August 5th, 2022
Food inflation continues to be on a rapid momentum, from 4.9% in May, to 6.0% in June to 6.9% in July. While there are indications that the momentum is shifting, if all indications are correct, every month will continue to have higher year-on-year inflation than the previous month. I maintain my projections that monthly inflation this 2022 could peak to as high as 8.5%, and annual average inflation could reach 6.0%.
The most important concern of the government will remain food security, food sufficiency, and food prices.
I have strongly recommended to the House leadership that we take up the Bayan Bangon Muli special powers bill that I filed even without the appropriations component, to ensure that the President has the latitude to manage price, supply, and logistics bottlenecks.
I am also convinced that, in this context, adjustments in monetary policy can be used only to adjust to global conditions, but they are no substitutes to supply and price solutions in the real economy.
Fuel price inflation, on the other hand, is beginning to slow down. This could indicate that the world is starting to adjust to the Russia-Ukraine conflict, and alternative sources or modes of purchase are being undertaken by various market participants. Barring any major developments, I expect fuel price inflation to slow down even further to below 5% by November.
However, we must cautiously watch this development, particularly given the resumption of full face-to-face classes by around the same month. Transport prices remain elevated and accelerating, although the momentum also appears to have slowed down. I expect transport inflation to remain below 20% at least until September.
Notably, apart from food, alcoholic beverages and tobacco, fuel, and transport, inflation for all other major commodity groups is within the 2-4% range, and that has been the case for the entirety of 2022.
On alcoholic beverages, the increasing prices of sugar will continue to increase prices. I have already recommended to the House leadership the following approaches to the sugar situation last month:
(1) Zero required sugarcane biofuels under the Biofuels Act. This requirement can be suspended by Executive Action;
(2) Alcohol companies should shift to non-sugarcane sources, such as cassava;
(3) The SRA should optimize the ongoing milling season; the promised inspection of sugar inventories should be completed effectively;
(4) Sugary drinks should be restricted from public schools during the face-to-face class resumption;
(5) The Philippine Competition Commission should undertake more aggressive measures to ensure that traders do not collude with each other on supply.
Additionally, we may need to allow bottlers and industrial users to import sugar.
Sugar is atop the priorities of the Committee on Ways and Means. We will be conducting a briefing with the Bureau of Customs on the sugar import situation, and with the Sugar Regulatory Administration on possible ways forward regarding its Sugar Industry programs as mandated under the TRAIN Law.
We will be conducting the briefings as early as next week or the week after, as soon as we are able to constitute quorum.