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A silver lining?

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A recent report by Capital Economics cites the potential impact of La Niña to lower food prices across Southeast Asia, including the Philippines, if it provides good growing conditions for crops in the region and puts downward pressure on food prices.

The La Niña weather phenomenon is associated with above normal rains, which could provide good growing conditions for crops and put a downward pressure on food prices.

“Our view is that central banks in the region will begin cutting interest rates later this year. La Niña increases the odds that easing cycles will be even more aggressive than our forecasts, which are already more dovish than the consensus,” said Ankita Amajuri, assistant economist at Capital Economics.

Citing the World Meteorological Organization, Amajuri said there is a 70 percent chance of a La Niña between August and November, which could provide support for producers of rice, coffee, and sugar as these commodities have been negatively affected by the dry spell over the past semester.

She noted that there have been 10 moderate to severe La Niña episodes in the past 40 years and rice inflation fell on seven occasions.

She adds that the latest inflation data across the region is encouraging as headline rates fell in almost every country that has released its data for June so far. This was primarily driven by easing food prices and energy costs, along with continued declines in core inflation.

In the Philippines, headline inflation slowed to 3.7 percent in June from 3.9 percent in May and 5.4 percent in June 2023. It marked the slowest in four months or since the 3.4 percent in February this year. The think tank expects inflation to fall further in the second half of the year.

While some quarters have raised fears over the prospect of the La Niña wreaking even more havoc on the agriculture sector and the economy, especially if incessant rains bring flooding, or if stronger and more frequent storms are to be expected, it is comforting to know that the rain clouds could also have a silver lining.

As long as the agriculture sector is ready for any eventuality, we should be able to ride out the storms that may come our way.*

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