Research group IBON said that Philippine inflation is still among the worst in Southeast Asia despite easing in April. Inflation in the country will remain high, the group said, unless the Marcos administration takes decisive steps to temper it.
The Philippine Statistics Authority recently reported that April 2023 inflation eased to 6.6% from 7.6% in March. This was attributed to slower increase in the prices of food and non-alcoholic beverages, transport, and housing, water, electricity, gas and other fuels compared to the previous month.
However, this inflation is still the highest among the Southeast Asian nations according to the countries’ national statistical agencies for this year. The Philippines’ inflation rate is higher than Singapore’s 5.5%, Indonesia’s 4.3%, Malaysia’s 3.4%, Vietnam’s 2.8%, and Brunei Darrusalam’s 1.2 percent.
The Philippines has also had among the highest inflation in the region since the pandemic. Philippine inflation which averaged 4% in the 2020-2022 period was the third highest of all 11 Southeast Asian countries, according to the Asian Development Bank (ADB).
Laos registered the highest average inflation (10.6%), followed by Myanmar (8.4%) in the said period. The rising prices of fuel and other imported goods aggravated by local currency depreciation are reportedly behind such high inflation.
The Philippine inflation rate has further eased in April after the 14-year high of 8.7% in January, but IBON said it will likely remain high and volatile because the government has not taken decisive steps to lower prices.
For instance, the Marcos Jr administration has refused to heed various groups’ clamor for the removal of the 12% value added tax on goods and services as well as taxes on oil, said the group. High taxes on fuel increase the price of oil which in turn affects the price of other products, said IBON. The last time the inflation rate was 6.6% was in August 2018 or eight months since the Tax Reform for Acceleration and Inclusion or TRAIN law imposed new taxes on oil, sweetened beverages and other consumer goods.
The country’s being a net importer of oil also makes the movement of local prices of goods overly dependent on the global oil market, IBON added. Virtually all of the country’s oil needs are imported so the ongoing Russia-Ukraine conflict which caused global oil prices to spike was a major factor in the recent spate of soaring inflation since November 2022.
IBON added that since less than 4% of the national budget is allocated for agriculture and agrarian reform, assistance for food producers is limited which hampers productivity and prevents food prices from being substantially lowered. The government’s recently-announced Php26.6- billion cash aid for the 9.3 million poorest households supposedly include farmers and fisherfolk but this only amounts to Php500 per family per month while peasant groups estimate the need for a Php15,000 production subsidy.
The group noted that government’s recently adjusting its inflation target for 2023 from 2-4% to 5-7% is in itself an admission that the conditions that cause prices to accelerate remain. IBON stressed that in the medium and long-term the Marcos Jr administration should address the economy’s chronic vulnerabilities such as weakened production sectors.
Meanwhile, in the short run, the government should heed recommendations to relieve the people of consumption taxes and increase purchasing power with wage hikes and substantial cash assistance to low-income families. It should also already start aggressively supporting local production to lower food prices including support for micro, small and medium enterprises. These supply-side measures are more effective than, for instance, interest rate hikes to reduce aggregate demand by slowing economic activity. It should also adopt a long-term strategy of building a self-reliant and independent national economy. ###