Inflation is at its highest in three years, but instead of offering a real solution to soaring prices, the newly-installed Marcos administration is downplaying the severity of this and saying it is beyond government control, said research group IBON. If like its predecessor thorough economic policy reforms are not put in place, the situation could worsen, said the group.
The Philippine Statistics Authority (PSA) reported that in June 2022 inflation went up to 6.1% – the highest since November 2018 (also 6.1%) – from 5.4% in May 2022 and 3.7% in June 2021. In the National Capital Region (NCR), June 2022 inflation also increased to 5.6% from 4.7% in May and 2.6% in June last year. The PSA attributed the increase to food and transportation becoming pricier amid rising fuel costs.
IBON noted that the prices of common food items in the NCR have increased in June 2022 from the year before as per agriculture department monitoring. For instance, the price of chicken increased by 25% from Php160 to Php200. Vegetable prices such as of carrots, potatoes, ampalaya, string beans, eggplants, squash and pechay increased by a range of 13% to 67% or by Php10 to Php20.
Higher transport costs also pushed up inflation. In June, the Land Transportation Franchise and Regulatory Board (LTFRB) approved temporarily raising traditional jeepney fare from Php9 to Php10 due to oil price hikes. Transportation inflation is bound to spike further in July with basic jeepney fare going up to Php11, electronic jeep fare to Php13, taxi flag down rate being raised to Php60, and the Metro Rail Transit no longer offering free rides.
Oil prices continued rising in June, bringing the year-to-date net increase to Php30 per liter for gasoline, Php45.90 for diesel, and Php39.75 for kerosene.
The group stressed that oil prices could be lower without the fuel excise tax. IBON estimates that the Department of Energy’s (DOE) monitored gasoline price of Php98.40 per liter as of end-June, for instance, could be lower at Php88.40 if the excise tax on gasoline were removed, or Php76.50 if both the excise tax and the value added tax (VAT) were removed. As for diesel, the Php98 per liter monitored price can be lower at Php92 and Php80.20, respectively.
Moreover, the impact of increasing prices could be mitigated by subsidies, but these are coming in too little too late, said IBON. The Php500 monthly household subsidies for six months promised by the government four months ago will be given to only 12.4 million families. But IBON pointed out that a lot more have suffered since the prices of oil and other goods and services soared.
If finally distributed after four months since promised, the Php500 per month subsidy will also just be equivalent to Php60 per day or a measly Php12 per person for a family of five. This is paltry, IBON said, as for instance in the NCR the minimum wage still barely meets IBON’s estimated family living wage of Php1,106 for five members despite a belated Php33 wage hike.
IBON said that the new administration needs to admit the breadth of the price crisis to undertake real solutions. However, Marcos disagreeing with the PSA-reported inflation figure as not that high tends to understate the structural as well as contingent factors and gives the government an excuse not to solve these. The group also said that while expanding fuel subsidies to include tricycles and offering free train rides for students are welcome for the short term, actual subsidy distribution to households, transport workers and producers still has a huge backlog.
As it is, Marcos’ reaction to the high inflation has not been helpful in coming up with proposals that can be immediately done to mitigate the impact of price increases, even if these have already been made clear, said the group. The Marcos administration can be more responsible by removing fuel excise, giving substantial subsidies to the poorest 70-80% households as well as to workers, small businesses and producers. It can opt to depart from the failed economic path of its predecessors by addressing the problems of economic decline especially in food and agriculture, import-dependence and lack of government regulation, and providing a genuine economic stimulus program to help uplift the economy, said IBON.