The economic managers assured the public Tuesday that the government is fast-tracking the release of the unconditional cash transfers (UCTs) for the country’s poorest households, along with other social mitigation measures to stay ahead of the temporary elevated inflation rate.
In Seoul, Finance Secretary Carlos Dominguez III said that he and the rest of the economic team agree that the best way to address inflation is for the Congress to swiftly approve the Rice Tariffication Act as this would bring down prices of rice by around P7 per kilo and reduce inflation to below 4 percent by the second half of 2018.
“The economic team of the Duterte Administration would like to assure you as well as the Filipino people that the Duterte Administration remains committed to reforming our socioeconomic structure towards a more inclusive society so that we can provide markets, we can provide the manpower to service manufacturing industries here in Korea. We shall continue to prioritize investments that will improve the health and education of our people, enhance security and public order, and build world-class infrastructure,” Dominguez said in a press briefing in Seoul, where President Duterte is winding up his three-day official visit.
Dominguez said that as of April this year, the unemployment rate dropped to 5.5 percent as 625,000 new jobs were created during the first fourth months of 2018, down by 0.2 percentage points from 5.7 percent during the same period last year.
He said sustaining the administration’s priority investments in infrastructure, public order and social services “is not an easy task,” but that the government has “to face the short-term challenges of a fast-growing economy, and we must tackle these problems in order to succeed in the long run.”
The finance chief assured the public that the government is “not casting aside” the inflation figure, which was recorded at 4.6 percent in May, as the government has put in place a “long menu of social mitigation measures” to ease the impact of high prices.
“We already know that the main contributors for inflation are higher tobacco products, the imported cost of fuel, and the higher prices of rice, corn and fish, and we are already taking steps to stay ahead of the situation,” Dominguez said.
The Tax Reform for Acceleration and Inclusion Act (TRAIN), which has been unfairly blamed for the inflation uptick, continues to account for only 0.4 percentage points of the inflation rate in April and May.
The 4.6 percent inflation rate for May was at the low end of the Bangko Sentral ng Pilipinas (BSP) forecast of 4.6 to 5.4 percent for that month, and also lower than the Department of Finance estimate of 4.9 percent. Dominguez said these were conservative estimates.
“I would like to emphasize that TRAIN is not the sole reason for the increase in inflation. The effect of high global oil prices driven by unfavorable geopolitical events, along with the import quotas on rice, have affected prices on a much larger scale,” Dominguez said.
“We, in the economic team, are of one mind that the best way to address inflation is to pass the Rice Tariffication Act. The estimates are it will bring down rice prices by around 7 pesos per kilo for the Filipino families and reduce inflation to below 4 percent by the second half of the year,” Dominguez said.
In Manila, Budget Secretary Benjamin Diokno and the rest of the economic team likewise assured the public that the government is putting in place social mitigation measures for the benefit of the majority of Filipinos.
A joint statement signed by Dominguez, Diokno and Socioeconomic Planning Secretary Ernesto Pernia said that there is a need “to stay the course” in pursuing the economic reforms needed to fulfill the Duterte administration’s vision of transforming the country into a predominantly high middle-class economy by 204o.
“Toward this objective, our economic program must generate the required resources so that we can continue to make investments in our people’s health and education, security and public order, and to build world-class infrastructure,” Diokno said, reading from the joint statement.
“Staying the course will not always be easy, but we owe it to our people, our children, and future generations. We know that we are going through a challenging period. The government is closely monitoring and taking steps to address the difficulties experienced by Filipino families today arising from higher prices,” he added.
Diokno said suspending TRAIN and adopting other band-aid solutions will not bring down prices as other factors such as the higher crude oil prices in the world market and the adjustments in the peso-exchange rate are the major drivers of inflation, and not the tax reform law.
On top of providing funding support for the government’s “Build, Build, Build,” program, Diokno said “we must keep in mind that TRAIN reformed a previously unfair and harsh tax regime. It lowered the personal income taxes of most Filipinos except the very rich—increasing the take home pay of 99 percent of Filipino taxpayers. This, coupled with free higher education and new jobs created through ourinfrastructure build up, enables the Filipino people to spend more for themselves and for the benefit of their families.”
The “Build, Build, Build” program, Diokno said, aims “to create more than one million jobs for ourfellow Filipinos through 2022, while reducing logistics costs for businesses, especially micro, small, and medium enterprises (MSMEs), many of which are located in the provinces.”
“We remain committed to doing all we can to invest in our people, and build safer communities and better infrastructure so that everybody will prosper. The economic team pledges its support in fulfilling President Rodrigo Roa Duterte’s promise of a strongly-rooted, comfortable and secure life for all Filipinos. The Philippines is already on the path of high and sustained growth. We must stay the course,” Diokno said.
He said UCTs given on top of the Pantawid Pamilyang Pilipino Program (4Ps) cash grants have already been distributed by the Department of Social Welfare and Development (DSWD) and Land Bank of the Philippines to around 80 percent of the beneficiaries, and that distribution to the rest of the recipients will be completed over the next few weeks.
“We will also accelerate UCT distribution to an additional 2.6 million households and more than 2.5 million indigent senior citizens who qualify as social pensioners,” he said.
The Department of Trade and Industry (DTI) is also continuously monitoring prices of commodities, including food products to ensure that retailers are in line with agreed suggested retail prices (SRPs).
Large tranches of rice imports will also arrive starting this month, making food cheaper for the Filipinofamily, Diokno said.
He also reiterated the need for the Congress to urgently pass the Rice Tariffication Act so that import quotas on rice would be replaced by tariffs, a move that would reduce inflation by around 0.4 percentage points if implemented in the third quarter of 2018, or by 0.2 percentage points if implemented in the last quarter.
“The Bangko Sentral ng Pilipinas estimates that this will reduce 2018 inflation by around 0.4 percentage points if implemented in the third quarter. More importantly, we estimate that this policy shift will drive down the price of rice by up to P7 per kilo for the Filipino family,” Diokno said.
As for the plight of commuters, Diokno said the Department of Energy (DOE) has already made arrangements with oil companies to provide discounts to public utility vehicles and is now exploring ways of importing oil from non-OPEC countries, while the Department of Transportation is finalizing guidelines for transport-related subsidies under the TRAIN Law.