Extension of lower agricultural tariffs up for review

MANILA, Philippines — The government is reviewing the possible extension of lower tariff rates on major agricultural commodities to ensure that inflation will continue its downward trend and return within target as scheduled.

In a briefing, Finance Secretary Benjamin Diokno said the economic team is assessing the extension of lower tariffs on meat, rice, corn and coal to keep prices of goods affordable.

“We are reviewing the possible extension. We will have another meeting next month to see if we have to extend across all commodities covered,” Diokno said.

President Marcos, through Executive Order 10, subjected fresh, chilled or frozen swine meat, maize, rice, and coal to the most favored nation rates for 2023 after inflation spiked last year.

The measure, however, will expire by year-end.

Finance Undersecretary Zeno Abenoja noted that the Interagency Committee on Inflation and Market Outlook (IAC-IMO) is already reviewing the covered items given the recent typhoons, the threat of El Niño, as well as external developments globally.

These include the export ban of India on its grains that is starting to drive up prices in major producing countries such as Vietnam, from where the Philippines sources about 90 percent of its imports.

“The possible extension will cover just the four (commodities), but the IAC-IMO reviews both food and non-food sources of inflation,” Abenoja said.

“A comprehensive review is actively ongoing, including those that are included in EO 10,” he said.

The EO reduced rates of duty on fresh, chilled, or frozen swine meat up to 25 percent, corn at 15 percent, rice at 35 percent, and coal at zero.

Inflation cooled to a 16th month low of 4.7 percent in July primarily due to slower food and non-food inflation.

Last week, HSBC Global Research warned that inflation could start picking up yet again next year, which means that the current slowdown would likely be temporary.

HSBC said inflation may rise once again by the second semester of 2024 as temporary tariff cuts on rice, coal, corn, and pork will expire, which could reintroduce another inflationary wave to the country.

“We estimate the maximum impact of these tariff adjustments to inflation to be as much as 1.4 percentage points,” HSBC said.

“We expect headline inflation to be tangent to the BSP’s upper-bound target range of four percent in the second half – a level that will likely complicate the BSP’s timing of the rate cuts,” it said.

As of now, Abenoja said the rice situation in the country seems to be manageable given that rice stock will be sufficient until year-end.

Nonetheless, the government continues to look at developments abroad, especially the spillover of the India rice ban that could affect rice prices from other exporters.