Politika pa more...

The country is a mess. We have serious economic problems and the President is more interested in settling scores with a persistent critic. It isn’t as if focusing on Senator Trillanes will fix a galloping inflation rate that is making the cost of living prohibitive for most people.

Inflation for August accelerated at a rather high 6.4 percent. As the official statement of the Duterte economic managers puts it, this is “faster than the previous month’s 5.7 percent and the 2.6 percent of the same period last year.

“This brings the year-to-date inflation to 4.8 percent, beyond the upper-band of the government’s inflation target of two to four percent, and slightly below the BSP’s revised full year inflation forecast of 4.9 percent. Meanwhile, month-on-month inflation (MOM) accelerated to 0.9 percent, from 0.5 percent in July 2018.”

The last time inflation rose this fast was nine years ago when it hit 6.6 percent during the Arroyo administration. In Metro Manila, inflation was a high seven percent. Food was at 8.6 percent and transportation is at 10.2 percent.

BSP Governor Nestor Espenilla Jr. observed that “much of it has to do with food supply shocks. Rice in particular. These warrant more decisive non-monetary measures to fully address.”

Espenilla called on government to do something about food supply to address inflation. This is beyond what monetary authorities can fix. The BSP governor said the 6.4 percent inflation figure is “beyond the acceptable target range.”

Later in the day, the economic managers confirmed BSP Governor Espenilla’s analysis: “The highest contributors to inflation in August are electricity, gas, and fuels, fish, rice, personal transport, vegetables, and meat.”

This is exactly what we have been saying in this column. But the Duterte administration brushed aside the concern of Rep. Joey Salceda who wanted immediate action to mitigate rising inflation.

This gave Joey the opportunity to hit back with the observation that the high inflation rate was “self inflicted because government did little or nothing… We can no longer blame market opportunists, profiteers, and rice hoarders…”

Reading the list of things the economic managers said they would do or recommend to do brings up the comment, why only now? Those were obvious suggestions from various sources, including Rep. Joey. 

Because the principal problem was with rice, it all goes back to President Duterte. The NFA administrator invited media to take photos of a nearly empty warehouse as he announced he had zero buffer stock. He plainly sabotaged this administration and Duterte did nothing.

The NFA administrator wanted to pin the blame on the NFA Council, particularly with its chairman who had a different opinion on how rice importation should be handled. The visual of an empty warehouse was enough to make commercial rice prices zoom in the local market.

Down south, rice supply also dwindled after the Malaysian Navy successfully stopped smuggling of rice from Sabah at the request of President Duterte. Smuggled rice (subsidized by the Malaysian government) had been the main supply source in our southern backdoor. The supply gap resulted in sky high prices of what’s available.

NFA totally mismanaged its basic mission of assuring enough buffer stock during the lean months before harvest. Worse, when their imports arrived, it was infested by crawling critters we call bukbok. NFA also failed to get the rice to market fast enough.

The only real solution to a supply gap problem is to infuse more supply. Price control, as some idiots propose, will just make rice vanish from the market.

There are other concerns. The high price of oil in the world market continues to put pressure on our transport and power rates. Our expanding trade gap is putting downward pressure on the peso at a time when the currencies of emerging markets are being adversely affected by a strong dollar. These all add to the cost-push pressures.

More dark clouds are on the horizon and government isn’t preparing for a deluge. According to a Bloomberg report, “Saudi Arabia’s expatriate workers are leaving the kingdom by the thousands, and the exodus may not yet be over.”

Citing official data, Bloomberg reports that the number of foreign workers declined in the first three months of 2018 compared with a year ago. “The losses were in sectors including construction — usually dominated by low-cost laborers — as well as trade and manufacturing.”

Rising unemployment among Saudi nationals puts pressure on the Saudi government to create jobs as their economy slowly recovers from a really bad economic slowdown, Bloomberg explains. Creating jobs for Saudis is a priority for Crown Prince Mohammed bin Salman.

A Saudi newspaper reported plans of government to order most retail businesses to replace all foreign workers with Saudis. We have about a million OFWs in Saudi Arabia and if this trend continues, a good number of them will be coming home.

 If they do come home, do we have enough jobs? And if they come home, forex remittances will be affected. That is one of the two pillars supporting our economy. The other pillar, BPO is also facing rough times ahead. No new investment is coming in as we sort out the rules under TRAIN 2 or TRABAHO.

This is why it is most inappropriate for the administration to focus on Trillanes. Sure, he is a pain in Duterte’s butt. But that’s democracy. Revoking his amnesty, assuming this can be done, produces the wrong optics for an administration that has more urgent things to do.

From an investor’s perspective, if Duterte can, by the stroke of his pen, nullify an amnesty that was con, curred with by both houses of Congress, can the word of this government on sanctity of contracts be trusted?

Putting Trillanes back in jail will not fix our economy. It only shows Duterte is pikon and in the eyes of our people, ang pikon ay talo.

Boo Chanco’s e-mail address is [email protected]. Follow him on Twitter @boochanco