Albay Rep. Joey Sarte Salceda, chair of the House Ways and Means Committee said government should speed up its agriculture program, particularly ‘Plant, Plant, Plant’ and release special cash aid to farmers, hog raisers and livestock producers to counter stagflation that threatens to hit the country.
Salceda, who was among the first to warn of the possible crisis early this year, said the country “is not there yet” but advised government to act fast using the “inflation tool kit” to save the economy.
The stagnant economic output and the rising inflation can be avoided with quick but right government actions focused on the agriculture sector, the lawmaker said, stressing the need to move fast on the vaccine rollout to hasten economic recovery.
“I don’t think we’re in a stagflation just yet. You have to remember that low growth in the country is not due to some cyclical reasons or some commodity shock, but because of Covid-19 alone. We have to accelerate the vaccine rollout for sure so we can return to more normal levels of output.
With the economy still in recession and millions of Filipinos still looking for jobs, the recent spike in inflation in January sounded off an alarm for a possible stagflation.
Stagflation involves both stagnation [economic contraction and unemployment] and inflation. The Philippine Statistics Authority reported a 9.5 percent GDP contraction for 2020 and 4.2 percent inflation for the month of January, up from 3.5 percent in December.
The Bangko Sentral ng Pilipinas has set am inflation target of 2% to 4% for 2021 to 2022, but economists say a relative price shock in an important sector, such as food, can spill over into other sectors and become a problem of general inflation.
“It’s a problem for economic policymakers because the usual levers of fiscal and monetary policy have tradeoffs. For example, if we lower interest rates to enable growth, we also help accelerate price increases. If you have these three problems happening in scale all at the same time, you are in a bind as a policymaker,” he explained.
Salceda, a noted economist, said the government should spend more, especially for cash aid to farmers, hog raisers, and livestock producers so that supply shocks are addressed. The Department of Agriculture’s flagship project Plant, Plant, Plant should also be implemented quickly.
“One government program that could address these three problems all at the same time is the rapid implementation of ‘Plant, Plant, Plant.’ You will remember that last month, I already warned the government that prices may hit us hard, so we have to invest in food supply. Investments in agriculture create jobs, improve output, and lower price pressures. It is one of those rare economic instruments that achieve all three,” said Salceda.
“I would remind them [government officials], however, that aggregate numbers do not always reflect the extent of misery of those whose means fall below the average,” he added.
Salceda said that while good aggregate numbers work in business, we in policymaking have a responsibility to protect those whose misery the numbers may obscure. Inflation, unemployment, and low growth definitely hit the poor harder, so we must always take not the aggregate or average view, but the view of the vulnerable,” he stressed.