Despite the brute inflation surge which hit 8% in November this year, the highest since November 2008 which took place at the height of a global financial crisis regime, a noted economist has assured the Philippine economy remains on track to recovery from the adverse impact of the Covid-19 pandemic.
Albay 2nd District Rep. Joey Sarte Salceda, a noted economist and considered as the resident economist of the House of Representatives where chairs its Ways and Means Committee, made the assurance in a statement he issued on the matter.
Following is his statement issued on November 6:
Statement on the November 2022 inflation report
Rep. Joey Sarte Salceda
As I emphasized in August, inflation could peak to 8.5% this year and end up with an annual average of 6%. We are on track to meet that number.
(https://mb.com.ph/2022/08/05/salceda-talks-inflation-theres-bad-news-and-good-news/)
As I also emphasized then, the problem is food, feed, and fuel. That remains the case now. Even as the Bangko Sentral ng Pilipinas has already hiked rates to meet the US Fed’s actions, that is no substitute for supply solutions, especially since we are an economy in rapid recovery momentum.
The primary driver of high inflation remains food prices, which have increased by 10% year-on-year. That is in part due to our rigid food trade regime in crops in short supply, such as sugar and onions. We already know what happens when we open up our food markets: Because of rice tariffication, rice inflation is the lowest among all major food items in the CPI.
We need to reconsider ways to protect our farmers in ways other than strict protectionism in our agricultural trade regime. The 38% year-on-year inflation in sugar can no longer be justified by protecting the local sector, which is heavily unequal on its own.
Stubborn protectionism of the sugar sector will stunt the growth of our food industry, and force us to import more sugar-heavy finished goods. That’s worse for balance of trade. As such, some form of sugar trade liberalization must remain on the policy table.
Corn prices are also skyrocketing, with consequences on meat costs. I urge the President and his economic team to consider increasing the Minimum Access Volume for corn immediately. By our calculations, foreign-sourced corn is already more expensive once landed, due to high out-quota tariff rates. We are thus forced to make do with insufficient domestic supply.
Our domestic vegetable sector, where prices have also increased, continues to be highly susceptible to climate change and pestilence. The problem appears to me to be the ability of our farmers to address these threats. In good years, our farmers are able to produce big surpluses in vegetables. Technology, climate prediction, integrated pest control, and other capacity development resources must be made available. The role of more robust and active Agricultural Training Institute and DA Regional Field Offices, as well as better Municipal Agriculturist Offices will be crucial.
The role of logistics and transport costs in food prices can be addressed. I recommend that President Marcos issue an executive order ensuring that all supply bottlenecks for food and other farm producer are eased. Local Government Units may be directed to lift all hindrances and blockages across farm-to-market routes. The Department of Transport may be directed to ensure the proper flow of traffic feeding into inter-island nautical routes. As much as 48% of prices of certain food staples are logistics costs. We can make an impact on food prices by reducing transport bottlenecks.
In the House, I continue to push for the classification of large-scale food price manipulation as economic sabotage. The leadership supports that move, and the committee on food and agriculture has already considered my suggestions in its hearings on economic sabotage.
There is an abundance of tools available to the President and his economic team to combat inflation. Immediate executive action may still take time to actually address fundamental drivers of inflation, but would be proper signaling for the public and private sectors. Inflation remains the toughest economic storm we must weather, and our ships must sail in the same direction.