Still too early to claim victory in war against inflation

RECIPE FOR RECOVERY The author, Margarito “Gary” Teves, served as finance secretary during the Arroyo administration and is currently the economic adviser for the National Movement for Federalism. —INQUIRER FILE PHOTO

While the moderation of the country’s headline inflation rate to a four-year low of 1.9 percent in September 2024 is welcome news, we should be cautious in proclaiming a resounding victory against inflation. High consumer prices remain a core issue, particularly among low-income Filipino households.

We may have won the battle now, but the war against inflation is continuous and it still needs the national government’s utmost attention. Keeping inflation low and stable requires the government to focus its resources on more sustained and strategic interventions.

Agriculture

We must amend the Comprehensive Agrarian Reform Law to allow land and farm consolidation by increasing the 5-hectare limit to 24 hectares to boost productivity and ensure a steady supply of agricultural products.

The Department of Agriculture should prioritize investing in research and training rather than primarily focusing on subsidies. This can lead to long-term productivity improvements.

Encourage the private sector to collaborate with the government and invest in the agricultural supply chain:

• Provide financing, technology and inputs to ensure higher yields.
• Invest in warehouses, cold storage and postharvest facilities to help maintain a stable supply of produce throughout the year.
• Improve farm-to-market roads to reduce transportation costs.
• Provide farmers with access to better training programs to enable them to diversify into higher-value crops, adding resilience to their income and stabilizing supply.

Energy

We must explore and expand a wide mix of energy. The Department of Energy (DOE) eased foreign equity restrictions in the implementing rules and regulations of the Renewable Energy Act to allow 100-percent foreign equity in renewable energy projects. The DOE also aims to increase the share of renewable energy to 50 percent by 2040 and more than 50 percent by 2050. While these plans will help increase energy supply and help in making the Philippines less reliant on coal, transitioning fully toward nontraditional sources would be costly.

Coal must not be taken out of the energy mix immediately, since the cost of coal retirement and energy transition to renewables is very costly according to estimations already mentioned above. Coal is still considered the cheapest option with abundant supply worldwide, and its usage will help make power both stable.

Let us continue improving the implementation of the Energy Virtual One-Stop Shop (EVOSS). After its passage in 2019, the DOE is continuing to expand EVOSS. Currently, the DOE is working on integrating permits from local government units as part of the EVOSS system in order to address delays in power project approval. The Energy Regulatory Commission was also integrated recently into EVOSS to help faster approvals for distribution utilities and affordability.

We must promote the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) incentive for power. Congress amended CREATE More and increased deductions from gross income for power costs from 50 percent to 100 percent. This will be an attractive incentive and should be promoted to investors.

Fiscal affairs

Finally, we must continue fiscal consolidation efforts to support growth. The government needs to ensure that the target deficit ratio of 3.7 percent by 2028 is met without sacrificing spending for social programs and agriculture to help low-income families that are the most vulnerable to inflation. To raise revenues, the government could focus on reforms such as enhancing value added tax efficiency, improving tax administration and ensuring effective control of tax incentives. —Contributed 

The author is an economist, a former lawmaker and finance secretary.