Economists urge more food imports to temper price spikes
MANILA, Philippines — More economists are urging greater importation in view of expensive food that jacked up the inflation rate to a two-year high of 4.2 percent year-on-year in January.
“Our priority right now is to ensure that food supply is adequate so that households affected by COVID-19 and the quarantines will not be doubly affected by the increase in food prices,” Acting Socioeconomic Planning Secretary Karl Kendrick Chua, the government’s top economist, said in a statement late Friday.
Chua, who heads the state planning agency National Economic and Development Authority (Neda), said “[temporarily] allowing more importation of key agricultural products, while adhering to strict safety protocols to prevent entry of contaminated products, will help augment supply and manage inflation.”
“The committee on tariff and related matters (CTRM) has endorsed the proposed increase in the minimum access volume (MAV) of pork and the temporary decrease in the most favored nation (MFN) tariff rates of pork and rice, subject to the proper process and investigation by the Tariff Commission. All these can increase the food supply and stabilize food prices,” Chua said.
The government reported last Friday that headline inflation or the rate of increase in prices of basic commodities zoomed past the government’s target range of 2-4 percent—considered to be manageable levels—last month.
Faster prices hikes were reported in meat products, especially pork amid tight supply due to the African swine fever scare.
Vegetable prices also continued to soar following the devastation wrought on agricultural produce by a string of strong typhoons before 2020 ended.
Inflation’s impact on the poor was worse as they needed to shell out more for food due to faster price hikes also reaching a two-year high of 4.9 percent in January across the basket of goods and services they usually consumed.
Economists were also worried that elevated consumer prices may temper consumption at a time when the pandemic-battered economy needed a boost to recover from last year’s gross domestic product (GDP) drop of a record 9.5 percent, the worst post-war recession.
Despite January’s higher-than-expected rate, Chua said the economic team still expects inflation to be “manageable as we continue to reap the benefits of the Rice Tariffication Law.”
“We passed the Rice Tariffication Law to address the rice shortage and related price hikes last 2018. As a result, rice prices decreased by around 10 pesos per kilo from its peak. In January, rice inflation was close to zero at only 0.1 percent. Just like before, the government continues to be proactive in addressing spikes in inflation as this affects the poor the most,” Chua said.
In 2018, inflation averaged a 10-year high of 5.2 percent due to food supply bottlenecks, new or higher excise taxes slapped on consumption under the Tax Reform for Acceleration and Inclusion Act or TRAIN Law that took effect that year, as well as skyrocketing global oil prices back then.
Following rice trade liberalization that enjoined entry of more imports, the Filipino staple food posted deflation or lower year-on-year prices from May 2019 up to November 2020.
But since December last year, nationwide rice prices inched up mainly due to supply issues in Metro Manila.
In a webinar Friday, former socioeconomic planning secretary and Inquirer columnist Cielito Habito said the inflation rate would likely average 4-5 percent this year, hence a need to ramp up food importation.
“Right now, we are forced to open agriculture—in pork, because of the shortage due to the African swine fever. And this no longer the time to oppose imports because the reason prices are skyrocketing is the sheer lack of domestic supply,” Habito said.
Roehlano Briones, senior research fellow at the state-run Philippine Institute for Development Studies (PIDS), said in a position paper submitted to the Senate last week that “rather than rely only on price freezes, we recommend [to] further liberalize private-sector importation by reducing tariffs on meat, fish, and vegetables.”
But House minority leader and Bayan Muna Rep. Carlos Isagani Zarate on Saturday opposed a looming opening up of the domestic market to an influx of imported goods amid a pandemic-induced recession.
“The Duterte administration’s policy of further liberalization of our economy will only aggravate rather than address the runaway inflation,” Zarate claimed in a statement.
“More importation would just make us more dependent on other countries and control not just the prices but even our food security. For us to have a more secure and stable economy we must increase support to our local farmers and producers especially in agriculture. If the government will just keep doing this liberalization policy, which has already failed us for decades, then high inflation would certainly be a perennial problem—at the expense of millions of our poor people,” Zarate added.
For Zarate, “more protectionist measures and government aid to local producers, as well as consumers, are needed to stem inflation.”
“Different administrations have continuously pushed for liberalization of our economy for decades. And now, yet again, the present administration is pushing for Charter change to still open it even more. But this policy has already failed our economy miserably. We must look for other ways in reviving our economy,” Zarate said.