The Duterte administration took only 11 months to tame elevated inflation rates to below 4 percent, the fastest in almost two decades, compared to previous government efforts to rein in upward price pressures when the rate breached the 4-percent mark, according to the Department of Finance (DOF).
Finance Undersecretary Gil Beltran said the inflation rate rose to 4.3 percent in March 2018, and hovered above the 4 percent level until January this year. It went down after 11 months to 3.8 percent in February and continued its downward trend in March at 3.3 percent, 3.0 percent in April 2019 and 3.2 percent in May, well within this year’s inflation target of between 2 and 4 percent.
In the four episodes of inflation pushing past the 4 percent level from 2004 to 2019, the first one took former President Arroyo 31 months to pull it down from 4.1 percent in June 2004 to 3.8 percent in January 2007, said Beltran, the Department’s Chief Economist, in his report to Finance Secretary Carlos Dominguez III during a recent DOF Executive Committee (Execom) meeting.
Over the 2008-2009 period–still on the Arroyo watch–the inflation rate rose to 4.6 percent, in January 2008, and went down to 3.2 percent in June 2009, which meant it took her administration 17 months to pull it down to the below-4 percent mark, Beltran said.
The third episode in 2011 took the Aquino administration 13 months to bring it down to below 4 percent, Beltran said, from 4.0 percent in January 2011 to 3.0 percent in February 2012.
“In our case, the Duterte administration took 11 months to move it below 4 percent, so we did it faster,” Beltran said. Inflation went down to 3.0 percent in April 2019 after rising to 4.3 percent in March 2018.
The economic managers said the law mandating the shift from quantitative restrictions (QRs) to tariffs on rice imports, which took effect in March, will further pull down inflation as this would make rice, which was among last year’s major inflation drivers, more affordable and accessible to Filipino families.
Last year, inflation breached the target set by the Bangko Sentral ng Pilipinas (BSP) at 2-4 percent as a result of the spike in crude oil prices, the adjustments to the normalization of interest rates by the US Federal Reserve, global trade tensions, and food supply issues caused mainly by weather-related events.
Rising domestic consumption as a result of more jobs created and lower personal income tax (PIT) rates for individual taxpayers under the Tax Reform for Acceleration and Inclusion (TRAIN) had also initially influenced inflation. Owing to the hefty PIT cuts under the TRAIN, a whoppingP111.7 billion was returned to the pockets of 99 percent ofFilipino wage earners, a cash windfall for millions of taxpayers which was almost the equivalent of a 14-month pay.
To rein in inflation, President Duterte issued Administrative Order (AO) No. 13 last year removing administrative restrictions on the importation of agricultural products.
The President had also issued Memorandum Order (MO) No. 26 directing the Departments of Agriculture (DA) and of Trade and Industry (DTI) to implement measures to reduce the gap between the farmgate and retail prices of agricultural products.
He had likewise directed the DA, Department of the Interior and Local Government (DILG), Philippine National Police (PNP), and the Metropolitan Development Authority (MMDA) under MO 27 to “adopt measures to ensure the efficient and seamless delivery” of imported agricultural and fishery products from ports to markets, while in MO 28, he ordered the National Food Authority (NFA) to immediately release existing rice stocks in its warehouses.
These directives issued by the President formed part of the measures recommended by the Economic Development Cluster (EDC) of the Cabinet to help rein in inflation.
The other measures included the DTI, NFA, Philippine National Police (PNP), National Bureau of Investigation (NBI), and farmers’ groups forming monitoring teams to closely watch over the transport of rice from ports to NFA warehouses and retail outlets; the DA replicating the issuance of certificates of necessity to allow fish imports to be distributed in Metro Manila’s wet markets and other markets of the country; reducing the gap between the farmgate and retail prices of chicken by setting up public markets where producers were able to sell directly to consumers; the Sugar Regulatory Administration (SRA) opening sugar imports to direct users; and the Bureau of Customs (BOC) prioritizing the release of essential food items in the ports.