The government on Monday said the sector -- which accounts for up to a quarter of total economic output and nearly half the workforce -- had contracted 7.15 per cent in the first half of the year, its worst fall in two decades.

A year earlier it had risen 3.54 per cent.

"The 7.15 per cent is quite a nasty fall. It's worse than expected," said Jose Vistan Jr, economist at Dharmala Securities Phils Inc.

The department of agriculture blamed the El Nino weather pattern, which has parched croplands since April 1997.

Analysts say the farm sector, which has been neglected by past administrations, needs more money for irrigation and roads to get their produce to market.

"The prospect is bleak if there is no strategic intervention on the part of the government," said Pablito Villegas, president of the private think-tank Meganomics Specialist International.

"What we need now is more strategic and bold operation on the field level," he said.

"The drying up of credit has resulted in farmers' inability to purchase inputs, particularly in this hard time. For agriculture to get moving requires at least 80 to 100 billion pesos ($1.9-2.3 billion) a year."

Analysts said the lack of cheap funds for farmers is hurting their productivity.

Even beneficiaries of the government's land redistribution programme since the late 1980s remain poor because they lack support services, such as cheap credits.

"Agrarian reform makes sense only if there are sufficient support services," said Edgar Bancod, senior analyst at Paribas Asia Equity.

Analysts said President Joseph Estrada's administration has to give agriculture funding priority to reduce unemployment.

"It makes a lot of sense to focus on that area. Unemployment is increasing and agriculture is still labour intensive," Bancod said.

But recovery in the farm sector by year-end could well be delayed by the arrival of the La Nina weather pattern, which brings torrential rain.

Meteorologists recently raised the probability of La Nina hitting the country in the fourth quarter to 55 per cent from 35 per cent at the start of the year.

"If La Nina does not wreak havoc this year, recovery could be expected towards the end of the year," Villegas said.

For the medium- to long-term, analysts said food security would remain the greatest challenge of the Estrada administration.

Estrada, a former actor who promised to lift the poor from poverty, has said food security would be the centre-piece of his administration.