Finance Secretary Carlos Dominguez III is optimistic the country's high inflation rate today will not affect the national budget and does not need an off-cycle measure from Bangko Sentral ng Pilipinas (BSP).
In an interview after his meeting with a lawmaker Friday, Dominguez said one needs “to have a perspective” when assessing the current inflation situation in the country.
“You have to really take a long view. When you take a long view you will realize that we are the second lowest inflation of the administration since (former president) Cory (Aquino),” he said.
Inflation rose to a multi-year high of 6.4 percent last August from month-ago’s 5.7 percent. Average inflation rate in the first eight months this year stood at 4.8 percent, higher than the government’s 2 percent to 4 percent target band until 2020.
The acceleration of domestic inflation was due to, among others, the faster rate of price increases of the food and non-alcoholic beverages index due to supply issues of fish, rice, meat and vegetables; and the alcoholic beverages and tobacco index due to hikes of excise tax on sin products.
Dominguez explained that in 2014 alone, rice inflation rose to about 14 percent, twice the current level, which, he said, clearly does not place the country in crisis now. “It may be a serious problem for some people but for the nation, in general, it’s not a major crisis,” he said, noting that the government has lots of tools that are available to address the situation.
The National Economic and Development Authority (NEDA) said the Economic Development Cluster (EDC) has submitted to the Office of the President a draft Executive Order (EO) that identified nine measures to address supply issues on fish, rice, meat and vegetables.
These measures include the following: the release of about 4.6 million sacks of rice currently available in National Food Authority (NFA) warehouses; replicating of issuance of certificates of necessity to allow fish imports to be distributed in wet markets around Metro Manila and other parts of the country; issuance of an Executive Order (EO) that will simplify and streamline licensing procedures for NFA’s rice imports; reduction of gap between farm gate and retail price of chicken; importation of sugar to direct users; and for the Bureau of Customs (BOC) to prioritize the release of essential food items in the ports.
These measures are intended to address the rise of inflation, which authorities said is supply side-driven. “I’m not even counting the potential monetary tools. It was decided that there will be no off-cycle (decisions),” said Dominguez, who sits as an ex-officio member of the Bangko Sentral ng Pilipinas’ (BSP) policy-making Monetary Board (MB).
Some analysts expect another increase in the central bank’s key rates before the rate setting meet of the MB on September 27.
To date, the Board has increased the BSP’s key rates by a total of 100 basis points as inflation continue to rise.
Earlier, BSP Governor Nestor A. Espenilla Jr. said monetary officials are ready to “take strong immediate action using the full range of instruments in its toolkit” to address threats generated by higher-than-expected inflation.
“The follow-through actions will also address other threats to higher inflation, such as excessive exchange rate volatility not consistent with underlying macroeconomic fundamentals in order to ensure that inflation returns to its 2 (percent) to 4 percent target over the policy horizon,” he said.