It takes a whole nation to fight inflation
Inflation slowed down to 7.6 percent in March but still above the government’s revised target range of 5 to 7 percent by end-2023. Prices of food, transportation, housing, water, electricity, gas, and other fuels contributed 22.4 percent to inflation.
According to the Department of Agriculture (DA), retail prices of rice will likely increase by P5/kilo in the next few weeks due to a low buffer stock, higher cost of imported rice, and lower production due to El Niño. Electricity rates are also likely to increase due to peak in the dry season.
These issues highlight the continuous need to control the inflation rate, which remains the most pressing concern of Filipinos.
What has the government done so far? DA’s 2023 budget was increased by 39.2 percent, totaling P184.1 billion, to enhance food security and agricultural productivity. The agency’s Kadiwa program was also expanded to allow more farmers to sell their products directly to consumers. This helps farmers earn more income, increases farming efficiency, and subsequently results in more affordable food prices. There are around 500 Kadiwa outlets across the country.
Government allotted P5.2 billion for its targeted cash transfer program which will provide P500 per month for six months to 9.8 million beneficiaries to mitigate the adverse effects of inflation. This, however, is a band-aid measure that partly eases the burden but does not directly address the issue of inflation.
President Marcos also created the Inter-agency Committee on Inflation and Market Outlook to guide the Economic Development Group in bringing down inflation.
What else can be done? We must continuously encourage the private sector and consumers to complement the government’s efforts to curb inflation. Below are some observations and recommendations:
1. Private sector on food inflation. Companies can help improve agricultural production by providing financing, inputs, and technology to farmers, and investing in post-harvest handling and processing facilities (e.g., cold storage warehouses, processing plants, and packaging facilities).
The Aboitiz Group launched “Fresh Depot,” whose first phase involved testing out a sustainable cold storage facility in Benguet; second phase aims to digitize data on farmers’ land and cultivation practices, along with preharvest, harvest, and market-related information.
Logistics costs account for 24 percent to 53 percent of wholesale prices. To reduce these costs, private firms can continuously invest in infrastructure and in the process, create better farm-to-market roads. San Miguel Corp.’s (SMC) initiative to develop expressways improved the overall supply chain for agricultural products across Luzon. 2. Private sector on fuel and energy inflation. SMC recently inaugurated its Battery Energy Storage System facility in Bataan, a game-changing technology that will bring down the cost of electricity the fastest way as it builds battery storage in 12 months and the cost of investment is so low compared to other technologies.
The Ayala Group committed to raising renewable power capacity from 4 gigawatts to 20 gigawatts by 2030 and has been selling its coal-fired assets to be able to transition to clean energy. Aboitiz Power allotted P190 billion to increase its clean energy capacity and diversify its power sources and has invested in a feasibility study to develop offshore wind in the Philippines.
Toyota Philippines has called on the government to expand tax breaks to electric vehicles.3. Micro, small, and medium-sized enterprises (MSMEs) are also doing their part to indirectly help tame inflation. Startup Mayani created an e-commerce platform linking farmers, consumers, and businesses. GoNegosyo, in cooperation with government, continues to offer mentoring programs to train more MSMEs in adapting to the digital economy.
4. Individuals/households can also contribute by planting vegetables in backyards or starting urban gardens on rooftops or balconies.
5. Local government units (LGUs) and the national government (NG) can promote a cofinancing mechanism to incentivize investments in agriculture. For every P1 an LGU allocates for agricultural development, the NG can give it an additional P2 to P3. Additional funds from the Mandanas ruling can help LGUs boost infrastructure budget. They can also provide initial inputs and warehousing for backyard or small agriculture producers.6. Legislative-Executive Development Advisory Council (Ledac), composed of the President and the Senate and House leaders, should also convene, at least monthly, to rigorously monitor the action plans to address the supply side of inflation and communicate these to the public after each meeting.
The private sector should also be regularly included in Ledac meetings, and the President could hold quarterly informal gatherings with business leaders to recognize their contributions and discuss collaborative strategies for managing inflation and other issues.
Conclusion. Filipinos have always taken pride in “bayanihan,” the spirit of unity and cooperation to achieve a common good. Bayanihan continues to be manifested during times of natural calamities and crises like the COVID-19 pandemic.
In the same way, the spirit of bayanihan can also be invoked to fight inflation, which we believe can be effectively addressed by increased and sustained collaboration among the government, private sector, and individuals.
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Gary B. Teves served as finance secretary under the Arroyo administration.
