War in the Middle East could reverse human development gains in the Philippines – UNDP

By Justine Irish D. Tabile, Senior Journalist

THE PHILIPPINES is at risk of losing part of its recent human development gains as the conflict in the Middle East weighs on the economy, with the impact expected to worsen as the crisis continues, according to the United Nations Development.Operation Program (UNDP).

In a policy report, UNDP said the country is among the most affected countries in the region, as it depends on the Middle East for its crude oil and imports food and fertilizers from other countries.

“The shock has reached households through three reinforcing channels: the purchase of electricity, agricultural inputs, labor migration and remittances.” These channels converge on the country’s development trajectory: UNDP estimates that the immediate impact of this crisis may set back the development progress of the Filipino population by 0.01 to 0.05 years, increasing the loss by 0.01 to 0.05 years. the disruption continues,” he said.

The policy report titled “Socio-Economic Impact of the Middle East Conflict in the Philippines” was prepared by Mohamed Shahudh, UNDP Philippines country economist.

Since the start of the Iran war on February 28, the macroeconomic conditions of the Philippines have weakened, as seen in the increase in inflation due to the increase in pump prices, the depreciation of the peso, and the slowdown in economic growth.

“UNDP estimates that more than 35,000 Filipinos may fall below the lower middle-income poverty line of $4.20 a day since the initial effects of the war, and this number is rising significantlybecause of the conflict for a long time,” he said.

The UNDP said this could increase the poverty rate in the country after the crisis to 17% from 16.9%, leaving about 20.146 million Filipinos living in poverty.

The estimate assumes a 28-day interruption followed by an eight-month adjustment period. If the recovery period is limited to four months, the UNDP projects 14,408 Filipinos to be pushed into poverty.

Among the most exposed groups are informal workers, public transport drivers, farmers, households dependent on remittances, women in low-wage and care-giving positions, and young workers.

“The regression will go through all three categories of the Human Development Index, which combines a country’s income, health and education outcomes into a single measure: income first, as inflation and slow growth erode real household income, and health and education secondarily, as stressed households cut back on food, postpone medical care and, if hardship persists, withdraw children from school,” the UNDP said.

According to the policy brief, the protracted conflict in the Middle East could significantly reduce domestic income by disrupting the flow of remittances which account for 20% of income. total remittances to the Philippines.

“UNDP notes that while short-term shocks may occur, long-term disruptions in Gulf labor markets could quickly turn into income shocks for families dependent on foreign countries, which could impact domestic food security and the continuation of education,” it added.

FLOWER STANDARDS
The UNDP also noted that food security may be affected as the price of food increases due to higher costs of fuel, commodities, and fertilizers.

“One of the most different results of the second round of prices in the Philippines goes to the prices of fertilizers. The country is an importer, and the nitrogen grades on which rice and corn depend are facing a shock to the supply of the Middle East,” it said.

The UNDP said prices of granular urea increased by about 37% to P2,255 per 50-kilogram bag (/kg) in March-April from P1,650/kg bag in January-February.

“The burden of this price increase falls heavily on the rice and maize farmers who use it the most, making them more vulnerable to long-term shocks,” it added.

Rice-farming households derive nearly two-thirds of their income from agriculture, making them highly vulnerable to high input costs and supply chain disruptions.

In March, President Ferdinand R. Marcos, Jr. placed the country under a one-year national emergency due to the impact of the Middle East conflict.

As part of its efforts, the Ministry of Agriculture established a rapid response fund for fertilizers and subsidized rice programs.

“I think the government responded well in the first round, in a really targeted, timely manner,” said Mr. Shahudh told. BusinessWorld.

“As the crisis continues, a broader set of measures may be needed, especially at the sub-national level, from areas where fertilizer prices are rising and where a crisis has been declared,” said Mr. Shahudh.

As the next growing season approaches, securing access to affordable services should be a timely government priority “to prevent existing financial pressures from becoming long-term. obstacles to human development.”

KEY TO GOV’T
UNDP said the Philippines the government must mitigate the impact of the crisis and ensure that this temporary oil shock does not set back sustainable development.

“(It should) protect the stability of fuel and basic food prices through supply measures and a careful sequence of relief measures that expire in mid-July, instead of extensive price controls, which help reduce the purchasing power of households most vulnerable to price increases,” he said.

The government should also ensure electricity supply through diversification of sources of refined products and accelerate medium to long-term investments in renewable energy.

However, in the near future, it said the government should require “higher buffer stocks of refined petroleum products and ensure that inventory levels are monitored against a minimum safety margin.”

UNDP also encouraged the government to protect lives by tackling the rise in fertilizer prices, supporting small and medium-sized businesses and illegal workers, and strengthening support for workers returning from overseas.

It also called for increased targeted cash transfers, prioritizing the most vulnerable, least developed areas.