When the rate of inflation hit 5.2 percent in June, the government said this was higher than usual but no cause for alarm. A Palace spokesman said inflation was higher because there was more money going around as a result of economic activity tied to the administration’s Build, Build, Build program.
The tune changed when inflation continued to rise to 5.7 percent in July. President Duterte’s economic managers issued a joint statement saying inflation would peak in the third quarter, then taper off by the end of the year.
This time, however, they acknowledged that the rising price of rice was a major factor.
“Part of the supply problem is the country’s declining rice stock inventory — caused by weather disturbances in the country and in other rice-producing countries like Thailand and Vietnam — which is taking a toll on the prices of rice,” said the joint economic team, composed of Finance Secretary Carlos Dominguez, Socioeconomic Planning Secretary Ernesto Pernia and Budget Secretary Benjamin Diokno.
The Palace said it would crack down on rice hoarders and would push to liberalize the importation of rice in the belief that prices would come down once supply goes up.
Then August came and inflation rose to 6.4 percent, a nine-year high, aggravated by rising world oil prices and the weakening of the peso vis-a-vis the US dollar.
Still, the Budget chief Diokno said the rate was “manageable,” and added that some manufacturers were being opportunistic in the way they raised prices then used the administration’s tax reform law as an excuse.
“We are using the power of the state to ask for cooperation from manufacturers. If there’s no reason for them to increase prices, then they shouldn’t,” he said at the time.
By way of assuring the public, he added: “I’ve seen worse inflations. I’ve been in government for 50 years.”
By September, however, it was clear that the government’s projection that inflation would peak in the third quarter was more of a prayer than a promise.
While the economic managers were predicting inflation would stay at 6.4 percent—the same as August— the central bank’s Department of Economic Research was predicting a rate as high as 7 percent, driven by higher prices of rice, fuel and some agricultural products as well as the weakening peso.
By early October, even Diokno acknowledged that the September rate could rise to 6.7 percent. Still, Diokno sought to play this down, saying “it won’t make a big difference now.”
Pernia, on the other hand, said the government is still bullish on the country’s economic growth, banking on “solid macroeconomic fundamentals,” even as the Asian Development Bank cut its growth forecast for the Philippine economy from 6.8 percent to 6.4 percent.
None of this is terribly reassuring, particularly for the working men and women who see their earnings eroded every day by high food and fuel prices.
While the economic managers insist that the excise tax slapped on fuel products as a result of its tax reform program contribute very little to inflation, common sense and real world experience tell us otherwise. When the price of gasoline rises, so does the cost of transporting goods—including food. Surely, this is not too difficult to understand.
Mssrs. Diokno, Dominguez and Pernia also need to understand that in the real world, nobody lives on “sound macroeconomic fundamentals” or promises that all this will blow over. It’s time to get real.