Optimism rising
CONSUMER confidence improves,” this, in effect, is how the Bangko Sentral ng Pilipinas reads the findings of its Consumer Expectations Survey (CES) for the first quarter of 2015. “[T]he overall confidence index (CI) increased to -10 percent from -21.8 percent in Q4 2014,” the BSP stated, noting that although still negative, the higher CI “means that the number of households with an optimistic outlook increased” although still “outnumbered by those who think otherwise.”
Conducted last Jan. 6-Feb. 5, the survey indicated that more families expect consumer goods to stay cheap, more jobs to become available and their savings to grow. The improvement in consumer sentiment was broad-based and evident across income groups, with the middle-income families showing the biggest improvement in sentiment, followed by the low-income households, the BSP said.
According to the respondents (of the randomly selected CES sample of 5,818 households, 5,705 responded to the survey), their improved outlook was driven by several factors, among them lower oil prices and the resulting stable prices of commodities.
But with consumer optimism on the rise, the greater challenge is to sustain its upward momentum and nothing gets to shoot it down.
To recall, 2015 started with benchmark crude prices falling to their lowest in more than five years—to around $53 a barrel as worries about excess global supplies amid weak demand continued to beset oil markets. The decision of the Organization of Petroleum Exporting Countries in November last year to maintain output accelerated the decline in oil prices, even as record production in Russia and Iraq added to concerns about oversupply. The crude oil benchmarks—Dubai, Brent and West Texas Intermediate—have lost more than half of their value from the peaks hit in mid-2014.
With oil inventories at high levels and weak global growth continuing to limit crude demand, economists believe that it would take some time for oil prices to fully recover to the more than $100-a-barrel annual average price seen from 2011 to 2013. Global oil prices are expected to stay weak in the next two years. In its latest commodity outlook, the World Bank forecast an average price of $53 a barrel for 2015 and $57 a barrel for 2016.
The local impact has been reflected in the pump prices of petroleum products. Diesel, used mainly in public transportation, is now down to P26-P32 a liter from P39-P43 in September last year (when global prices started to weaken sharply); gasoline has eased to P38-P44 a liter from P48-P55, and LPG, which is the main fuel for households’ cooking needs, is at P508-P728 per 11-kilogram cylinder from P640-P763. Similar downward adjustments were made in transport fares and electricity rates.
There is a downside though to the cheaper oil environment: Government revenues from oil imports have fallen sharply, too. And to recover part of the loss, the Aquino administration is thinking of raising the excise tax on oil products.
This option was raised by Economic Planning Secretary Arsenio M. Balisacan, who is also head of the National Economic and Development Authority. Balisacan said that the Bureau of Customs stood to lose P40 billion in revenues this year due to the weak oil importation. More than a fifth of Customs’ annual collections come from imposts on petroleum products. Increasing the excise taxes on these products will surely cover part of the shortfall in Customs revenues brought about by lower oil prices.
Multilateral lending agencies—the Washington-based World Bank and the Manila-headquartered Asian Development Bank—suggested the same, pointing out that countries could take advantage of low oil prices through increased taxation. The World Bank noted that the excise tax on petroleum has not been adjusted since 1997, resulting in huge revenue losses averaging P120 billion a year or 1 percent of gross domestic product.
Raising the taxes on petroleum products at this time could only be a damper and may ultimately turn out to be counterproductive. To be sure, the taxes will simply be passed on to consumers, and ordinary Filipinos have been suffering from high fuel and food prices and an ever-increasing cost of living for the past five years. The government should allow them some respite owing to cheap crude oil prices. There are other sources of revenues it could tap to cushion the impact of low oil prices on Customs collection. Going after the big-time tax evaders will be a good starting point. Scrapping incentives to industries that have been protected for decades is another. But spare the long-overburdened ordinary consumers, please!
