Can inflation be tamed?

Bad telltale signs are all over the place. Worse, all directions point upward as far as prices are concerned.

For the eighth consecutive week, prices of refined oil products rose yesterday with diesel posting the biggest hike amounting to P1.35 more per liter as the Brent crude oil price breached the $80 per barrel mark last week. Gasoline prices were raised by P1 per liter, and kerosene by P1.10 per liter.

While fuel prices grew steadily on the uptrend, our peso-dollar exchange rate is taking the opposite direction with our Philippine peso going down to an average of more than P54 to $1. Since our country is not an oil producer, we import our crude oil requirements from abroad. Hence, it is adding to the cost of importing crude oil products here in our country.

Prices of refined oil products have been the major drivers of our country’s inflation rate. Classified under the commodity group electricity, gas and other fuels, it is ranked number one in its contribution to inflation. For obvious reasons, the upticks in fuel prices impact upon transport costs, not to mention diesel is the fuel used by most public utility jeepneys and buses as well as trucks that bring the vegetables, fruits and other food products to markets.

Last Friday, the Bangko Sentral ng Pilipinas (BSP) released its figures on inflation rate that points up again higher than the nine-year high inflation of 6.4 percent in August.

The BSP disclosed September’s inflation rate could accelerate further to 6.8 percent.

“The BSP Department of Economic Research projects September 2018 inflation to settle at around 6.8 percent, with a range of 6.3 – 7.1 percent. Higher domestic petroleum prices, higher prices of rice, and other agricultural commodities due to typhoon Ompong, and the peso depreciation contributed to the upside price pressures for the month,” the BSP explained.

The Department of Finance (DOF), on the other hand, predicted a much lower head inflation rate at 6.4 percent for September.

The official inflation figures is expected to come out any day this week based on the latest monitoring by the Philippine Statistics Authority (PSA) that releases them every first week of the month.  The PSA, an agency attached under the National Economic and Development Authority (NEDA), regularly monitors the monthly consumer price indexes (CPI), is the government agency that officially releases inflation figures of the previous month’s average.

Department of Budget and Management (DBM) Secretary Benjamin Diokno, in an interview yesterday over ANC, refused to speculate the final inflation numbers except telling audience “to just wait” since the official figures are coming out anyway this week. Diokno conceded though the inflation rate for September will reflect the “peak” that the Cabinet economic advisers cluster of President Rodrigo Duterte previously projected.

As far as many Filipinos feel it, the country’s inflation woes were largely traced to Republic Act (RA) 10863, or more popularly called – or should we say infamously known – as the TRAIN Law that stood for Tax Reform for Acceleration and Inclusion. President Duterte signed into law RA 10863 last year but its effectivity started on Jan. 1 this year. Hailed for lowering the government’s tax takes from lower salary brackets, RA 10863 obviously has its downside of having fueled inflationary pressures.

RA 10863 reduced the withholding taxes of salaried workers. While it meant more money getting into the monthly take-home pay of workers, the greater purchasing power of consumers, however, are not sufficiently met with greater production of goods and services in our country. There is money in the system chasing fewer goods.

The government, unfortunately, forgot to beef up the supply side of the “law of supply and demand,” largely by the National Food Authority (NFA). The NFA, among its mandates, is supposed to provide lower priced rice, the food staple of Filipinos. As it turned out, the former NFA head did not use the 2017 and 2018 funds allocated for palay procurement program for its buffer stocks as provided in the Congress-approved budget laws for two consecutive years.

Instead, Congress would later discover the NFA used the funds to retire its “legacy debts” and resorted to importing rice abroad. Thus, it led to the present shortage in NFA rice at the markets and drove prices up, including the commercial rice varieties. 

Diokno, BSP Governor Nestor Espenilla Jr., with Finance Secretary Carlos Dominguez, and NEDA director-general Ernesto Pernia comprise President Duterte’s economic team. After reaching the “peak,” Diokno reiterated their estimates that inflation rate will “taper off” in the fourth quarter of this year.

The very optimistic estimates of the Duterte economic team, however, seemingly do not match the realities in the markets and groceries. In fact, there would be more pressure on the prices with the advent of the Christmas season. The Department of Trade and Industry (DTI) last week disclosed local manufacturers already informed them to expect price increases on the favorite “noche buena” food products of Filipinos.

Diokno, an economist by profession, believes inflation rate will slow down and return to the range of two to four percent by next year, citing the projected impact of the anti-inflation measures the economic team recommended and are now being implemented. The slew of administration’s anti-inflation measures, he stressed, are expected to bring down prices, especially of rice, fish, sugar and other food products.

He cited in particular Administrative Order No. 13 that President Duterte signed last Sept. 21 removing non-tariff barriers and streamlining the administrative procedures on agricultural products. These non-tariff barriers were already being implemented by the NFA, the Sugar Regulatory Authority (SRA), the Bureau of Fisheries and Aquatic Resources, and the Department of Agriculture, Diokno cited.    

That is, if President Duterte’s order that aims “to tame” rising consumer prices is really being implemented fully.