Economic managers looking for ways to improve agriculture sector

February 13, 2019

With the agriculture sector having only grown at a rate of 0.8 percent in 2018, the Duterte administration’s economic managers, including Budget Secretary Benjamin  Diokno, are exploring measures to enhance farm productivity.

“Had the agriculture sector grown at its potential of 4 percent in 2018, full-year economic growth would have reached 6.5 percent, equal to the low-end of our revised growth target last year,” said Diokno in a statement on Wednesday. 

“Looking at 2018 Gross Domestic Product (GDP) growth by industrial origin, the agriculture sector contributed a measly 0.1 percentage point to the full-year growth rate of 6.2 percent. Simply put, the farm sector had virtually zero contribution to economic growth last year,” Diokno added.

“It’s for these reasons that the Duterte administration is prioritizing the agriculture sector. For our farmers and fisherfolk in the rural areas, higher productivity will mean higher incomes. At the same time, for consumers, this means lower prices for staple food items like rice, vegetables, fish, and meat,” Diokno elaborated.

Agriculture sector expansion was the highest under President Joseph Estrada, averaging 6.5 percent.

He is followed by President Gloria Macapagal Arroyo with an average of 2.9 percent growth for the agriculture sector. Then, President Rodrigo Duterte hit 2.4 percent in his first two years, followed by 1.8 percent under President Corazon Aquino, 1.2 percent under President Benigno Aquino III , and 0.8 percent under President Fidel Ramos.

“The economic managers are working hand-in-hand with officials in the agriculture and agrarian reform sectors to put it in a more sustainable and less volatile growth trajectory,” said  Diokno.

The historical data on the employment share and contribution to GDP of the agriculture sector speak volumes that it is the “laggard industry” of the Philippine economy.

As of end-2018, the agriculture sector accounted for 1/4th of total employment in the Philippine economy. However, its share to total GDP is disproportionately low at less than 1/10th, specifically 8.1 percent (at constant 2000 prices). 

“Agriculture has really been a weak link, and this structural issue has been pointed out by many economists. It has consistently grown at rates lower than overall economic growth, and has failed to reach its potential economic contribution despite the great number of people the agriculture sector employs,” said Diokno.

“This is bad news because the poor are concentrated in rural areas where agriculture is the primary livelihood. Clearly, inadequate policies, vulnerability to natural hazards, and bureaucratic mismanagement all had a hand in the sluggish performance of the agriculture sector throughout the years,” he added.

''In our last Cabinet meeting, we discussed some measures to help farmers and fisherfolk,” said Diokno. “The LandBank discussed ways to allow small farmers access to credit and loan facilities. That’s one step in ensuring more resources are channeled to the agriculture sector,” he added.

Weak agriculture growth and last year’s inflation spike exposed the vulnerabilities of the farm sector. The DBM is reviewing studies by agriculture experts to find ways in enhancing resource allocation in the farm sector.

One recommendation by the Organisation for Economic Cooperation and Development (OECD), for instance, is to direct more resources in improving supply-chain connectivity (e.g. farm-to-market roads and other infrastructure) and focusing on agricultural research and extension services. This leads to long-term productivity gains as opposed to emphasizing input subsidies (e.g. fertilizers, seeds).

“ Once ready, we will share our findings in hopes of reversing the poor performance of agriculture. This will take a holistic approach, both in policy formulation and program implementation. Rest assured that the DBM will continue to play its part in ensuring that resources are allocated to most beneficial and most efficient purposes,” Diokno said. DMS