds and fertilizer, enhancing livestock and poultry subsectors and of small ruminant, increased white corn production for snack and supplemental food, expansion of coconut  production, coconut replanting, development of fisheries ( aquaponics, aquaculture, fish cages), and urban farming and gulayan in schools and barangay.

   I also includes a cash for work program and  P20 billion for  food logistics and food market even as supply and logistics disruption occurred due to the COVID 19 crisis and lockdown.

   However, even the proposed budget appears to be just a “wish list.”

   The agriculture sector has  been plagued by food movement and transportation problems resulting in huge losses from throwing away of rotting vegetables from Benguet and other provinces and of wasted fish production from fish ports of Bulan in Sorsogon, Masbate Pass, Masbate Bay, Ticao Pass, Burias Pass, and Sibuyan Sea.

   The logistics problem has even been worsened by inability to transport animal and meat products from Visayas and Mindanao to Luzon due to the African swine fever (ASF) quarantine restrictions. (Melody Mendoza Aguiba)

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