What the COVID-19 led Global Economic Recession could mean for Rice-Based Food Security in Asia
By Harold Glenn A. Valera, Jean Balié, and Valerien O. Pede
An economic slowdown is now on the horizon due to the COVID-19 crisis. A recent World Bank report tells us that an economic slowdown in 2020 is inevitable, as suggested by its revised lower global growth forecast.
This dark outlook deepens the hardship of people who have lost income due to the lockdown and economic stoppage. While an economic slowdown has many negative impacts, one of the most important is the fall in real income. A substantially lower disposable income can weaken food security among the poor, as people find it more difficult to afford the food they want. In Asia, where rice is the main food staple, we expect that variations in income will impact rice demand. More precisely, falling income is expected to force poor people to shift to less expensive staples. Thus, a key question is the extent to which the current economic slowdown may raise the demand for rice. A related question is whether the global rice system is capable of supplying this demand and can avert any negative impact on rice-based food security. The answers to these questions have important bearing on the type of policy interventions that governments should contemplate to address poverty and food security risks, especially in developing countries where large fractions of the population are already suffering from limited or erratic access to health care and other essential services.
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Figure: Trends in real prices of rice for selected countries. Source of raw data: GIEWS FPMA Tool (FAO).
Rice consumption and economic slowdown
The COVID-19 pandemic, initially seen as a public health crisis, has triggered two types of GDP forecasts, one in which output continues to grow but at a slower rate than before, and one in which there is no growth but instead a period of fall in output, as shown in the recent projections by the World Bank and the International Monetary Fund. The former refers to economic slowdown, while the latter to economic downturn. An example of economic slowdown is the 2.3% GDP growth forecast for China in 2020 (see Figure 1). In contrast, the GDP growth forecast in 2020 for Thailand is -3.0%, which means that the economy is projected to contract.
In Figure 1, we capture past and projected economic slowdowns or downturns. During the 2008-2009 global financial crisis (GFC), economic slowdowns and downturns were noticeable for major Asian economies where rice plays an important role for food security and diets. In the case of India, real GDP growth slowed down in 2008 but recovered in the following year. Another major slowdown in these Asian countries was last seen in the aftermath of the 2011 financial crisis.
It is important to remember how fast the world’s attention turned to agriculture to address the food security crisis that resulted from those economic crises. While the current COVID-19 health crisis originates outside the financial system, the connections to and implications for the food systems and ultimately food security have been rapidly established (see IRRI, WFP and IFPRI for examples). Food systems have been and will continue to be impacted at multiple levels and in multiple ways through first order (drop or shift in demand, supply disruptions, labor shortage, trade restrictions, etc.) and second order economic effects (economic recessions, massive unemployment, inflation risks, etc.).
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The impact of the COVID-19 crisis on rice-based agri-food systems is expected to be much more serious and deeper than the 2008-2009 GFC. Containment efforts to address the pandemic have already severely disrupted farm supplies such as seed, fertilizer, and other agro-inputs. The lockdowns imposed in countries heavily impacted by the COVID-19 pandemic have also created important labor shortage and migration within countries (e.g. India). This could result in a higher rural wage rate if limited labor availability continues.
The lockdowns are also changing the behavior of consumers. They have been stockpiling food and other essential items. Consumers have also tended to change their spending expectations, anticipating a much longer negative financial impact of the crisis. According to a recently published McKinsey & Company article, the outlook of consumer spending is gloomy for most European countries, while for countries like Brazil and Japan the spending propensity would be impacted less.
Dwindling investments to strengthen agricultural research and development in the recent past reflects donors’ neglect of increasingly visible risks. The international community must recognize that investing in agriculture, and rice-based agri-food systems in particular, is a priority for world stability once again. The COVID-19 pandemic compounds the challenges posed by climate change to build more resilient rice-based agri-food systems. This is the time to bolster investments in the global rice sector to ensure sufficient food will continue to be available to feed the world. There is no time and space for complacency, given the growing threat to food insecurity.
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