​Should we worry about inflation? (2)

PHILIPPINES - In Brief 05 Feb 2021 by Romeo Bernardo

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The Philippine Statistics Authority (PSA) today announced that January inflation shot up to 4.2% from 3.5% in December, traced largely to food inflation which rose 6.6%. In the space of one month, average prices went up 1.3%, the highest since June 2008 with food prices contributing close to 3/4s of inflation. Although typhoon-related price pressures on vegetables have receded, prices of meats and fish have gained momentum. Other non-food sources of inflation include higher electricity prices (reflecting higher oil prices in previous months) and the annual adjustment in excise taxes on alcohol and tobacco.[1]January’s higher-than-expected inflation, which exceeded even the BSP’s 3.3-4.1% forecast for the month, is the third straight month of above average month-on-month inflation rates (1.1% in November and 0.9% in December). The persistence of high food prices at this time of high joblessness has led President Duterte to order temporary price controls on pork and chicken. While the implementation of the executive order has been deferred by a week (to February 8), many have pointed to its futility given real supply-demand imbalances in the market in the wake of the African Swine Fever (ASF). The Department of Agriculture together with the planning agency, are now working on a more market-based solution involving the relaxation of the quota on pork imports (i.e., increasing the minimum access volume or MAV) accompanied by lower in- and out-quota tariffs, with the twin measures expected to increase domestic supply and reduce prices.[2]With the ASF having reduced domestic hog population and producers as yet unwilling to risk re-population, many agree that relaxing imports...