Pray for end of war

There is no need to panic against any immediate spikes in the prices of food and other basic goods. For as long as there are more than enough supply stocked up in the stores, groceries, and markets to meet the demands of consumers, Department of Trade and Industry (DTI) Secretary Ramon Lopez reassured the public we’re all good for now amid fears that the Ukraine-Russia “war” might adversely trigger another world crisis and impact anew the Philippines.

Taking place at the heels of the receding cases of the coronavirus disease 2019 (COVID-19) pandemic in our country, Lopez counts on the strong recovery momentum of the Philippine economy to cushion the impact on us of this emerging world crisis.

To ensure such supplies remain stable, the DTI Secretary presented to us during our weekly virtual news forum Kapihan sa Manila Bay the specific plans of actions and programs spelled out in the 14-point policy measures drawn up by the government’s economic managers. The DTI Secretary is part of the economic team of President Rodrigo Duterte who drew up these contingency measures addressing each and every projected impact to the Philippine economy in case of a “prolonged” armed conflict between Ukraine and Russia.

The conflict between the two countries dating back in 2014 erupted anew last Feb. 24 when Russia invaded Ukraine. The world market reacted viciously and pushed up the price of crude oil as economic sanctions began against Russia’s invasion on Ukraine. Russia is a major producer of crude oil. The Brent oil – the benchmark of the world price of crude oil – rose to $120 per barrel level before settling at $114 as the war between Russia and Ukraine intensified.

This translated to this week’s increases, the 10th consecutive time, here in the pump price of diesel which now sells at P63.01per liter, and P71.08 per liter for gasoline. No less than Department of Energy (DOE) Secretary Alfonso Cusi warned in his press briefing last Tuesday that the prices of gasoline and diesel in our country may even breach P100 per liter. That is, if the price of crude oil in the world market would further go up should the Ukraine-Russia “war” drag on.

“We’re stable. Kalma lang (be calm only). What’s important is to solve these policy barriers,” the DTI Secretary pointed out. This is to allay fears to unbridled price spikes of consumer products like rice, sugar, among other basic goods. Lopez stressed the fact that the Philippines has less than one percent of goods being imported from both Russia and Ukraine.

If there would be any inching up of prices, Lopez warned producers and traders that they cannot and should not immediately pass on to consumers their marginal cost of increase. He pointed to the fact that domestic manufacturers carry a minimum inventory stock of 30 to 60 days on basic foods ingredients such as wheat and flour, a measly volume of which we import from both Russia and Ukraine.

A number of these existing measures in place, in fact, were updated and strengthened more to absorb the initial escalations in the production costs of domestic manufacturers, Lopez reassured us. In the process, he pointed out, the Filipino consumers are being protected from the severe price shocks.

Lopez conceded though the steep spikes in the local pump prices of refined oil products have been the most impactful – a reflection of the higher cost of production of industries and manufacturers. But as Lopez explained, these oil price upticks do not push up cost of production by same amount. Lopez estimated the price impact average increase – if any – would be about 5% at the most over a given period of time.

Also, the government would require for “staggered” increase of any power rate hike by public utilities like the Manila Electric Co. (Meralco), Lopez disclosed.

This set of policy measures were presented and approved by President Duterte during the Cabinet meeting convened at Malacañang last Monday night. Two of the 14-point measures recommended by his economic team, however, require legislation by the 18th Congress. These were, namely, increasing the petroleum buffer stock from 30 to 45 days; and, increasing the buffer stock from seven to 15 days of liquefied petroleum gas (LPG) used for cooking.

Unfortunately, the lawmakers are currently in recess during this campaign period for the May 9 national and local elections. The economic team told the President they are ready to recommend the holding of special sessions of Congress to tackle these two bills before the Ukraine-Russia conflict escalates any further.

Notably not included is the proposed amendment of the Tax Reform for Acceleration and Inclusion (TRAIN) Law, which several senators and congressmen insist is the most immediate and effective response to cushion the Filipinos from the oil price crisis. Specifically, the lawmakers were pointing to amend Section 43 of the TRAIN Law that allowed the suspension of the excise tax on gasoline and other refined petroleum products should the world price of crude oil rises beyond $80 per barrel for three consecutive months. This prescriptive period under the TRAIN Law, however, had already lapsed in 2020. Hence, the need to amend it.

The Duterte economic team fears the proposed suspension of excise tax on oil products might even cause far worse problems for the country.

Suspending collection of excise taxes from oil products, they cited, will mean giving up much needed revenues for the government to fund the “social protection” measures lined up to initially assist the most immediately affected sectors like the public transport, fisher folks and farmers. The Duterte economic team provided for the doubling of the amount of government subsidies more than the allocations in the 2022 national budget. These subsidies are ready for distribution in April and May as allocated, Lopez announced.

Having said all of these, the DTI chief urged, “Let’s pray for peace in Russia and Ukraine.” Amen to that.