‘Near crisis’

Consumer prices are at their highest in five years, the economy has slowed down, and the midterm elections are approaching.

Albay Rep. Joey Salceda thinks the country is seeing the first “near-crisis” of the Duterte administration.

The first crisis was in fact the five-month siege of Marawi last year, which prompted the declaration of martial law. But Salceda is an economist from Albay so he’s more focused on the economic woes of the entire country.

And right now the bad news on the economic front just keeps coming. How will it impact on President Duterte’s priority programs and plans?

Already, galloping inflation has derailed his TRAIN 2. The second phase of the Tax Reform for Acceleration and Inclusion now has a new acronym, TRABAHO.

This could also boomerang if investors affected by the withdrawal of their tax incentives make good on their warning to move their operations to Vietnam and other countries, rendering hundreds of thousands of Filipinos jobless.

Duterte’s push for a constitutional revision to shift to federalism is in limbo, to put it mildly. After the flap over “pepedederalismo,” Sen. Panfilo Lacson says the cremated ashes of federalism are waiting to be scattered.

To curb inflation, Duterte’s supporters want to flood the market with imports of basic food items including rice. While this could ease price surges, local producers – both the large-scale operators and marginal agricultural workers – are worried, especially with a bumper rice harvest expected later this year.

What’s a President to do?

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Yesterday, the Philippine Statistics Authority reported that the country’s economic growth decelerated to 6.0 percent in the second quarter. It was still the third best performance in Asia after Vietnam’s 6.8 percent and China’s 6.7, but still less than hoped for by the government, according to Socioeconomic Planning Secretary Ernesto Pernia.

The country’s chief economist attributed the deceleration, among others, to the closure of Boracay during the peak travel season, slower deployment of workers overseas, restrictions in the mining sector and a slide in aquaculture production due to the shutdown of fish pens in Laguna de Bay. Pernia, who earlier warned about the dire economic consequences of the shift to federalism, did stress the long-term benefits of green policies, so I guess he’ll still keep his job.

Like rising prices, the economic slowdown would be blamed squarely on the government.

As of yesterday, fuel prices were nearly double the figures during the Christmas holidays last year. Economists argue that among the drivers of inflation, fuel and electricity account for only 0.7 percent. But you don’t have to be an economist to see how any significant and sustained increase in fuel prices leads to an increase in the prices of practically everything else.

Anyone who shops in the wet market regularly can ask the stall owners why they are increasing their prices. Unless they source their products from their own backyard, the stall owners will point to the higher cost of transporting the goods as a prime reason.

When prices of raw food items and other basic goods increase, there is a spiraling effect on many other items such as processed food, manufactured non-food items and even household rent.

Since the excise tax on fuel under TRAIN took effect, for example, the prices of the two top locally produced butter brands have jumped by about 15 percent; for local baking margarine, the price has surged by about 20 percent.

My fresh carabao or buffalo milk for breakfast, which is produced in the Science City of Muñoz in Nueva Ecija and retailed in two large supermarket chains, is now priced at up to P145 from the previous P119 for a 500 ml bottle. The drive to Muñoz from my part of town takes about four to five hours. Surely fuel costs for the temperature-sensitive milk pushed up the price.

For rice, the local variety that I used to buy for P1,790 per 50-kilo sack now costs P2,030.

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The government’s economic team, horrified by the idea of losing the windfall from the fuel excise tax, insists that TRAIN has had a minimal impact on the fuel price surge. They tell the public to blame external factors instead, which have tightened crude oil supply and weakened the peso.

But we can’t do anything if US President Donald Trump imposes sanctions on top oil producer Iran. On the other hand, we can do something with the excise tax, without waiting for the mechanism that will trigger its suspension – $80 per barrel for crude oil in the world market. (Brent crude was trading at $72.41 yesterday.)

Opponents of a suspension say it will require an amendment of the TRAIN law. Critics are asking, what happened to executive power? President Duterte wielded it in his order implementing the Reproductive Health law even while the Supreme Court was sitting on a petition against the measure.

Duterte may have to wield it again in the case of TRAIN, because even if his economic managers shout themselves hoarse, he’s the one being blamed, and not Trump, each time drivers of jeepneys, motorcycles and tricycles gas up and their wives go to the market and see their purchasing power shrinking progressively.

And no, these folks don’t pay income tax so that sweetener for TRAIN doesn’t apply to them.

So far, however, Duterte is bowing to his government’s number crunchers when it comes to these matters.

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What’s the alternative? Flood the market with imports of almost everything, including rice.

Consumers will appreciate any consequent price drop. But in the process, the government could be alienating another constituency: local producers, including rice farmers, many of whom are among the poorest in our society.

Imports are also highly vulnerable to currency volatility. With the peso weakening, any reduction in the prices of food items as a result of importation may be short-lived.

Given the country’s sad experience, concerns have also been raised about the potential for corruption in importations, particularly of rice.

If prices continue to increase even with the flood of imports, the government will be in bigger trouble, and an election year is approaching.

Yesterday, presidential spokesman Harry Roque said no Cabinet member had endorsed tariff cuts on several food items, which would lead to a flood of imported goods, to tame inflation.

So what’s Plan B? Discussions continue. The central bank yesterday cut interest rates by another 50 basis points, but its impact on inflation is still several months away.

Salceda could be right about a “near crisis.”