The Philippines, the world’s largest rice importer, has reduced the import tax on rice from 35% to 15% from this year until 2028 to cool down domestic inflation. However, analysts worry that the move could benefit major rice-producing countries in Asia, such as Vietnam and Thailand, while Philippine farmers suffer.

Along with rice tax reductions, this country also decreased import taxes on coal, chemicals, and some other basic commodities to reduce energy and input costs. The decision is part of the new Comprehensive Tariff Program for 2024–2028 approved by Philippine President Ferdinand Marcos Jr. on June 4.

“Rice is the most important commodity in the basket of Filipino consumers. So, we have agreed to reduce the import tax from 35% to 15% from now to 2028,” Mr. Arsenio Balisacan, Minister of Economic Planning and General Director of the National Economic Development Authority (NEDA), said at a press conference after the decision was announced. “Reducing import tariffs will help rice prices in the Philippines fall to a more reasonable level.”

Vietnam is currently the Philippines’ largest rice export partner, followed by Thailand.

Rice now accounts for 9% of the Philippines’ consumer price index (CPI), but it has accounted for more than 50% of total inflation in the past three months, according to NEDA. In April, the rice price recorded its third consecutive monthly increase when it increased by 3.8% over the same period last year.

According to Mr. Balisacan, President Marcos’ administration is trying to lower food prices to support poor people with the reduction of rice import taxes to just 29 pesos (0.49 USD) per kilogram of rice this year.

In August last year, when Mr. Marcos was the Minister of Agriculture, he imposed a ceiling price on rice to control inflation—an ineffective move, according to economists. A month later, he lifted this rule.

Mr. Miguel Chanco, Chief Economist of Emerging Markets at Pantheon Macroeconomics (UK), said that reducing rice import tariffs will make imported rice in the Philippines cheaper than domestically produced rice.

“This will definitely have a negative impact on the income of Filipino farmers,” Mr. Chanco said. “But according to the authorities, it will help reduce global inflation, thereby increasing the purchasing power for all Filipinos.”

Mr. Chanco added that the Philippines’ move will bring “great benefits” to Asian rice-exporting countries such as Vietnam and the Philippines. Particularly for India, the world’s largest rice exporter, the benefits may not be significant because the South Asian country is currently imposing export restrictions.

According to the Department of Plants, Department of Agriculture, Vietnam is now the Philippines’ largest rice supplier. In the first five months of 2024, Vietnam exported 1.44 million tons to the Philippines, accounting for 72.9% of the country’s total rice imports. It is followed by Thailand with 300,227.24 tons, Pakistan with 144,834.50 tons, and Myanmar with 65,080 tons. The Philippines also imports rice from India, China, Japan, Cambodia, Italy, and Spain.

Mr. Robert Dan Roces, Chief Economist at Security Bank (Philippines), said that the Philippine government’s decision to reduce import tariffs is a “double-edged sword.” Because consumers will benefit while farmers are facing more competition with cheap imported rice.

“This could lead farmers to switch crops. Therefore, the government needs to have support programs in terms of price or increasing farming productivity, thereby helping to reduce damage to farmers, ”Mr. Roces recommended. /.