The year-to-date inflation (January to June 2018) averaged 4.3 percent, just slightly higher than the government’s target of 2 to 4 percent.
But the unwelcome news is that the inflation rate in June 2018 rose to 5.2 percent, due to faster price increases in major commodities like food, fuel and transport. In turn, such increases were caused by a host of factors, including global oil prices, peso depreciation and rice prices and further amplified by the price effects of interaction among them.
We assure our people that we remain optimistic that inflation will continue to be managed to taper off towards year-end towards the inflation target of 2-4 percent.
While we acknowledge the public sentiment on rising prices, let us remind ourselves that the TRAIN Law raised the take-home pay of 99 percent of income tax payers by an average of 15%, much higher than inflation. The additional revenues that we generated from the TRAIN Law will also allow us to provide free education in state colleges and universities, free irrigation for farmers, conditional cash transfers to poor families ad senior citizens, and higher salaries to government employees including uniformed men. Without doubt, these should help in coping with the rising prices of goods.
While inflation may still peak in the third quarter but taper off by October, the government needs to exert all efforts to implement necessary measures, both short-term and long-term, to address the impact of inflation on both growth and people’s welfare.
An important and urgent challenge to manage inflation is actually the need to increase the supply of goods and services, especially food—in particular, rice that takes up a large chunk of the food budget of poor families. When demand outpaces supply in a fast-growing economy, it’s normal for prices to go up.
Therefore, we view with urgency the need to initiate measures that will boost the productivity of our agriculture sector and address the high cost of bringing agricultural products to markets. These may not produce immediate results but they are crucial in managing inflation over the medium to longer term. In the meantime, to beef up our country’s food supply, we should maximize trade opportunities with our ASEAN partners and even beyond.
We also need to strictly monitor prices to avoid profiteering, implement the Pantawid Pasada, and the PUV modernization programs, and for Congress to prioritize the amendment of the Agriculture Tariffication Law. We also support faster distribution of the unconditional cash transfers to the bottom half of families numbering 10 million.
Meanwhile, we recognize the positive development in our surging manufacturing sector which bounced back in May 2018 with increases in both production volume and value. We call on the private sector to continue investing to further increase productivity. Such investments will greatly contribute to employment and income growth of our labor force, besides expanding the supply of goods.
On the part of government, we remain committed to addressing factors that could hamper growth like rising trade tensions and higher interest rates as a result of monetary policy normalization in advanced economies. It is important to enhance the production capacity of enterprises by addressing infrastructure gaps to decrease production costs, while providing workers with necessary knowledge and skills. The recently signed Ease of Doing Business Law will help especially small and medium enterprises, and will further boost the manufacturing sector.
We remain optimistic that we can meet our medium-term economic growth target of 7 to 8 percent, notwithstanding the growth risks that we need to manage. We assure the Filipino people that we shall be in the forefront of monitoring and addressing inflation and all its related issues.