A Japan-based analysis and research firm has tagged the Philippines as among the Asian countries most vulnerable to El Niño in terms of impact on economic growth.
The country is expecting the onset of El Niño, which brings lower-than-usual rainfall and poses a threat to agricultural production. At the same time, the United Nations’ Food and Agricultural Organization (FAO) has noted that international prices of rice has been increasing.
The Nomura Group report said that with El Niño occurring, they expect fiscal and supply-side policies – such as social assistance, price controls, and subsidies – to serve as the first line of defense. “Monetary policy is unlikely to be used, though rate cuts could be delayed,” the company said. “Given the Philippines’ limited fiscal space and high inflation risks, the BSP (Bangko Sentral ng Pilipinas) may need to resume its rate hiking cycle.”
It added that El Niño can limit agricultural production and drive higher food inflation, especially among net importers of food like the Philippines.
“An El Niño will likely result in a stagflationary shock – higher inflation, lower growth,” the group said. “Within Asia, we see India, Philippines and Thailand as more vulnerable to downside growth risks, while most countries would likely suffer the effects of higher inflation, especially food importers like the Philippines.”
According to Nomura, a severe occurrence of El Niño could eat away 0.2 percentage point of Philippine GDP growth.
In an advisory dated June 8, the United States-based Climate Prediction Center declared that El Niño conditions are present and are expected to gradually strengthen into the Northern Hemisphere winter 2023-2024. It added that there was a 56 percent chance that it will be “strong” and an 86 percent chance of “exceeding moderate strength.”
We shouldn’t let our guard down, as far as El Niño is concerned, with the simple fact that the wet season has already returned. Preparations to mitigate its effects shouldn’t be abandoned at the first signs of rain, as our country remains vulnerable to its potential impacts on economic growth. Think tanks and scientists still believe that the weather phenomenon will manifest later this year, and are still warning those that are expected to be affected not to be caught off guard.
Hopefully the Philippines is continuing its preparations to mitigate any negative effects of El Niño if as, predicted, it strengthens.*