How is agricultural growth related to the nations economic growth?

The Philippines is considered as one of the worlds mega biodiverse countries, rich in
both flora and fauna. Agriculture in the country is a very crucial sector for reducing poverty lines
and attaining the desired Millennium Development Goals (MDGs), which also consists of
reducing the percentage of people living under extreme poverty and hunger into half by the year
2015 (as compared to the level presented back in 1990). The agricultural sector projects its
relation to the growth of the economy since official poverty statistics show that the concentration
of the poor has been in the entire agriculture sector. Many resources have been devoted by past
administrations to agricultural modernization, the provision of agricultural inputs, and agrarian
reform, but the Philippines continues to face a lot of challenges particularly to uplift the farmers
out of poverty (Worldbank, 2013). Several decades ago, the countrys economy and employment
have been highly dependent on agriculture. In recent years, however, the population has become
less dependent on farming. In terms of share to the total economy, the agriculture sectors
importance has progressively dropped over the past years. About a third of the economy (29.7
percent) was agricultural back in the year 1946. Agriculture in the year 2012 on the other hand
now contributes merely 11.1 percent to the economy (Albert, 2013). According to different
studies, it shows that the government, with the help of different kinds of technology, have

focused more on the Industry and the Service sectors of the country.

Agriculture including forestry and fishery, plays a dominant role in the Philippine
economy. The countrys population is predominantly rural (70 percent of the total) and two-thirds
of this population depends on farming for their livelihood. In terms of employment, about onehalf of the labor force is engaged in agricultural activities. Primarily, Philippine agriculture
consisted of rice, corn, coconut, sugar, banana, livestock, poultry, other crops and fishery
production activities.

Despite the sectors desire to establish and implement reforms to increase the levels of
productivity, competitiveness, market adaptability, efficiency, and sustainability of agri-based
industries, these reforms were obstructed by levels of inadequate resources, limited
implementing capabilities of national and local government units ( LGUs), and weak
coordination among implementing agencies. Furthermore, the occasional occurrences of natural
disasters (e.g., El Nio phenomenon and La Nia phenomena) and international market crisis
(e.g., 1997 financial crisis) aggravated the real growth of the sector, resulting to contraction in
output as observed in 1998.
From 1993 to 2004, agriculture, fisheries, and forestry hardly grew on the average by
2.6%. Real growth in agriculture of 1% in the Philippines from 1980 to 1990 lagged behind the
world average and middle-income country average of 2.8% and 3.5%, respectively. Neighboring
Asian countries such as China, Vietnam, and Thailand posted very high growth rates during the
period. From 1990 to1997, the Philippines improved its real agricultural growth rate to 1.9%, but
this is still considerably lower than middle-income countries in Asia. However, during the 19982003 period, Philippine agricultural growth was comparable to Thailand and Vietnam (DA,
2012; PCARRD, 2013; DOST, 2013).
The decreasing share for agriculture in national employment and GDP is an inevitable
consequence of economic progress. This is largely due to higher income elasticities of demand
for non-agricultural goods and services. As their incomes grow, consumers increase their
consumption of manufactured goods and services faster than their consumption of food.
Paradoxically, the process is usually accompanied by rising incomes and a lower incidence of

poverty among those who depend on agriculture for a living. A paper produced by DFID (2004)
emphasizes the historically close correlation between different rates of poverty reduction over
the past 40 years and differences in agricultural performance particularly the rate of growth of
agricultural productivity. Through different studies, links have been identified between both
agriculture and poverty reduction as being established through four transmission mechanisms:
1) direct impact of improved agricultural performance on rural incomes; 2) impact of cheaper
food for both urban and rural poor; 3) agricultures contribution to growth and the generation of
economic opportunity in the non-farm sector; and 4) agricultures fundamental role in stimulating
and sustaining economic transition, as countries (and poor peoples livelihoods) shift away from
being primarily agricultural towards a broader base of manufacturing and services (CervantesGodoy and Dewbre, 2010). They go on to note that the potential for future poverty reduction
through these transmission mechanisms depends on the extent to which agricultural productivity
can be increased where it is most needed.
Previous research suggests that income growth coming from the agricultural sector is
more effective in reducing poverty than the growth in other sectors because: 1) the incidence of
poverty tends to be higher in agricultural and rural populations than elsewhere, and 2) most of
the poor live in rural areas and a large share of them depend on agriculture for a living (World
Bank, 2008b; Christiaensen and Demery, 2007; Ravallion and Chen, 2007). However, even if the
incidence of poverty is lower within the population of non-farm people (whether rural or urban)
growth in income from non-farm sources could be proportionally more effective in reducing
poverty. Moreover, it could be that even for poor farm families, growth in income from non-farm
sources is more important than growth in farm income.

Sources:
http://www.rappler.com/move-ph/issues/hunger/52372-agriculture-hunger-food-security
http://www.nscb.gov.ph/beyondthenumbers/2013/04122013_jrga_agri.asp
http://www.agnet.org/view.php?id=20110705103721_764767

http://tagaloglang.com/The-Philippines/Economy/agriculture-forestry-fishing-and-industry.html
http://www.oecd.org/tad/44804637.pdf
http://www.mb.com.ph/phs-agriculture-fails-to-boost-gdp-oshdp/