President Rodrigo Duterte’s economic team said Tuesday they expect oil prices to come down and urged Congress not to suspend the Tax Reform for Acceleration and Inclusion Law because doing so would hinder growth.
Finance Secretary Carlos Dominguez said oil bought before prices climbed to $75 per barrel would come in soon, lowering the inflation rate. He also said that world oil prices were on a downtrend.
“The price of future deliveries of oil is actually lower than the current prices, so we are seeing that trend going down,” he said.
The scheduled summit between the United States and North Korea ought to calm the market and bring down oil prices, Dominguez said.
“The Middle East would be calmer than what it has been past few weeks so fuel prices would not be too volatile,” he said.
The inflation rate next year would fall below 4 percent, despite rising to 4.6 percent in May, he said.
Dominguez acknowledged that higher prices for tobacco, rice, fish and corn contributed to the higher inflation, but said the government was “taking steps to stay ahead of the situation.”
Earlier, the economic managers issued a joint statement urging lawmakers not to suspend TRAIN, the administration’s tax reform program that labor groups have blamed for rising prices.
“Suspending TRAIN and adopting other band-aid solutions will only have a minimal and short-term impact on inflation and will stifle our growth, further delaying our nation’s progress toward becoming an upper-middle-income country by 2019, such that around 6 million Filipinos would be lifted out of poverty by 2022,” said the statement signed by Dominguez, Budget Secretary Benjamin Diokno, and Socioeconomic Planning Secretary Ernesto Pernia.
“We must keep in mind that TRAIN reformed a previously unfair and harsh tax regime. It lowered the personal income taxes of most Filipinos except the very rich—increasing the take-home pay of 99 percent of income tax payers. This, coupled with free higher education and new jobs created through our infrastructure build-up, enables the Filipino people to spend more for themselves and for the benefit of their families,” they said.
They said the government was committed to doing all it could to invest in the people, and build safer communities and better infrastructure so that everybody will prosper.
“The economic team pledges its support in fulfilling President Rodrigo Roa Duterte’s promise of a strongly rooted, comfortable and secure life for all Filipinos. The Philippines is already on the path of high and sustained growth. We must stay the course,” they said.
They said the government was also closely monitoring and taking steps to address the difficulties experienced by Filipino families today arising from higher prices. The Philippine Statistics Authority on Tuesday reported that inflation rate for May 2018 accelerated to 4.6 percent from 4.5 percent a month ago.
(Factors affecting inflation)
The agency said this was driven primarily by higher rice, corn, fish, tobacco, and personal transport prices, the latter largely driven by rising world crude oil prices. They said the increase in the international oil prices beyond the programmed level of $60 per barrel contributed 0.5 percentage points to the overall inflation rate in May 2018.
They also said that the Department of Energy has already made arrangements with oil companies to provide discounts to public utility vehicles and the Department of Transportation was finalizing guidelines for fuel subsidies under the TRAIN Law.
“We also expect large tranches of rice imports to arrive starting this month, making food cheaper for the Filipino family. We are of one mind that one of the best ways to address high food prices is for Congress to ensure urgent passage of the Rice Tariffication Act,” they said.
The Bangko Sentral ng Pilipinas estimates that this will reduce 2018 inflation by around 0.4 percentage points if implemented in the third quarter.
They said TRAIN was vital for the government’s “Build, Build, Build” Program.
“We must bridge the infrastructure gap that has painfully made our country lag behind our Asean neighbors. Through this program, we seek to create more than one million jobs for our fellow Filipinos through 2022, while reducing logistics costs for businesses, especially micro, small, and medium enterprises, many of which are located in the provinces,” the economic managers said.
But Senator Grace Poe, chairman of the Senate public services committee, warned that without the mandated subsidies for poor families and low-wage earners, the TRAIN Law “would result in more harm than good.”
Senator Paolo Benigno Aquino IV, on the other hand, dismissed the claim that suspending TRAIN would hamper economic growth.
In separate letters to Dominguez, Transport Secretary Arthur Tugade, Labor Secretary Silvestre Bello III, Social Welfare Secretary Virginia Orogo and Land Transportation Franchising and Regulatory Board chairman Martin Delgra III, Poe urged the immediate implementation of subsidies provided by the TRAIN Law that have yet to be activated.
“As swift as we had passed the TRAIN Law, it is only right that we immediately implement the mitigating measures, which we have designed for the poorest of the poor,” Poe said.
She said the social welfare and benefits program is an indispensable part of the implementation of TRAIN. Without this program, she said, TRAIN would do more harm than good.
Under Section 82 of the tax reform law, the senator said jeepney franchise holders are entitled to fuel vouchers; minimum-wage earners and the poorest 50 percent of the population are qualified to receive fare discounts, rice discounts and free skills training while a total of 10 million low-income households will each receive P200 per month this year and P300 per month in 2019 and 2020.
“The overwhelming sentiment …[is] that minimum wage earners are already suffering from the simultaneous effects of increasing fuel prices, inflation on basic commodities and services, and this is compounded by the effects of the TRAIN Law,” she said.
Aquino said there was enough in the government’s P3-trillion national budget because government agencies have continued to underspend.
“We really need to focus on the efficiency of our agencies,” he said.
He also cited the need to improve collection by the Bureau of Internal Revenue and the Bureau of Customs instead of just adding to the prices of goods.
“Government services should not be held hostage to the TRAIN Law,” he said in Filipino. “We can find the budget. The committee on finance will be able to look for funds to make sure these important programs will continue.”