Inflation? Economic managers blame big spenders

MANILA, Philippines — Rising inflation is caused by a slew of external factors as well as the huge spending appetite of Filipinos, economic managers said yesterday.

During the Tatak ng Pagbabago Pre-SONA 2018 Forum yesterday, economic managers said major contributors to inflation are soaring global oil prices and robust consumer demand that is rapidly outpacing supply.

Bangko Sentral deputy governor Diwa Guinigundo said a one-percent increase in global oil price translates to a 0.06 percent rise in inflation. Global oil prices have risen to above $72 per barrel largely because of tensions in the Middle East and supply issues.

Guinigundo, however, expressed confidence that headline inflation would taper off by the third quarter of the year and return to the range of two to four percent by 2019.

“These are temporal factors, not permanent,” he said.

As this developed, the Department of Labor and Employment (DOLE) admitted the five-year high inflation rate will affect all workers, regardless of their salary range.

In an interview, Labor Secretary Silvestre Bello III said workers will have to adjust “whether you are a minimum wage earner or not” because of the higher prices of goods and services.

Opposition Rep. Edcel Lagman of Albay accused the government of deceiving people on inflation by downplaying its effects while senators urged the administration to intervene and ease the burden on consumers.

Rosemarie Edillon, undersecretary of the National Economic and Development Authority (NEDA), said the rising inflation is also partly caused by having more money in the economy chasing after fewer goods.

This happens as producers struggle to meet the increasing demand that comes with higher take-home pay. “Demand is outstripping supply,” she said. “Therefore there is a need to increase capacity.”

Finance Secretary Carlos Dominguez III said several products in the consumer basket such as cigarettes and sugary drinks are meant to be more expensive via excise taxes for health reasons.

“So those are the two items that we want prices to go up. We were not surprised that prices of soft drinks went up as well as prices of cigarettes,” he said.

He also noted that legislating higher take-home pay for wage earners strengthened their purchasing power.

“We are also injecting into the economy around P32 billion a month and that goes around and people buy. I don’t think the savings rate increases,” he said.

This, he said, is happening alongside aggressive public spending for infrastructure.

“This is a problem that we want to happen because of sin products and it’s a problem that is also a result of additional purchasing power from our public,”  Dominguez said.

Deceptive

Lagman said President Duterte’s “apologists” errantly downplayed the high inflation rate by saying it was not alarming because people have more money to spend from a higher tax-free income under the Tax Reform from Acceleration and Inclusion (TRAIN) law and free tuition in state universities and colleges (SUCs).

Lagman said this was a “grand deception” since most employees are not benefitting from the P250,000-a-year tax-free income since minimum wage workers have long enjoyed tax exemption and do not have monthly earnings of P21,000, which is the tax-free income cap.

“The free tuition fee for college education in SUCs is only a percentage of the total expenses for a student who has to spend for board and lodging, transportation, meal allowance and books and instructional materials,” he added

Lagman pointed out that only 34 percent of all college students are accommodated in state schools, while the larger 66 percent are enrolled in private universities and colleges and are thus not benefitting from the free college education program.

Sen. Paolo Benigno Aquino IV called for the full implementation of the mitigating measures under the TRAIN law as he reiterated his call to suspend the tax measure. – With Jess Diaz, Marvin Sy