Who’s to blame for soaring inflation? ‘All of them’ in gov’t, says economist

Ralf Rivas

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Who’s to blame for soaring inflation? ‘All of them’ in gov’t, says economist
UP professor Emmanuel de Dios likens the Philippines' economic managers to the suspects in Agatha Christie's 'Murder on the Orient Express' – they're all 'guilty'

MANILA, Philippines – The June 2018 inflation rate ended up even higher than all government forecasts, targets, and market expectations, after it surged to 5.2%.

Who should be held accountable for the spike? And how can inflation be tamed to within a decent range?

University of the Philippines (UP) School of Economics professor Emmanuel de Dios called out the government for not taking the blame.

De Dios said economic managers should at least acknowledge that the Tax Reform for Acceleration and Inclusion (TRAIN) law has something to do with the soaring inflation.

“It’s futile for the DOF (Department of Finance) to say TRAIN is only responsible for 0.4% of the [inflation]. But who is in charge of the economy? ‘Di ba silang lahat (Isn’t it all of them)?” De Dios said in a forum on democracy and governance on Thursday, July 5.

“If you read [Agatha Christie’s novel] Murder on the Orient Express, ganoon ang nangyayari dito (that’s what’s happening here). Pointing fingers, but all of them are guilty. And the sad part about it is there has been no coordination among these government agencies,” De Dios added.

He also slammed the government for collecting money through tax reform, but being unable to spend it as quickly as planned.

“Once the government gets the priorities wrong, you might end up wasting [funds],” De Dios said.

Even higher inflation looming?

The inflation figure was announced on the same day the provisional P1 jeepney fare hike took effect in Metro Manila, Calabarzon, and Central Luzon. 

The Manila Electric Company (Meralco) also hinted at an increase in generation charge due to tight power supply last June and the further depreciation of the peso.

Meanwhile, some regions reported higher inflation figures, like the Autonomous Region in Muslim Mindanao (ARMM) which posted 7.7%.

Consumers ask: how much more?

Socioeconomic Planning Secretary Ernesto Pernia attributed the higher inflation in the ARMM to the region’s poor infrastructure. Inadequate infrastructure means higher costs of delivery and production, and Pernia noted that the government seeks to address this problem through the Build, Build Build program.

Pernia also said he hopes inflation would not spike further in July, and assured Filipinos that the government is doing its best to stabilize prices.

The National Economic and Development Authority (NEDA) coordinates with agencies like the Land Transportation Franchising and Regulatory Board (LTFRB) regarding hikes and analyzing possible effects on the wider economy.

Several labor groups have also repeatedly lobbied for an increase in minimum wage, to ease the burden of workers. NEDA Undersecretary for Policy and Planning Rosemarie Edillon said they have discussed the matter with several regional wage boards.

For the last quarter of the year, Pernia hopes inflation will taper off. But prices are historically high from October to December, as people have more cash to spend.

Pernia also said the planned rice tariffication law and the possible decline of oil prices in the global market could tame inflation during that period. (READ: Rice prices soar as Duterte marks 2nd year in office)

BSP to reassess policy

The Bangko Sentral ng Pilipinas (BSP) earlier raised interest rates by 25 basis points to 3.5% to tame inflation. Raising interest rates encourages people to save up in banks instead of spending their money, and thus helps ease inflation.

However, Pernia hinted that the BSP may have been behind the curve.

“There may have been a little bit of a slip in [the] timing of increasing policy rates…. [The issue] is best addressed to BSP,” he said.

In a message to reporters, BSP Governor Nestor Espenilla Jr said “the higher-than-expected June inflation outcome is a setback.”

“We will review and update our situational assessment and forecast inflation path. This will shape the strength and timing of our next monetary policy response to firmly anchor inflation expectations,” he said.

The central bank said it remains committed to ensuring that inflation would fall within the target of 2% to 4% “as soon as possible.” – Rappler.com

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Ralf Rivas

A sociologist by heart, a journalist by profession. Ralf is Rappler's business reporter, covering macroeconomy, government finance, companies, and agriculture.