Managers confident of taming prices

financialtribune.com The economic managers yesterday acknowledged that inflation, which is already at a five-year high, could push even higher in the July-to-September quarter although they never doubt it should subsequently taper off as the year winds down.

This was stressed yesterday by the Secretaries of Finance, Budget and Management as well as by the National Economic Development Authority who collectively issued a statement saying headline inflation at a five-year high of 5.2 percent in June should retreat to within-target range of 2 percent to 4 percent this year.

“The year-to-date inflation averaged 4.3 percent, just slightly higher than the government’s target of 2 to 4 percent. But the unwelcome news is that the inflation rate in June 2018 rose to 5.2 percent due to faster price increases in major commodities like food, fuel and transport. In turn, such increases were caused by a host of factors, including global oil prices, peso depreciation and rice prices and further amplified by the price effects of interaction among them.

“We assure our people that we remain optimistic that inflation will continue to be managed to taper off towards year-end towards the inflation target of 2-4 percent,” Finance Secretary Carlos G. Dominguez III, Budget Secretary Benjamin Diokno and Socioeconomic Planning Secretary Ernesto Pernia said.

“While we acknowledge the public sentiment on rising prices, let us remind ourselves that the TRAIN Law raised the take-home pay of 99 percent of income tax payers by an average of 15%, much higher than inflation. The additional revenues that we generated from the TRAIN Law will also allow us to provide free education in state colleges and universities, free irrigation for farmers, conditional cash transfers to poor families and senior citizens, and higher salaries to government employees, including uniformed men. Without doubt, these should help in coping with the rising prices of goods,” they quickly added.

The cash transfer program under President Duterte adds an estimated P60 billion to P80 billion worth of liquidity to the financial system every year.

But the economic managers reiterated that while inflation may still peak in the third quarter, this should taper off by October.

“The government needs to exert all efforts to implement necessary measures, both short-term and long-term, to address the impact of inflation on both growth and people’s welfare,” they said.

“An important and urgent challenge to manage inflation is actually the need to increase the supply of goods and services, especially food—in particular, rice that takes up a large chunk of the food budget of poor families. When demand outpaces supply in a fast-growing economy, it’s normal for prices to go up,” they said.

Food accounts for a little over half of the consumer price index (CPI) from which the rate of change in prices is computed each month by the Philippine Statistics Authority (PSA).

“Therefore, we view with urgency the need to initiate measures that will boost the productivity of our agriculture sector and address the high cost of bringing agricultural products to markets. These may not produce immediate results but they are crucial in managing inflation over the medium to longer term. In the meantime, to beef up our country’s food supply, we should maximize trade opportunities with our ASEAN partners and even beyond,” the economic managers said.