Philippine economy

Extreme heat is hurting the economy

Ralf Rivas

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Extreme heat is hurting the economy

HEAT. Pedestrians cover their heads as they experience a 40 degress celsius heat index in Manila, on April 2, 2024.


The heat is threatening to turn the economy into a hot mess

MANILA, Philippines – Beyond the searing sensation on the skin and the stifling air that weighs heavily on the chest, extreme heat has broader economic implications that affects industries, businesses, and livelihoods.

The state weather bureau PAGASA tagged some areas in the Philippines with dangerous temperatures, reaching as high as over 40 degrees celsius, which could result in heat stroke.

For perspective, the Philippines’ mean annual temperature is at 27.1 degrees celsius, according to the World Bank’s Climate Change Knowledge Portal. The hottest months are usually in April and May.

A discussion paper by economists of the Bangko Sentral ng Pilipinas (BSP) found that as the country’s average temperature goes up by 1 degree celsius, it tends to make the economy grow more slowly by about 0.37 percentage points. 

This slowdown in economic growth gets even bigger, about 0.47 percentage points, when events like El Niño occur. 

Map from the World Bank’s Climate Change Knowledge Portal.

The study, which is the first to quantify the long-term effects of temperature shocks on output growth in the country, noted that extreme temperatures caused by El Niño Southern Oscillation (ENSO) events can cause prices of goods to spike.

“Short-term inflationary effects of temperature shocks on headline, food, and non-food are deeper in magnitude at 0.49 ppt, 0.69 ppt, and 0.49 ppt, respectively, when we incorporated dummy variables for episodes of ENSO events,” the study said.

Luzon is more affected by these inflationary effects, as most of the regions are predominantly agricultural and have food processing and machinery production. 

Inflationary pressures caused by these temperature shocks remain persistent up to four years, with a cumulative increase of 0.77 percentage points in headline inflation, according to the study.

Chart from the World Bank’s Climate Change Knowledge Portal.

The study found that output in the manufacturing and services sectors dip as temperature rises. 

“The magnitude of drop is more evident in the real value added of manufacturing sector at 1.8 ppt vis-à-vis the 0.7 ppt decrease in the services sector output,” the study said.

Researchers, however, noted that while output has dipped in heat-exposed industries, labor productivity remains the same. Workers in heat-exposed industries may already be used to the heat and could still be productive.

“The results possibly imply that workers in the construction and transportation sectors are already used to the weather conditions in the country. Likewise, in the transportation sector, jeepney and taxi drivers operate on a quota- and boundary-based system such that regardless of the weather conditions, they still need to work to either meet their daily quota or earn back their ‘boundary fees.'”

However, research from other countries show that exposure to extreme heat does reduce worker productivity, not only for outdoor occupations, but also for indoor industries.

Another World Bank study found that even white-collar workers can be negatively affected by heat, including government workers and financial traders.

On crop production, BSP researchers found that temperature shocks have a negative effect on palay and corn. A rise in temperature, in the short run, negatively impacts palay production by 1.83 percentage points and corn production by 3.51 percentage points. (READ: How climate change, lack of insurance, push farmers out of agribusiness)

However, researchers found that high temperatures have a positive impact on mango production, as mangoes prefer climate conditions with warm temperatures and light amounts of rainfall especially during the fruit development stage.

“These results show that higher temperatures have varied results on food production which, in turn, could have implications in the formulation of the government’s support programs as well as in setting up crop-targeted insurance schemes,” researchers said. –

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Ralf Rivas

A sociologist by heart, a journalist by profession. Ralf is Rappler's business reporter, covering macroeconomy, government finance, companies, and agriculture.