Finance Secretary Carlos Dominguez III is raising the alarm of rising pork prices in the Philippines which, if left unchecked, could cause inflation to spiral and wipe out past economic gains.
Dominguez sounded like an economics professor during his presentation to the Senate Tuesday on the merits of lower pork import tariff. But his dissertation on surging pork prices and their implications on inflation was not bereft of real figures that recently bedeviled the Philippine economy.
“Inflation is the rise in prices, and if it becomes uncontrollable, it can be like a flood that will eventually erode our fiscal and monetary foundations. It will wash away all that we have put together in the past years,” Dominguez told senators.
The current surge in pork prices due to a supply shortage is threatening to exactly do that, like in the case of rice three years ago. The inflation rate surged to 6.7 percent in September 2018 following the low supply of rice and mistimed imports.
“Rice contributed one full percentage point to the 2018 peak inflation rate, and Congress acted quickly to pass the Rice Tariffication Law in 2019. The law opened up the Philippine rice market and, in turn, lowered the price of rice for more than 100 million Filipinos,” says Dominguez. “Today, the Filipino consumer enjoys an average reduction of P8 per kilo compared to the peak of rice prices in 2018. Consumers also have a wider variety of rice choices now. As a result, rice is no longer the main contributor to our overall inflation rate.”
Rice inflation, according to him, turned negative almost immediately after the enactment of the Rice Tariffication Law. Two years after the law was enacted, sustained low rice prices contributed only 0.1 percentage point to the inflation in March of 2021.
The surge in pork prices today is basically the same in 2018 when the cost of rice accelerated. But the inflationary effect of rising pork prices is more potent today.
“I have seen various food supply issues, but I have never seen the price of pork driving up the inflation rate like it does now. From 1995 to 2020, meat contributed only about 5 percent of the overall inflation. In the first three months of 2021, it contributed more than one-fourth of the overall inflation. The recent inflation of meat prices is unprecedented,” says Dominguez.
Due to the relatively high share of meat in the consumption basket of the typical Filipino family, he said the rise in meat prices, especially pork, is driving up the inflation rate.
“As meat inflation soared to double-digits in the first quarter of 2021, it became the top contributor to the overall inflation of 1.3 percentage points. This is even higher than the 1 percentage point contribution to inflation rate of rice at the height of the 2018 rice crisis,” he says.
The outbreak of the African Swine Fever, meanwhile, took a toll on domestic hog production.
“Pork is a significant component of our diet, and it is a rich source of protein. When pork prices go up, the household budget for 100 million Filipinos suffers. We need immediate solutions to address the price increase,” says Dominguez.
“Our temporary solution to this is to bring in more supply. As I have pointed out, pork prices are rising because of supply shortfalls. It is not a question of smuggling or anything. It is because of shortage and bringing in more supply would stabilize and bring down the price of pork and, therefore, the inflation rate.”
To address the shortfall, President Rodrigo Duterte has issued Executive Order No. 128 reducing the tariffs on pork imports falling within the so-called minimum access volume, from 30 percent to 5 percent during the first three months of the directive and to 10 percent in the next nine months.
Agriculture Secretary William Dar defended the imports and lower tariff, saying it is not aimed at killing the local hog industry (the ASF has already killed millions of pigs nationwide since 2019) but merely addressing the shortfall in pork supply this year.
But Dominguez reiterated his warning. “The worse we could do in a situation like the one we are facing today is to let supply issues force food prices up even more. If food prices rise, the inflation rate also increases. If the inflation rate rises, interest rate increases will follow. This unhealthy chain of events will make economic recovery even more difficult for all.”
Pay now, not later
A public policy think tank has called on the National Telecommunications Commission to seek an early resolution before the Supreme Court to resolve NOW Telecom’s appeal over its alleged unpaid supervision and regulation fees since 2004.
“With the coronavirus crisis reaching unprecedented levels, every agency’s contribution to the public coffers is a paramount obligation. With an immediate resolution of NOW’s appeal, the government stands to gain an additional P2,566,410,944.99 in fresh funds to address the pandemic,” said former lawmaker and Infrawatch PH convenor Terry Ridon.
Ridon, a former House legislative franchises committee member, cited the October 12, 2020 letter of NTC director Imelda Walcien addressed to NOW Telecom chief operating officer Rene Rosales.
In her letter, Walcien said the “company is required to pay P2,566,410,944.99 on or before November 30, 2020.”
“This is subject to any resulting assessments based on the final and executory decision or resolution of the Supreme Court. Any payment received shall be treated as a provisional payment to the 2020 SRF,” Walcien added.
But NOW lawyer Gilberto Gallos claimed the company had no unpaid SRF and spectrum user fees to NTC.
“The validity of the claim of the NTC is the subject of a dispute pending in the Supreme Court. Let us just abide by and respect the judicial process, and wait for the resolution of the Supreme Court,” Gallos said.
Gallos noted that no less than the NTC issued a Certificate of No Outstanding Liabilities stating NOW Telecom had “no uncontested obligations” to the NTC as of October 1, 2018.
Based on NTC records, NOW has accrued liabilities amounting to P2.3 billion from 2004 to 2017. Another P99 million was added to its payables in 2018, followed by P92.1 million in 2019. It has been billed P67.85 billion in SRF for 2020.
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