MANILA, Philippines — The executive order (EO) to control inflation submitted this week by the Cabinet’s Economic Development Cluster (EDC) to President Duterte would focus on the removal of administrative and non-tariff barriers on the importation of key food items such as rice, fish, sugar, meat and vegetables, the National Economic and Development Authority (NEDA) said.
Economic managers want the removal of non-tariff barriers for these food items implemented within the month to immediately boost supply and drive down prices.
The EDC recognizes that the rise in prices of these items has been the major contributor to inflation for the past two months. Fish and seafood, rice and meat, and vegetables accounted for 2.4 percentage points out of the 6.4 percent inflation rate in August.
“The issuance of the executive order as well as quick implementation of immediate and short-term measures will address the supply issues that have been driving up inflation,” said Socioeconomic Planning Secretary Ernesto Pernia.
Immediate to short-term measures contained in the proposed EO include making rice available in the market through immediate release of stocks from NFA warehouses, importation, and distribution of projected harvest; monitoring of rice transfer from ports to warehouses and retail outlets; and the speedy passage of the rice tariffication bill.
Availability of fish and chicken would be increased by allowing imports to be distributed quickly and by setting up public markets with cold storage facilities where producers can sell directly to end consumers. Apart from importation, improving logistics, transport, distribution, and storage was also deemed crucial for curbing price inflation of sugar, vegetables, and other food items.
Medium- to long-term measures include boosting agricultural production by promoting the use of and developing resilient and high-yielding varieties of crops while reassessing the country’s planting season and crop viability in each region. Policy measures include the review and possible amendment of the Fisheries Code and other policies governing the sector and legislation for the tariffication also of sugar, fish, meat and vegetables.
The EDC emphasizes the urgency of passing the rice tariffication bill, which is currently in the Senate after approval by the House of Representatives on third and final reading.
Inflation is seen to go down by 2.4 percentage points once the government successfully implements the nine measures recommended by the EDC aimed to curb the rise in prices of food and agricultural products.
In an interview, Budget Secretary Benjamin Diokno said food items, particularly rice, fish, meat and vegetables, accounted for 2.4 percentage points out of the 6.4 percent inflation rate in August.
He said this will be shaved off the headline inflation figure once the EDC-recommended measures for the agricultural sector are approved and implemented.
“The impact of food (to inflation) is 2.4 percent...so that will normalize. Inflation will be cut down by 2.4 percent,” Diokno told reporters when asked what the impact of the measures would be to inflation.
Inflation hit a nine-year high of 6.4 percent in August, bringing the year-to-date headline inflation to 4.8 percent. This is higher than the government’s target range of two to four percent. Economic managers earlier said rice, fish, vegetable and meat were among the main contributors to inflation during the period.
With these measures in place, the EDC expects inflation to taper off in the coming months. Diokno said this is expected to normalize in the fourth quarter of this year, and go back within the government’s two to four percent target range by 2019.
He said the full impact of the measures may be seen by the following month, but some relief should be felt by consumers immediately following the announcement of the measures.
“The announcement itself will already have an impact on the market,” he said.
Meanwhile, the budget chief said it is “irresponsible” for critics to describe the increase in prices of consumer goods and services as “runaway” inflation.
“To me, that’s irresponsible because runaway inflation means no one is in control. Runaway inflation is associated with hyper-inflation where even the central monetary authorities have no handle of what’s going on,” he said.
“To characterize the August 2018 inflation rate of 6.4 percent as runaway inflation is irresponsible, it’s building a lot of panic in the minds of people. Our central monetary authority is very capable and we have a lot of tools,” he added.
According to Diokno, the 6.4 percent inflation last August, while elevated, is not a cause for panic yet as the country had experienced higher inflation in the past.
He said inflation peaked close to 50 percent during the Marcos administration; 21.2 percent during Corazon Aquino’s administration; 13.9 percent during the Ramos administration; 10.7 percent during the Estrada administration; and 10.5 percent during the Arroyo administration.
Finance Secretary Carlos Dominguez, for his part, also said the elevated inflation last August cannot be described as a “major crisis.”
“We are not in a major crisis. It may be a serious problem for some people but for the nation in general, it’s not a major crisis and besides, we have a lot of tools that are available to us,” he said.
As such, Dominguez said there is no cause for panic, adding that it was decided by the Monetary Board not to hold an off-cycle policy meeting before Sept. 27.
“It was decided that there will be no off-cycle (Monetary Board meeting)” he said.