First there was good news. The GDP rose by 7.6 percent, according to our PSA.
In Davos, the president was only expecting 7.1 percent, still higher year-on-year, but recall that we had a 9.5 percent contraction in the first year of the COVID-19 crisis. “Happy days are here again,” or so it seemed.
And then the other day, the PSA released bad news that rained on the economic managers and the president’s parade.
It announced a higher than high January inflation rate, at 8.7 percent, well beyond what our economic managers were predicting—that prices have begun to taper down in 2023.
And what drove the new record 14-year high inflation rate?
Food, which now accounts for 29.9 percent of the basket of goods, went up by 10.7 percent.
Rentals too, because it is the start of a new year and the economy has re-opened.
Utilities too, but the bad news is these are expected to increase even further, and with the summer and heat wave approaching, the impact of high water and electric bills will be felt even more.
The president assures us that with their interventions, such as lower tariff rates on imported food, the January inflation rate will start decreasing in the months to come.
DA officials of course know that with the entry of summer, the harvests will come in. Normally, that should give us a sigh of relief from the high prices of the past seven months.
What DA officials worry about, even if they are not saying it publicly (the Sebastian et al. syndrome), is how high fertilizer and fuel costs have affected the expected summer crop, whether staples such as rice and corn, or all other agricultural produce.
The world food market is likewise worrisome. Dairy products (we import almost all our milk requirements) are on the rise. Rice is inching upwards. Flour will remain unstable. Corn and soybeans as well.
NEDA Secretary Arsi Balisacan whistles in the dark, citing “measures meant to balance the interests among local food producers, consumers and the overall economy” while claiming that “a robust and resilient agriculture…(will) ensure enough food supply and keep prices stable.”
But our farmers are asking—what measures? And when?
Verily, food inflation is an albatross weighing heavily on the economy’s neck.
The brouhaha about the highest-priced onions in the universe still bothers many, even if these have started to decrease, with new harvests and imports.
Still, government comes up with SRP’s which do not work and never do, especially in the wet markets.
The Bangko Sentral will once again adjust interest rates, using this monetary tool to tame down inflation.
But this is a lack of supply, not a demand-pull inflation. Increasing interest rates will affect real estate, construction, even manufacturing.
Farmers who rely on informal lending by the middlemen in the value chain do not even understand what impact BSP’s interest rate adjustments will make on their miserable lives.
Higher interest rates will instead impact on industry expansion, and therefore jobs.
But then again what else can the BSP do? Inflation is the bigger problem.
In the third quarter of 2017, when NFA still had some teeth, its rice inventory was as low as 7 days of the national consumption.
By 2018, with neither NFA nor DA doing anything about government-held inventory, we had a rice supply crisis.
The calculations were wrong, aggravated by the cool relations between then DA Secretary Manny Pinol and then presidential adviser Leoncio Evasco under whom NFA was being supervised.
The president, in response to the preventable crisis, called one of the biggest rice traders in the country, and threatened him and his family with mayhem similar to Bato’s Tokhang.
Did it work?
For a week or so, but the law of supply and demand is an immutable law of economics, that even the highly popular Ramon Magsaysay could not “repeal.” So rice prices continued to be a headache for government.
Maybe if then President Duterte called all the big rice traders, but he threatened only one. As for our current leader, can he do a Duterte credibly?
Sonny Dominguez and his economic team were unperturbed by the high rice prices in 2018.
Instead they saw it as opportunity to push Congress into passing the Rice Tariffication Law, domestic legislation that formalized our full accession to the World Trade Organization’s lapse of quantitative restrictions on rice.
Rice prices have stabilized (but no, they have not gone down), while our farmers have been crying ever since.
As we wrote in a previous article, it is all about balance and timing.
Sooner than later, our exasperated president will in the still of the night ask himself why he even aspired to the thankless job of being president at this time.
Inflation, a huge legacy debt, a lethargic bureaucracy, plus external developments where he has little control if any.
He moves from country to country, from conference to conference, hoping to generate investments we badly need. He reaps pledges.
When will the pledges materialize, in a world where the rich countries are drowning in their own economic problems?
In fairness to the unfairly demonized PNoy administration, Benigno Simeon Aquino III left his successor with ample financial resources and low indebtedness.
A reliance on then low interest-denominated foreign loans to finance the Build, Build, Build push, in itself a worthwhile undertaking, followed by a pandemic where social subsidies had to be rushed amid an economic lockdown, cost us billions upon billions which then pushed the debt upwards to P13.5 trillion.
That is what President Marcos Jr. inherited.
That gives him little elbow room, and with food inflation as albatross, things do not look too good, especially for the poor who have to bear the brunt in their seminal existence.