Philippines Agribusiness Q4 2018
We hold a broadly positive view on the Philippines's agribusiness sector in the long term, given the country's potential forexpansion into new sectors, such as palm oil. This view is supported by an upwards revision of our forecasts for rice, sugar, milk,poultry, and pork production, as well as for wheat, milk, pork, and poultry consumption in this update. Despite the Philippine senatehaving passed into law the Tax Reform for Acceleration and Inclusion (TRAIN) which imposed additional excise taxes on sugarydrinks at the start of this year, we particularly like the outlook for sugar mills and believe the livestock sector will continue to showhealthy growth rates. The Philippines's vast consumption market along with strengthening government support, will foster domesticand foreign investment and favour output expansion. However, 'backyard' farming and infrastructure problems, especially transportcosts, will continue to hamper the sector's growth. These inefficiencies will become increasingly crippling as South East Asia movestowards the ASEAN Economic Community, which is supposed to lead to trade and investment liberalisation across the region.Although the Philippines's government appears to have taken the measure of the challenge and is now supporting rice and sugarproduction, agriculture in the country remains uncompetitive. As such, the sector is at risk of low-cost imports from its neighboursover the medium term.
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