By Justine Irish D. Tabile, Senior Reporter
THE PHILIPPINES risks losing a part of its recent human development gains because the Middle East conflict weighs on the economy, with the impact expected to be more significant because the crisis continues, in keeping with the United Nations Development Programme (UNDP).
In a policy transient, the UNDP said the country is among the many hardest hit within the region, because it is dependent upon the Middle East for many 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 transient titled “Socioeconomic Impact of the Middle East Conflict on the Philippines” was prepared by Mohamed Shahudh, country economist for UNDP Philippines.
For the reason that Iran war began on Feb. 28, the Philippines’ macroeconomic conditions have weakened, as seen within the spike in inflation because of soaring pump prices, the peso depreciation, and a slowdown in economic growth.
“UNDP estimates that greater 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 protracted conflict,” it said.
The UNDP said this might 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 restricted to 4 months, the UNDP projects 14,408 Filipinos to be pushed into poverty.
Amongst essentially the most exposed groups are informal staff, public-transport drivers, farmers, households depending on remittances, women in low-paid service and care work, and young staff.
“The setback would run through all three dimensions of the Human Development Index, which mixes a rustic’s income, health and education outcomes right into a single measure: income first, as inflation and slower growth erode real household incomes, and health and education more steadily, as households under pressure in the reduction of on food, postpone medical care and, if the strain persists, withdraw children from school,” the UNDP said.
In keeping with the policy transient, a protracted 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 could also be absorbed, prolonged disruptions to Gulf labor markets can rapidly translate into income shocks for migrant-dependent families, potentially impacting household food security and academic continuity,” it added.
FERTILIZER PRICES
The UNDP also noted that food security could be undermined as food prices rise because of higher costs of fuel, freight, and fertilizer.
“One of the crucial 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,” it 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 essentially the most, making them essentially the most vulnerable to a protracted 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.
In March, President Ferdinand R. Marcos, Jr. placed the country under a one-year state of national energy emergency because of the impact of the Middle East conflict.
As a part of its efforts, the Department of Agriculture arrange a quick-response fund for fertilizer and subsidized rice programs.
“I believe the federal government has responded well for the primary round, with a extremely targeted, time-bound approach,” Mr. Shahudh told BusinessWorld.
“Because the crisis progresses, a more comprehensive set of measures could also be needed, particularly on the subnational level, starting in areas where fertilizer prices are increasing and where states of calamity have been declared,” Mr. Shahudh added.
As the following planting season looms, protecting access to reasonably priced inputs ought to be the federal government’s time-sensitive priority “to stop current financial pressures from translating into longer-term human development setbacks.”
PRIORITIES FOR THE GOV’T
The UNDP said the Philippine government should mitigate the impact of the crisis and ensure this temporary oil shock doesn’t change into an enduring setback for development.
“(It should) protect price stability for fuel and food staples through supply-side measures and careful sequencing of the relief measures that expire in mid-July, somewhat than broad price controls, helping to cushion the purchasing power of the households most exposed to cost increases,” it said.
The federal government must also secure energy supplies through diversification of sources of refined products and speed up the medium-to-longer term investment in renewable energy.
Within the near term, nonetheless, it said that the federal government should require “higher buffer stocks for refined oil products and ensure inventory levels are monitored against safety minimums.”
The UNDP also urged the federal government to guard livelihoods by addressing rising fertilizer prices, supporting micro and small enterprises and informal staff, and strengthening support for returning overseas staff.
It also called for the expansion of targeted money transfers, giving priority to high-exposure, low-development regions.