MANILA, Philippines — The first meeting of the Marcos administration’s advisory body on inflation floated familiar proposals to combat brutally-high inflation, but analyst thinks the state could do more to curb price growth.
The array of measures, targeted towards the short- and medium-term, included resorting to importation to curb supply gaps, bolstering hog repopulation programs, and accelerating disbursements of subsidies to farmers and fisherfolks.
As it is, the Inter-agency Committee on Inflation and Market Outlook convened its first meeting on Thursday. The creation of the advisory body was greenlit by President Ferdinand Marcos Jr. early March.
The list also included prepositioning rice buffer stocks during El Niño, strengthening the Kadiwa program, improving the local agriculture sector, promoting private investments within the supply chain, and passing reforms such as the Livestock, Poultry and Dairy Competitiveness and Development Act.
The proposals come at a precarious time for the economy. Experts issued calls early in the term of the Marcos administration to bolster supply chains and improve food security, as inflation was already showing signs of accelerating back in May.
Inflation has yet to show a definitive downtrend but already cooled in March as aggressive interest rate hikes make their way around the economy. Consumer price growth settled at 7.6% year-on-year in the previous month, slower compared to the 8.6% outturn in February.
Inflation skyrocketed to a 14-year high in past months as persistent supply chain bottlenecks, expensive fuel prices, and the reopening of the domestic economy fanned pressures. Monetary policy responded by unleashing 425 basis points into borrowing costs, sending interest rates to 6.25%.
Central banks everywhere, like the Bangko Sentral ng Pilipinas, inject rate hikes to discourage consumers and firms from taking out credit. These increases take six to 18 months before it seeps into the economy.
Measures such as fuel subsidies and targeted cash transfers to vulnerable groups and “careful review” of wage hike proposals were presented at the meeting of the inflation advisory body as well. The Marcos Jadministration is also turning to data-driven analysis to manage supply and demand, tapping into databases and existing research programs.
That said, the inflation advisory committee houses most of the state’s departments that have a hand in economic policy, such as the Departments of Agriculture, Energy, Trade and Industry, Finance, Budget and Management, and the National Economic and Development Authority.
Solutions?
The state’s proposals, while welcome, need to be more creative as Leonardo Lanzona, an economist at Ateneo de Manila University sees it.
“These are all rehashed proposals of policies that have already been in place. What is missing is a structure that will link all of these disparate programs together to develop one overall response,” he said.
The Ateneo economist pointed out that the body’s existence stood in contrast with projections that inflation is decelerating. The BSP is targetting inflation would average 6% this year.
“The government seems to think that it can solve all of these issues by themselves. All it has done is to stifle competition and strangle farmers and small private retailers with its heightened state-controlled importation and expanded Kadiwa stores,” Lanzona said.
Sonny Africa, executive director at local nonprofit IBON Foundation, offered a similar assessment.
“Unfortunately it seems as if the interagency committee is rolling them out again more to give the impression of action than to really give immediate relief or to fix the structural roots of expensive food,” he said in a Viber message.
Marcos appointed himself secretary of the agriculture department as well, at a time when the domestic economy is still recovering from the pandemic while managing inflation woes. Since the start of his term, prices of key food items, such as sugar, onions and eggs fell at the mercy of supply chain bottlenecks that fueled inflation.
Aside from monetary policy, the Marcos Jadministration resorted to importing certain agricultural products to ease the burden of consumer price growth. To this end, Africa found holes in the state’s plan to mitigate inflation.
“Recall how the Kadiwa program reached at most just 1.2 million or not even 5% of households last year, with the real number probably less from double-counting. This is paltry relief for millions of families struggling with high prices of food and other basic needs,” he said.
Kadiwa, a program of former President Ferdinand Marcos Sr., was employed by past administrations to arrest skyrocketing prices of agricultural commodities. Literally a farm-to-table approach, makeshift shops would sell food products at reasonable prices, easing the burden for low-income consumers while helping farmers sell their crops.
That said, these proposals could do little to tame inflation, as Africa sees it. Inflation could still not slow down in the manner that the state is expecting.
“Inflation will likely moderate in the middle of the year but this will be more due to the softening in global oil and food prices and strengthening of the exchange rate rather than any real efforts in the agricultural sector,” Africa said.