Last Tuesday, the government announced that inflation for the month of July reached 5.7 percent, representing yet another high for at least the last five years.
Two days later, the National Economic and Development Authority revealed that economic growth in the previous quarter was recorded at 6 percent — still a robust number, but significantly lower than what everyone in the private and public sectors expected.
The April-June gross domestic product was the weakest in three years, ending a run of 10 consecutive quarters that saw the economy grow at least 6.5 percent.
Socioeconomic Planning Secretary Ernesto Pernia laid the blame squarely on the high inflation rate, without which, he said, growth should have been anywhere between 7 and 8 percent.
He also cited the closure of Boracay and tighter mining regulations as other reasons for the pinched economic expansion.
On the same day the startling GDP figures were released, the central bank announced its largest interest rate hike in a decade — aimed to fight inflation which, it admitted, will get worse in the coming months before it gets better, hopefully, by 2019.
Despite the dour situation, “Everything is good,” assured Malacañang. But signs of panic are emerging.
Last week, the country’s economic managers floated the idea of encouraging President Duterte to issue an executive order reducing the tariffs on meat and fish imports.
The proposal was allegedly being pushed by Speaker Gloria Macapagal Arroyo as a means to provide instant relief to consumers beset by surging prices.
Energy Secretary Alfonso Cusi also unveiled his own plan to import cheaper diesel from Russia to give local motorists lower priced fuel options.
The rationale for these proposals and policy actions — to help mitigate the impact of high commodity prices — may sound good. But they are shortsighted panacea solutions that would only create a fresh host of problems, with the consequences outweighing any short-term benefits.
Lowering tariffs on food imports, for instance, would have marginal benefits at best, according to the lead economist of the Bangko Sentral ng Pilipinas, Deputy Governor Diwa Guinigundo.
Meat and fish make up only a small portion of the basket of goods that goes into computing the monthly consumer price index.
On top of that, current tariffs on these goods are already low, so any tariff reductions will provide only the slightest of benefits to consumers.
However, the adverse effects would be considerable. Tariff cuts will swamp the country with cheap imported goods, walloping the businesses of local meat producers and the fishing industry which, as it is, are already at a disadvantage due to competition from lower-priced imports.
The biggest component of the food inflation basket remains rice, at almost 10 percent. If policymakers can solve this problem, they would go a long way in easing high food prices. But there seems little headway at this point on this area.
In the case of the Department of Energy’s proposal, the diesel it wants to import is, unfortunately, cheaper only because it is dirtier.
The Euro 2 standard diesel is a 22-year-old emission standard that was abandoned by the local industry when it shifted to the cleaner burning Euro 4 diesel three years ago.
Allowing imports of dirtier fuel that may only be a few centavos cheaper than the existing type sold in gasoline stations will, again, provide short-term relief to consumers, and quick publicity points for its backers. But its long-term impact on the environment will be disastrous.
The country faces economic challenges on many fronts that call for urgent but carefully considered solutions that should address the issues over the long run, such as tighter monetary policy, more fiscal spending and the tariffication of the rice industry.
The independent research group IBON Foundation estimates that the inflation rate has already reduced the income of 60 million poor Filipinos nationwide by about 12 percent. And no relief is yet in sight.
Imposing hasty, ill-thought-out economic palliatives meant primarily to earn brownie points for legislators and an administration nervous about the growing hostility of the public over the inflationary squeeze will only make the situation worse.
The country’s growing economic troubles require more than quick fixes — or hollow words of comfort from Malacañang.
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