Rice crisis to cost Philippines one percent of GDP: study

[KLT]

Rice crisis to cost Philippines one percent of GDP: study

AFP
April 9, 2008

Manila - Soaring food prices are likely to cost the Philippines nearly
one
percent of its economic output this year to ensure adequate supplies
to the
poor, Credit Suisse said on Wednesday.

The government has announced plans to import up to 2.7 million tonnes
this
year even as prices soared to near-historical levels amid tight global
supplies.

President Gloria Arroyo has cited rising food prices as a threat to
the
Philippine economy, while analysts have warned major rice importers
that
soaring prices could lead to social unrest and pose security problems.
The
government has deployed police and military to crack down on rice
hoarders.

The Swiss-based investment bank said in a study that Manila was likely
to
import 2.6 million tonnes this year at up to 1,000 dollars a tonne to
ensure
it would have enough stocks to sell to the poor at state-subsidised
prices.

"We estimate that the fiscal cost of importing rice at a high price
and
selling it at the current domestic price could approach one percent of
GDP
(gross domestic product) in 2008," the Credit Suisse report said.

A potential loss of 1.3 billion dollars or 0.7 percent of GDP was
likely
because it would incur margin costs for storage and distribution and
release
it into the domestic market at its current selling price, it added.

The government, through the National Food Authority (NFA) is the
Philippines' main rice importer as well as the buyer of last resort
for
locally grown rice. It has recently raised the price it pays for rice
it
buys from Filipino farmers by 44 percent to discourage rice smuggling.

Credit Suisse said the NFA was likely to finance the bulk of its loss
through government-guaranteed borrowings from commercial and state
banks.

"Although the cost of the rice subsidy is sizeable, we think the
government
has enough fiscal flexibility to shoulder this burden without
impairing its
sovereign creditworthiness," it added.

Credit Suisse said Philippine rice production has been rising
steadily, to
11.3 million tonnes this year from 5.6 million tonnes in 1998, but
that the
growth of its population, now estimated at more than 90 million, has
outpaced output growth.

Experts say the Philippines does not have adequate farmland suitable
for
growing the water-intensive crop.

While Philippine rice yields of 3.6 million tonnes per hectare (2.47
acres)
are way above the 2.6 million tonnes per hectare in Thailand, the
world's
top rice exporter, Manila's production costs per tonne was
substantially
higher at 96 dollars compared to 74 dollars for Bangkok, Credit Suisse
said.

Copyright ) 2008 AFP