Balisacan: El Niño won’t have 'big impact' on economy

National Economic and Development Authority (NEDA) Secretary Arsenio Balisacan on Wednesday brushed off the potential negative impact on the economy of the El Niño phenomenon next year but admitted a possible uptick in commodity prices.  

“With respect to growth, the effect on the economy, I don’t think it will make a big [impact]…it will make an impact, but the challenge will be more on the prices,” Balisacan said at a press conference in Pasig City.

“The big difference between 1997-1998 and now is that the relative share of agriculture in the economy is now much smaller. It’s something like 10% of the economy,” added Balisacan, referring to the severe El Niño that hit the country in 1997 to 1998.

The NEDA chief made the remark after Science and Technology Secretary Renato Solidum Jr. said Tuesday that at least 65 provinces in the country could experience drought next year due to El Niño.

Balisacan said the Inter-Agency Committee on Inflation and Market Outlook (IAC-IMO) will closely monitor the situation and “use all other tools of government, even trade policy tools to be able to minimize the negative effects of El Niño phenomenon.”

The country’s socioeconomic planning chief said the government will “intervene enough, early enough, and fast enough” so that the price spikes associated with the drought will be curtailed.”

If food prices go up next year, such as when inflation accelerated to as fast as 8.7% in January 2023, Balisacan said the gains in taming inflation will be reversed.

“We go back again to the old cycle of high inflation, high interest rate, low demand, low growth. We don't want that,” he said.

Inflation, which measures the rate of increase in the prices of goods and services, decelerated to its slowest in 20 months in November amid the slower increase in food and transport costs. 

High inflation which resulted in higher interest rates was blamed for the slower economic growth in the second quarter of the year before it recovered to 5.9% in the third quarter, thanks to government’s ramped up spending which offset the decline in household spending during the period.

Among the “trade policy tools” of the government was the proposal to extend Executive Order No. 10, set to expire by December 31, 2023, until the end of 2024.

“This is going to be seen as part of preparation for the difficult months of next year,” Balisacan said.

“The NEDA Board will meet on Thursday that’s part of the agenda,” he added.

Signed on December 29, 2022, President Ferdinand "Bongbong" Marcos Jr. issued Executive Order No. 10, which extended until December 31, 2023 the reduced tariff rates on the following commodities:

• Meat of swine, fresh, chilled, or frozen at 15% (in-quota) and 25% (out-quota)
• Corn at 5% (in-quota) and 15% (out-quota)
• Rice at 35% (in-quota and out-quota)

Moreover, the NEDA chief said the country should front load imports in preparation for the effects of El Niño on agricultural commodities.

“Definitely the time to store is now. If such storage can happen early then we can moderate the increases in prices next year… The aim is to prevent any uptick in prices that will translate into higher inflation,” he said. —VAL, GMA Integrated News