A Steadfast Approach: Government's Continuous Battle Against Inflation Drivers

COURTESY: National Economic and Development Authority (NEDA)

The national government is continuously stepping up efforts against persistent inflation drivers following the slight rise in the country’s headline inflation rate in May 2024, according to the National Economic and Development Authority (NEDA). The Philippine Statistics Authority (PSA) reported on June 5 that the headline inflation rate increased to 3.9 percent from 3.8 percent in April. This slight uptick in inflation resulted mainly from the higher year-on-year increase in the prices of housing and utilities, along with a faster annual growth for the transport index.

The most notable contributor to May's inflation increase is the rise in housing and utilities prices, recording an increase of 0.9 percent. This is a significant jump from the 0.4 percent increase in April. Housing and utilities are essential components of the consumer price index, making their impact on inflation particularly pronounced. The government's focus on these sectors is critical to curbing inflation and stabilizing the economy.

To address these issues, the government is implementing policy reforms aimed at reducing the cost of utilities. These measures include promoting renewable energy sources, enhancing the efficiency of the energy distribution network, and subsidizing utilities for low-income households. By doing so, the government hopes to create a more stable and affordable housing and utilities market, which will ultimately help in controlling inflation.

Another significant factor contributing to the rise in inflation is the transport index, which saw an increase of 3.5 percent in May from 2.6 percent the previous month. The transport sector is vital for the economy, as it affects the cost of goods and services across various industries. Therefore, any increase in transport costs can have a ripple effect on overall inflation.

The government is taking several steps to address the rising costs in the transport sector. These include investing in public transportation infrastructure, promoting the use of electric vehicles, and implementing fuel subsidies for public utility vehicles. These initiatives aim to reduce the cost of transportation, making it more affordable for consumers and helping to control inflation.

Food inflation decelerated slightly but remains elevated at 6.1 percent in May from 6.3 percent in April. The slowdown is primarily due to the slower increase in the prices of vegetables, tubers, plantains, and cooking bananas, which saw a decrease to 2.7 percent in May from 4.3 percent in April. However, rice inflation remains a concern, although it decreased slightly to 23.0 percent for the month from 23.9 percent in April.

To manage food inflation and enhance food security, the NEDA Board has agreed to reduce the rice duty rate to 15 percent from 35 percent for both in-quota and out-quota imports until 2028. This policy aims to make rice more affordable for consumers while ensuring a stable supply. Additionally, the NEDA Board approved the extension of reduced tariff rates on corn, pork, and mechanically deboned meat under Executive Order No. 50, s. 2023, until 2028.

The NEDA Board's recent approval of the new Comprehensive Tariff Program for 2024-2028 is a strategic move to ensure access and affordability to essential commodities while balancing the interests of consumers, local producers, and the economy. By reducing tariffs on essential food items, the government aims to lower food prices, benefiting both consumers and the economy.

Secretary Arsenio M. Balisacan emphasized that one of the Marcos Administration’s priorities is to raise productivity to sustainably reduce food prices and shield consumers and the economy from the price volatility of food commodities in the global market. The government is focused on modernizing the agricultural sector to increase productivity and reduce costs, thereby making food more affordable for consumers.

To further mitigate the impact of elevated food prices on the poor and vulnerable sectors, the Department of Social Welfare and Development and relevant agencies are set to fully implement the Food Stamp Program nationwide in July. This program expects to cover one million households by 2027, starting with an initial 300,000 families in 10 regions. This initiative aims to provide immediate relief to those most affected by high food prices, ensuring that they have access to essential food items.

On the part of the Executive, the government will continue to find supply-side solutions to help manage price increases of other commodities and keep inflation within the target range in the coming months. These measures include enhancing supply chain efficiency, reducing import tariffs on essential goods, and promoting local production to reduce dependency on imports.

The national government's continuous efforts against persistent inflation drivers demonstrate a steadfast commitment to stabilizing the economy and ensuring the well-being of its citizens. By addressing the core contributors to inflation, such as housing, utilities, transport, and food prices, the government aims to create a macroeconomic environment conducive to investment and high-quality job creation. These efforts are essential to achieving the Marcos Administration’s development targets by 2028 and ensuring a stable and prosperous future for the Philippines.