The country’s regional wage boards are thoroughly studying and assessing proposals seeking salary increases for private sector workers, the Department of Labor and Employment (DOLE) said Wednesday.
This developed as inflation will remain elevated in 2023 due to second-round effects and may average about 5.2 percent, an economist said.
Labor Secretary Bienvenido Laguesma said they are giving the Regional Tripartite Wages and Productivity Boards (RTWPBs) ample time to decide on the proposals.
“We do not want to pre-empt the process of the Boards for the simple reason that any decision they will make, if there is discontent and there will be an appeal. That would go to the National Wages and Productivity Commission, where your humble servant stands as chairman. So, at this point, we don’t want our statement to be premature,” he said in a press briefing.
Laguesma said the NCR wage board has already conducted an initial hearing last week and “will continue to roll out the process.”
“We know that many are getting impatient of the process. But we cannot just rush this,” Laguesma said.
Labor groups have repeatedly pushed for a new round of wage hikes due to inflation.
ING Bank Manila senior economist Nicholas Antonio Mapa said in a report: “With the widespread prevalence of second-order effects and little in the pipeline in terms of relief to the food basket, we believe inflation will only glide lower next year, still settling above target to average closer to 5.2 percent.”
Mapa said inflation, unlike previous surge episodes such as in 2018, will not likely slow down quickly, only “a steady grind lower.”
“The saying inflation will be sticky downward should hold sway next year given how pervasive price pressures have become. Some would tie this to vibrant domestic demand, but the true reason for the proliferation of second-order effects would be the protracted supply side shocks emanating from the ongoing war in Ukraine,” Mapa said.
In the past, he said, only a few items were responsible for above-target inflation, but the current episode looked completely different, as more than 160 items faced price gains of more than 4 percent.
“With prices so high for so long, every firm has been granted a clear-cut reason to hike prices themselves, leading to the price spiral. Still-bogged-down supply chains have not helped, as we’ve witnessed shortages for items such as sugar all the way to onions,” Mapa said.
He said although some could live without commodities such as vegetables “and that extra teaspoon of sugar,” the issues remained glaring, and little appeared to be in the pipeline to truly address the shortfalls.
On Tuesday, BSP Governor Felipe Medalla said the inflation rate was expected to peak in December 2022.
Medalla said there were uncertain events that could impact the annual increases in consumer prices for the month, such as what would happen outside of the country.
Laguesma, meanwhile, said he is not in favor of calls to abolish the wage boards.
“In my opinion, the existing mechanism, the regional wage boards, remains as the better choice. This is because it involves the direct participation of the different sectors. There are worker and employer representatives, along with the government. There is balance,” he added.
However, the Labor chief said it is up to lawmakers to decide on the matter.
In September, the Makabayan bloc filed House Bill 4898, seeking to establish a national wage for private sector workers, thus abolishing the existing regional wage boards.
Inflation in November 2022 has accelerated to a 14-year high of 8 percent from 7.7 percent a month ago, due to faster increases in the prices of food and non-alcoholic beverages.
This was significantly faster than the 3.7 percent in the same month a year ago. This brings the average inflation from January to November 2022 to 5.6 percent, well over the government’s target range of 2 to 4 percent.
The Development Budget Coordination Committee on Dec. 5, 2022, in consultation with the Bangko Sentral ng Pilipinas, has decided to retain the current inflation target of 3.0 percent ± 1.0 percentage point (or 2 to 4 percent) for 2023 – 2024 and set the same inflation target for 2025 – 2026.
The announcement of the medium-term inflation target is in line with the BSP’s commitment to transparency and accountability as well as the forward-looking approach in the conduct of monetary policy.
“I’m very sure that the peak [of inflation] will be in December,” Medalla said, although he refused to give a specific number. But he said inflation might slightly pick up from the 8 percent in November 2022.
“ … We thought inflation was going to peak in October 2022 but [then] typhoons came,” Medalla said.
Medalla also did not rule out the possibility of more rate hikes early next year.
“ A rate hike is a likely event but things might change…,” Medalla said.
The Monetary Board raised the benchmark interest rate in the middle of this month by 50 basis points to a more than 14-year high of 5.5 percent to prevent the second-round effects of inflation that may accelerate further this month.
Accordingly, the interest rates on the overnight deposit and lending facilities were set to 5.0 percent and 6.0 percent, respectively.
“The BSP’s latest baseline forecasts show that average inflation is still projected to breach the upper end of the 2-4 percent target range for 2022 and 2023 at 5.8 percent and 4.5 percent, respectively,” Medalla said.
However, the forecast for 2024 fell to 2.8 percent owing mainly to the further easing in oil prices, peso appreciation, and the slightly lower domestic growth outlook resulting in part from the BSP’s cumulative policy rate adjustments.
“The Monetary Board arrived at its decision after noting the further uptick in the headline (inflation) and the sharp rise in core inflation in November amid pent-up demand. Moreover, upside risks continue to dominate the inflation outlook up to 2023 while remaining broadly balanced in 2024,” Medalla said.
He said the expected upside risks to inflation over the policy horizon stem mainly from elevated international food prices due to high fertilizer prices and supply chain constraints.
On the domestic front, trade restrictions, increased prices of fruits and vegetables due to weather disturbances, higher sugar prices, pending petitions for transport fare hikes, as well as potential wage adjustments in 2023 could push inflation upwards.
Meanwhile, the impact of a weaker-than-expected global economic recovery continues to be the primary downside risk to the outlook.