Research group IBON said that faster inflation largely due to rising food prices hits poor households the worst. The group also said that the Duterte administration’s proposal to increase food imports is short-sighted, and that the best defense against rising food prices and high inflation is to increase domestic food supply through long-term solutions that correct long-standing government neglect of agriculture.
The Philippine Statistics Authority (PSA) reported that July 2018 inflation rose to 5.7% from 5.2% the previous month. This was mostly driven by worsening inflation in food and non-alcoholic beverages with higher rates among 9 out of 11 commodity items in the index. Prices rose fastest for vegetables (16%), corn (13%), and fish (11.4%).
IBON said that this increasingly expensive food is particularly problematic for poor families because food takes up a greater portion of their expenditure compared to higher income families. According to the latest available data from the 2015 Family Income and Expenditures Survey, 59.7% of the expenditures of families in the bottom 30% income group was spent on food compared to just 38.8% for families in the upper 70% income group. Rising prices will push more families into hunger and poverty, the group said.
The Duterte administration is proposing to arrest escalating food prices and inflation by lowering tariffs on food to increase their importation. IBON however said that while this could give some immediate relief it is only a short-sighted measure and the government is still failing to come up with long-term solutions to rising domestic food prices.
The much-needed long-term solution is to increase domestic agricultural, fisheries and livestock productivity, said the group. Yet the Duterte administration is proposing to increase food imports while cutting the Department of Agriculture (DA)’s proposed budget for 2019 by Php862 million, making it 1.7% lower than in 2018. Domestic producers lacking government support are at risk of being undermined or displaced by cheap food imports.
IBON said that additional food imports should only be for a short time until prices stabilize. Suspending the Tax Reform for Acceleration and Inclusion (TRAIN) Law will also greatly reduce inflationary pressures. The group stressed that measures to increase farm productivity should immediately be implemented including providing irrigation, production and storage facilities, extension services, subsidized credit and marketing support, among others. ###