A further calibration of policies amid the reforms being undertaken should be done to ease the rising pressure on prices which President Rody Duterte’s economic team had pinpointed and is working on.
The five-year high 5.7 percent inflation rate in July coming after a 5.2 percent rise in June is troublesome since commodity prices are a gut issue and they are being manipulated as having been the result of the Tax Reform Acceleration and Inclusion (TRAIN) law.
The recent government figures show effects of the TRAIN on the inflation numbers will be temporary since, in July, its major contributor in the 21.5 percent spike on the prices of non-essential alcoholic beverages and tobacco.
Excise taxes on so-called sin products were increased under the TRAIN which the administration said is part of mores to persuade the public to lead a healthy lifestyle.
The economic team said the key solution to lowering inflation is higher productivity while implementing a “strategic trade policy” in the short term.
The interplay of such measures will address supply constraints that “pushed consumer prices up.”
A reading of the inflation figures for July showed that the spike in the price data was also the result of a rise in food and non-alcoholic beverages.
An easing on the price index of education and deceleration in recreation and culture offset the increase in headline inflation. Economic managers said the decline in the cost of education resulted from the government’s provision of free tertiary education in state universities and colleges.
Among the problems that the economic team zeroed in on is the declining rice stock inventory caused by the adverse weather which is also affecting major rice producers Thailand and Vietnam, thus fueling higher prices of rice.
Rice stocks in July 2018 declined by 8.2 percent year-on-year to 2.36 million metric tons with the National Food Authority’s rice buffer remaining almost depleted.
Bangko Sentral ng Pilipinas Governor Nestor Espenilla said the measures undertaken by government would return inflation at its normal course at the start of next year.
The economic team expects the enactment soon of a law amending Republic Act 8178 or the Agricultural Tariffication Act to replace quantitative restrictions on rice imports with tariffs after Rody endorsed it as urgent during his State of the Nation Address.
The enactment of the law is expected to improve rice supply in the market and bring down the price of the grain.
The economic team added that reform in agriculture will also provide a P10-billion enhancement fund for rice farmers that will help them have better access to technology and, thereby, ramp up production.
The Department of Trade and Industry and the Department of Agriculture will implement stricter price monitoring to prevent price manipulation.
The discordant yellow voices, however, pin the entire blame on inflation to the TRAIN law, saying that it should be suspended.
The TRAIN suspension will have the desired effects of those seeking to destabilize the Rody administration since it would result in dislocations in the budget with massive infrastructure spending already on the way.
From January to June, revenue collections had risen 20 percent to P1.41 trillion exceeding the target by eight percent or P105.7 billion.
It has been awhile since revenue targets have been achieved which is crucial to the delivery of social programs such as the Pantawid Pamilyang Pilipino Program (4Ps) and the other targeted social programs that helped in reducing the poverty rate.
Rody gave specific orders for the economic managers to keep the TRAIN running while measures are being implemented to deal with high inflation as it should be done.
TRAIN is reaping success as it is hailed by global economists as effective in maintaining the strong growth momentum.
Stopping TRAIN cold in its track favors those who seek to erase its gains.