DOF pushes for more deliberate inflation reduction strategies

Finance Secretary Ralph G. Recto was encouraged by the further drop in the Philippines’ headline inflation to 2.8% in January 2024 and pushed for a more deliberate implementation of the Reduce Emerging Inflation Now (REIN) plan to keep the prices of goods and services stable.

“This positive development is very encouraging. As I’ve said before, our top priority is to reduce inflation and protect the purchasing power of the Filipino people. Addressing inflation will not only further grow the economy but it will help boost our revenue collection and improve the quality of life of Filipinos,” the Finance Chief said.

Inflation is the rate at which the overall prices of goods and services have increased over time.

The inflation rate in January is significantly slower than the 8.7% recorded in the same month last year and the 3.9% in December. It is also well within the government’s overall target band of 2% to 4%.

For the said month, inflation continued to decline due to slower increases in the prices of food items and non-alcoholic beverages.

Food inflation eased to 3.3% from a high of 11.2% in the same period a year ago and the 5.5% rate in December 2023. Compared to the previous month, the drop in food inflation was due mainly to the lower prices of vegetables and meat.

However, rice inflation increased compared to last month mainly due to higher prices in the international market as trade protectionism continued in India and weather disturbances affected crops in Thailand, which are the Philippines’ major sources of imported rice.

For non-food items, inflation declined to 2.0% from 7.3% in the same period in 2023 and 2.6% in December. This was mainly due to the lower contribution of housing rentals; electricity, gas, and other fuels; as well as food and beverage serving services or restaurants.

Government strategies under REIN

To further arrest inflation, the Department of Finance (DOF) will oversee the vigorous implementation of strategies under its REIN plan.

These initiatives involve closely monitoring financial assistance programs or ayuda aimed at supporting vulnerable sectors.

The focus lies on enhancing the efficiency of beneficiary identification, optimizing the distribution of financial aid, addressing areas for improvement and resolving issues, ensuring accurate determination and budgeting of assistance, and collaborating with relevant agencies responsible for the effective execution of these programs.

The DOF will, at the outset, also prioritize the expeditious execution of the 2024 national budget to enable the timely implementation of measures aimed at enhancing agricultural production, especially during the peak of the El Niño which is forecasted in March.

This includes accelerating the implementation of the El Niño Mitigation and Adaptation Plan, which involves the rehabilitation of irrigation systems, targeted cloud seeding operations, promotion of water-saving technology, and intensified price and supply monitoring of basic commodities and agricultural productions.

The DOF, together with the Department of Agriculture (DA), is also working to fast-track the Philippine Crop Insurance Corporation (PCIC)’s indemnification program due to drought and pests.

The government will likewise ensure timely and sufficient imports of key commodities based on more frequent analysis of demand and supply conditions while combating anti-competitive practices.

Simultaneously, the government will actively engage in discussions with various stakeholders to expedite the implementation of programs and projects geared towards improving agricultural productivity.

To help keep the prices of rice stable, the President issued Executive Order (EO) No. 50 extending the modified rates for rice imports and other goods until the end of the year.

Moreover, the Philippines secured the largest share of its rice importation agreement with India, securing 295,000 metric tons (MT) to augment the country’s rice supply out of the 1.03 million MT total rice exports to be distributed among seven countries.

With the recent signing of a 5-year Rice Trade Cooperation deal with Vietnam, the country expects to access 1.5 million to 2 million MT of rice annually at a competitive and affordable price. This agreement will help ensure a steady supply of rice in the near term.

The possible expansion of the Unilateral Minimum Access Volume (MAV) of select commodities is also being facilitated by the Inter-agency Committee on Inflation and Market Outlook (IAC-IMO) to streamline importation guidelines and issuances among concerned agencies.

To help mitigate oil inflation over the medium term, the government will issue guidelines for the voluntary increase of ethanol blend for gasoline, which could help decrease the cost of gasoline.

Fuel subsidies will also be released to drivers and operators in a timely manner.

To help address the second-round effects of toll rate hikes on food inflation, the government will release the guidelines for the implementation of the toll rate hike exemption for trucks catering to agricultural goods.

The DOF is working closely with the Toll Regulatory Board (TRB) and tollway concessionaires toward the finalization of the said guidelines which shall take into account the latest inflation forecasts of the Bangko Sentral ng Pilipinas (BSP).

The IAC-IMO, co-chaired by the Secretaries of the National Economic and Development Authority (NEDA) and the DOF, is set to meet on February 16, 2024 to align efforts on the timely implementation of direct measures to curb food and non-food inflation.