Suspension of TRAIN urged amid ‘choking’ economy

MANILA, Philippines — As skyrocketing consumer prices threaten to “choke” and eventually stall the economy, experts are urging legislators to suspend the first package of the Tax Reform for Acceleration and Inclusion (TRAIN) law and review its impact on consumer prices before moving to the second package of the program.

“I hope they consider the impact of these recent inflation numbers,” economist Emmanuel Leyco said in an episode of “The Chiefs” on Cignal TV’s One News Wednesday evening.

“So when they start considering are we going to continue to implement TRAIN 2 or TRAIN 1, the excise tax, I think we have to put a human take on who is being affected and how they are being affected by inflation and how it will be exacerbated if we adopt TRAIN 2,” Leyco added.

On Wednesday, the Philippine Statistics Authority (PSA) reported that headline inflation in August reached a nine-year high of 6.4 percent from 2.6 percent the year before.

Economic managers have attributed the rise to the growth of food inflation, as price adjustments for food and non-alcoholic beverages jumped to 8.5 percent from 2.9 percent a year ago.

Leyco explained that this has greatly affected poor households who on average spend 60 percent to 70 percent of their household budgets on food, compared to the rich who only spend about 20 percent of their budget on food.

“I think our legislators will have to think of the cases of the poor people who are already going hungry without TRAIN 2,” Leyco said.

He added that what legislators can do now is suspend the implementation of TRAIN 1, which raised excise taxes on fuel, motor vehicles and sweetened beverages.

“Even suspend all TRAIN 1 program altogether and not even think of TRAIN 2 until we are able take hold of our economic (situation),” Leyco said.

Economist JC Punongbayan echoed Leyco’s sentiments. “Before moving on to TRAIN 2, I think we have to hold our horses and actually go back to TRAIN 1 and evaluate it first,” Punongbayan said.

Meanwhile, Leyco debunked claims that the country’s higher inflation indicates the people have more money to spend.  

“If you look at underemployment statistics, it means people are making less. That means they’re earning less. They have less money,” Leyco said.

Based on data from the PSA, unemployment rate in July dropped to 5.4 percent from 5.6 percent in the same month last year. However, underemployment rate remains high as it jumped to 17.2 percent or an estimated 7.0 million workers from 16.3 percent or 6.5 million workers in the same period last year.

“I think that’s an economist way of deviating from the real issue. In textbooks we can argue that way, but in reality when we are looking at the numbers, underemployment is going up… what does that mean? People are making less so it cannot be used as an indicator that people are making more money,” Leyco explained.

Hunger looms

With Filipinos earning less and consumer prices continuously rising, Leyco said widespread hunger is looming in regions where inflation is highest.

“If you consider ARMM (Autonomous Region in Muslim Mindanao), where more than 50 percent of the population is living in poverty, inflation rate of 8.1 percent would mean that some people are already skipping meals, going hungry,” he pointed out.

August inflation figures show that annual inflation in Areas Outside NCR (AONCR) grew at 6.2 percent, compared to 2.4 percent last year and 5.5 percent last month.

Leyco also said the government’s economic team should do something about the sluggish export industry and the threat of artificial intelligence (AI) on business process outsourcing (BPO).