Inflation

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“The National Food Authority (NFA) and the NFA Council need to get their act together.

Inflation is a two-headed monster that can sink or propel a nation, economically speaking.

Moderate inflation can actually spur economic activity. But an abnormal and unfettered rise in prices could hurt employment and economic development. Hyperinflation, as what is happening now in Argentina and Venezuela, would be disastrous. Episodic food riots since the 17th century in some countries caused by hyperinflation should be a grim reminder to all governments to ensure that such tragedy must not be allowed to happen in today’s globalized economy.

We are far from the economic crisis currently gripping the two Latin American countries. However, there is much concern about the unabated rise in prices in the country which has reached an alarming level.

Bangko Sentral ng Pilipinas (BSP) is expected again to increase interest rates which will escalate borrowing costs further. As global oil prices also increase, higher transport and power costs will continue to go up. The deterioration of the peso against major currencies, as our balance of payment deficits widen, can only compound the cost-problems of employers even more.

“Food, and rice in particular, is one of the critical factors affecting inflation. While BSP is implementing monetary measures to address inflation.

As if these were not enough, it will not be totally unexpected that labor unions will file a petition for an atrociously high increase in minimum wage which business could hardly afford at this time where costs pressures weigh heavily on its operations and viability. Further, there is anxiety on the part of employers that wage boards might even grant an excessive salary hike to show compassion to labor and shift the burden to employers.

Granting an unreasonable wage increase will harm business, the engine that fuels economic growth in this country but will harm even more the almost 10 million jobless, self-employed and under-employed. Business is equally affected by the inflation arising from the high cost of production and the wage boards must be cautioned in granting extravagant non-correctible salary hike.

Given all these and the seeming endless distractions and noises from the political front, employers and investors are anxiously worried.

While oil price movements in the international market are beyond the control of our policy makers, there are a number of actions that can be immediately put in place to curb inflation and help not only employers but most specially the less fortunate workers who bear the brunt of high prices of basic goods.

Food, and rice in particular, is one of the critical factors affecting inflation. While BSP is implementing monetary measures to address inflation, the surging price of rice is a purely supply and logistics issue.

Rice import restrictions have caused the price of rice over the years to remain high. Equally disturbing is that the supply and, eventually, the price of this commodity are also affected by the smuggling operation in the south.

The National Food Authority (NFA) and the NFA Council need to get their act together immediately if only to restore an adequate supply nationwide, inclusive of buffer stocks free from “bukbok” (weevil). It will alleviate for now the inflation expectation and ease demand pull pressures for this commodity. In the near term, government must seriously address the effectiveness of NFA in fulfilling its mandate and decide firmly and soonest on the rice tariffication bill.

It would be difficult and unproductive to reverse TRAIN 1 and delay the implementation of TRAIN 2 but the government can consider suspending the automatic increases in taxes on petroleum products in the coming years, as originally proposed.

This will temper spikes in the cost of transport and power and, most importantly, rein in inflation expectations.

It has been said that inflation will peak in the third quarter and normalized in the fourth quarter but there is no assurance that this will come about. What is certain is the fact that there is creeping inflation and this can be addressed with coordinated efforts from various line agencies of government such as NFA, BSP, Department of Labor and Employment and Department of Finance. The clock is ticking and the time to tame and keep inflation within acceptable levels is urgently needed now.

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