The Development Budget Coordination Committee (DBCC) briefed the House of Representatives’ Committee on Appropriations, chaired by Representative Elizaldy Co, on February 28, 2023 to discuss the impact of high inflation on the country’s macroeconomic and fiscal outlook, as well as measures to mitigate its effects on the economy.
Finance Secretary Benjamin Diokno presented the government’s plans to tackle inflation which, according to him, requires an all-of-government approach.
“[A]n aggressive and focused campaign to fight high inflation continues to be a top priority of the government,” Secretary Diokno said.
Inflation in January 2023 rose to 8.7 percent from 8.1 percent in December 2022, going beyond the Bangko Sentral ng Pilipinas (BSP)’s inflation forecast of 7.5 to 8.3 percent and private sector economists’ median estimate of 7.6 percent.
The continued increase was mainly due to food supply constraints and higher utility rates.
The BSP forecasts that inflation will remain above-target in the near term. However, the BSP expects inflation to slow down to 3.1 percent in 2024. Inflation could remain above 4.0 percent until December 2023, and will revert to the lower end of the target range of 2 to 4 percent by January 2024 mainly due to negative base effects and the likely deceleration of global oil and non-oil prices.
To maintain price stability, the BSP hiked its policy rate by 50 basis points to 6.0 percent, effective February 17, 2023.
To complement this, the Department of Finance (DOF) will intensify the timely implementation of non-monetary measures to curb persistent inflation and mitigate its impact on the most vulnerable sectors.
A short- to medium-term framework is being constructed with the help of the Presidential Management Staff and other relevant government agencies to mitigate inflation.
With this, the DOF has proposed short-term interventions from production to importation, post-harvest, storage, distribution, and transport of goods to improve every stage of the supply chain.
Apart from these, ground monitoring and assessment will be improved by creating an Inter-agency Committee on Inflation and Market Outlook (IAC-IMO).
“Ground monitoring will entail further enhancing our early warning systems and situation analysis to ensure timely and immediate intervention from the government,” said Secretary Diokno.
To protect the vulnerable sectors, the government will expand and improve the KADIWA Program, empowering farmers to sell their produce directly to consumers.
Fuel discount to farmers and fisherfolk (FDFF) and a targeted cash transfer program will also be implemented to cushion these sectors against shocks.
“[W]e must ensure that these measures do not add up further to demand-side inflationary pressures,” Secretary Diokno cautioned.
Meanwhile, the Department of Energy (DOE) is actively pursuing supply and demand side measures to ensure affordable and reliable energy supply.
As for the medium- to long-term, the government will ensure food security by increasing investments for improvement of the agriculture sector and providing extended financing to micro, small, and medium enterprises (MSMEs), farmers, and fisherfolk.
Secretary Diokno noted the passage of the following measures that will improve the agriculture sector:
● New Agrarian Emancipation Act, which seeks the condonation of agrarian reform beneficiaries from PHP58 billion worth of debt stemming from the award of agricultural lands under the Comprehensive Agrarian Reform Program (CARP).
● National Land Use Act, which classifies land according to use: protection (for conservation), production (for agriculture and fisheries), settlements development (for residential purposes), and infrastructure development (for transportation, communication, water resources, social infrastructure).
● Livestock Development and Competitiveness Bill, which seeks to replace the minimum access volume on corn with a uniform 5 percent tariff rate to ensure a stable supply of cheap corn for inputs and corn tariff revenues to be set aside for corn productivity improvement.
● Amendments to the Philippine Crop Insurance Corporation (PCIC) Charter, which will include the provision of suitable disaster risk transfer programs to farmers and fisherfolk for their crop, livestock, and fishery products.
Finally, an energy-secure future will also be ensured by accelerating renewable energy (RE) development and formulating strategic plans to provide a sustainable energy supply. To this end, the DOE will release a comprehensive Philippine Energy Plan (PEP) in September 2023.
National Economic and Development Authority Secretary Arsenio Balisacan, Budget Secretary Amenah Pangandaman, and Central Bank Governor Felipe Medalla represented the DBCC alongside Secretary Diokno.