Not yet time to rest

Days after the President’s second SONA where he pointed to inflation as the biggest headache during his first year in office, then claimed that it was tamed by government actions, the newly-appointed Bangko Sentral governor declared that “it was too soon to declare victory.”

Gov. Eli Remolona was among bankers on the occasion of the 30th anniversary of the Bangko Sentral which took over the insolvent Central Bank by way of Republic Act 7653 authored principally by then Sen. Franklin Drilon and signed into law by Pres. Fidel V. Ramos on June 13, 1993.

A bit of historical trivia: Before the “bagong” BSP, we had the Central Bank of the Philippines, a creation after many years of planning dating back to the Commonwealth.

Republic Act 265, or the Central Bank Act of 1948. was signed into law by then Pres. Elpidio Quirino in June of 1949, after the untimely death of Pres. Manuel A. Roxas, its first and long-time governor being Miguel Cuaderno.

That Central Bank had to be re-capitalized by the government after the financial crisis of the early 1980s highlighted by the assassination of Benigno S. Aquino Jr. which bled our monetary system into a fatal spiral of sky-high interest rates and the inability to settle our foreign debt payments during the last years of martial rule.

Legal lending was a high of 36 percent if you could get a loan, and Bobby Ongpin tried mightily to siphon off dollars to finance our imports through the “Binondo central bank.”

While so-called “headline” inflation has gone down from a high of 8.7 percent in January this year to 5.4 percent in June, “core” inflation, which excludes items that are subject to volatile movements, such as food and energy, remains quite high at 7.7 percent average for the first half of the year, as observed by Remolona.

Core inflation includes rentals, transport, clothing, and the recurring costs of doing business.

It’s not yet time to rest, the new BSP governor tells us.

True enough, bad news came in like a torrent this July, and the Chinese ghost month is still two weeks away.

On the local scene, El Nino has been preceded by destructive typhoons, especially the last one, Egay, which hit Northern Luzon, one of our major food basket areas. Rice, corn and vegetable crops have been destroyed.

On the international scene, Russia is hitting Odessa and Ukrainian ports, backing out of an arrangement brokered earlier allowing grain shipments from the embattled zones to freely exit towards the rest of the world.

That will cause a wheat shortage, which will trigger upward price movements on other staple grains, rice and corn included.

India, which exports 40 percent of the world’s thin rice trade, has banned exports of long grain and broken rice, along with wheat, to ensure domestic food security.

This will cascade into other exporting countries, such as Thailand, Vietnam, the United States, Pakistan and Brazil.

Production figures in these countries are either on the decline, or stagnant.

China with its huge population is expected to bid high for Asia’s rice supply.

Then again, OPEC and Russia are continuing their production cuts which will impact on energy-importing countries like ours.

In fact, the news last Friday announced huge pump price increases effective this week.

So while core inflation remains high, the impact of oil and food will be the major worries for the Philippines, as we have entered the typhoon season in an El Nino year which will get worse in the fourth quarter of 2023 and well into next year.

Then again, while oil demand went down with the Chinese economy still in the doldrums, winter is fast approaching, when demand for oil goes up in countries north and south of the equatorial band.

So the rosy expectations the President announced before Congress are not likely to materialize, as inflation continues its deadly upswing in the coming months.

And it will be felt most in the urban centers which depend on food from the agricultural regions and consume much more oil for transport and energy requirements.

The downward trend from a high of 8.7 percent in January when onions and sugar reached astronomical highs to June’s 5.4 percent was due to food imports, but these will be more costly in the coming months.

We can expect BSP to employ its usual monetary tool, which is to increase interest rates, the same instrument the US Federal Reserve intends to do.

But that will dampen business credit at a time when the economy needs to grow through investments and expansion after the effects of the three-year toll caused by the pandemic from which the economy has yet to recover.

Moreover, the private sector, if it will resort to borrowings, will be crowded out by government borrowings, which are sovereign guaranteed.

And because the same conditions are world-wide, over-all demand is likely to dampen, and economies might be pushed into recession, at best, and continued decline.

So soon after SONA Numero Dos, the economy is raining upon the parade.

Now let’s see how the much ballyhooed pledges from the President’s 14 foreign trips in the last 13 months turn out into real direct foreign investments.

Government can of course spend more, and the P5.7 trillion proposed budget, wisely spent, could spur economic activity.

But then again, most of that will be eaten up by: first, debt payments including interest; second, some 920 billion in congressional insertions, a.k.a. pork barrel entitlements; third, some 260 billion in military pension payments which continue to grow per year; and personnel salaries of a huge bureaucracy along with its unbridled appetite for wasteful spending in its maintenance and operating expenses.

There are proposals for tax adjustments, the latest of which is Joey Salceda’s proposed tax increase on luxury products, and he has enumerated quite a few of those products only the very rich can afford to splurge on.

But who are the biggest spenders on luxury?

His colleagues in Congress and their families, plus contractors most of whom are also politicians or politically connected, so will they shoot themselves in the foot?

Will they control their greed by limiting their pork appetites?

Sources say that senators get a minimum of P2 billion each, which doubles, even triples, depending on “abilidad.”

Congressmen, almost 300 of them (excluding the few who dare say “nay”), are assured at least P500 million each, while some get fatter slabs amounting to as much as P5 billion each.

And where do these projects go?

Items where the level of commissions are most difficult to detect, allowing for more greed, such as river dredging, flood control, and slope protection, plus the traditional “farm-to-pocket” or “road to my farm” projects.

Yet every typhoon and low pressure area brings rain that causes rivers to overflow and floods ravaging farms and destroying standing crops, while landslides kill.

Meanwhile, LGU officials most of whom are dynasts along with their representatives in Congress, continue to waste their IRA plus Mandanas incremental revenue on beautification, fiestas to regale the voters, while bloating their local bureaucracies with incompetent favorites.

Because the legislature has control of the purse, and the executive kowtows to them who approve the size of the purse and its apportionment, little is left for much needed infrastructure projects like dams and bridges, for which government hopes the private sector will invest through PPP or private-public partnerships.

Now figure in high interest rates, inflation, and the cost of doing business in a graft-ridden and highly contentious environment into the equation.

None but the favored and well-connected who can twist terms of reference to their designs will participate.

Meanwhile, P14.1 trillion in public debt will become P15.7 trillion or higher by 2024.

But then again, our policy makers know that Filipinos, especially the lumpen, the “masa” Erap calls them, do not know how to count beyond a few thousands.

So for the elite, “tuloy ang ligaya” while the poor continue to suffer and the wealth gap continues to grow.

Cry for the benighted land and its future, with its brains and brawns leaving the Philippines because it’s so hard to love .