October 5th, 2021
Rep. Joey Sarte Salceda (2D-Albay)
Chairman, House Committee on Ways and Means
I welcome certain aspects of the September inflation report, with the caveat that the decline in prices for certain goods can go faster. Overall transport sector inflation has declined from 7.2% to 5.2%, which is still elevated relative to the all-items inflation rate of 4.8%. This could be lowered further in 2022, with interventions in the transport sector, such as service contracting and active transport, which I am pushing for in the national budget.
Bicol remains the region with the highest inflation, but the region recorded a significant improvement, of a half a percentage point, from last month’s 7.4% to this month’s 6.9%, driven down largely by the improvement in transport sector prices (from 12.6% to 5.7%).
Although food inflation in Bicol has slowed down from 8.2% to 7.9%, this remains high, especially as incomes did not increase and in all likelihood probably declined year on year. The threat that prices will continue to drive families to poverty remains real.
I thus continue to advocate for an increase in the agriculture budget of at lest 10%, to ensure that our food production and protection programs are sustainably funded.
Outside the departmental budget of the Department of Agriculture, I also urge the implementing agencies of the Rice Competitiveness Enhancement Fund to sustain the implementation of its programs and accelerate the completion of backlogs from the mechanization component to improve farm yields. Earlier this year, I already warned about a potential increase in world rice price due to supply pressures in Vietnam, our leading supplier.
Expediting the RCEF to boost domestic production could help mitigate risks from higher rice prices abroad. As rice bran is also a key component of livestock feed, improved domestic rice production will also have positive impacts on the prices of meat.
A notable decline is the education inflation, which is now down to zero percent in NCR and has decelerated from 1.1% nationwide last month, to just 0.9% this month. I take this as a positive sign that schools are already passing on the savings they expect to make through the preferential tax rate we passed for them as principal author of their new tax regime.
On monetary policy, the declining inflation leaves some room to keep the growth-focused policy of the Bangko Sentral ng Pilipinas. I thus expect no further adjustments to key policy rates from now until the end of 2021.
Poverty remains the key issue with prices, and our approach must be both to mitigate excessive price hikes, and restore incomes. The best approach to achieve both ends is to restore as much economic activity as possible with improvements on the health emergency management side. The more quarantine-driven supply constraints we can lift, the better it will be for price levels. Vaccination will be key in this regard. The sooner and the faster we can vaccinate, the better. #