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2018 inflation highest in 10 years amid slowing growth — IBON

Inflation for 2018 is more than double the Duterte administration’s original inflation target for the year and the highest in a decade, research group IBON said.

Along with slowing economic growth, this further points to the failure of government’s economic managers to rein in consumer prices and of its neoliberal policies, such as the Tax Reform for Acceleration and Inclusion (TRAIN), which continue to burden the poorest Filipino families, said the group.

The reported annual average inflation rate rose to 5.2 percent in 2018 from 2.9 percent in 2017 and 1.6 percent in 2016.

IBON noted that this is much higher than the government’s original annual inflation projection of two to four percent for 2018 and the highest since the 8.2 percent rate in 2008.

Aside from missing its inflation target, the government is also facing an economic slowdown.

The economic growth target for 2018 has already been adjusted downwards from 7-8 percent to 6.5-6.9 percent.

The gross domestic product growth rate already slowed to 6.3 percent in the first three quarters of 2018 from 6.7 percent in 2017 and 6.9 percent in 2016.

Inflation eased last December to 5.1 percent but the poorest half of the population still saw their real income erode by anywhere from Php3,300 to Php7,300 from the high inflation throughout 2018.

Rising prices always spell more difficulty for the poor especially amid low or even stagnant incomes, IBON said.

The Duterte administration should also not be too quick to take credit for the lower year-end inflation, IBON added.

The biggest factor easing inflation is not anything the government has done but rather falling global oil prices from increased supply amid a global economic downturn.

On the contrary, the Duterte administration’s insistence on TRAIN’s second tranche of fuel excise taxes adds inflationary pressure, the group said.

The economic managers will fallaciously claim that relatively slower inflation in the first few months of 2019 proves that TRAIN and the additional fuel excise taxes are not inflationary, IBON said.

Such dismissiveness of how TRAIN makes consumer goods and services more expensive however only affirms the government’s insensitivity to the plight of the Filipino people, especially the poor.

IBON said that poor Filipino families worst affected by last year’s high prices will continue to carry the burden of these into the new year if government does not take genuine measures to curb inflation and arrest a faltering economy.

The government can start with repealing TRAIN and implementing a progressive tax system. #

High prices still burden poor despite inflation slowdown

On the release of the November 2018 inflation rate, research group IBON said that prices are still high and rising even with the reported slowdown.

This remains a burden on poor families trying to live off low and precarious incomes. Substantial and longer-term solutions are still needed, said the group.

Headline inflation slowed to 6.0 percent in November from 6.7 percent last month.

Inflation slowed in food and non-alcoholic beverages; housing, water, electricity, gas, and other fuels; and communication.

Inflation however worsened in the rest of the commodity groups. Additionally, year-on-year inflation is still double the 3.0 percent rate in November 2017.

IBON stressed that prices are still higher than before due to the inflationary impact of the Tax Reform for Acceleration and Inclusion’s (TRAIN) consumption taxes, rising global oil prices and the peso depreciation.

Rice, fish, meats, fruits, vegetables and other basic commodities are still more expensive now than a year ago.

The majority of Filipino families who have low incomes are burdened the most. Inflation has eroded the incomes of the poorest 60 percent households by a total of Php2,650 to as much as Php7,000 from January to November of this year.

The Php537 minimum wage in the National Capital Region is the highest nationwide but even this falls far short of the estimated family living wage of Php1,002 for a family of five.

Meanwhile, some 2.5 million of the target 10 million beneficiaries of TRAIN’s unconditional cash transfers (UCT) have still not received anything almost a year into TRAIN.

The Duterte administration’s economic managers said that slowing inflation “suggests” the effectiveness of government’s anti-inflationary measures such as Administrative Order No. 13 removing barriers to agricultural imports.

IBON executive director Sonny Africa disputes this: “The government is too quick to take credit and too dishonest to accept blame.”

“The inflation slowdown may even be due more to falling global oil prices since October than the Duterte administration’s half-hearted anti-inflation measures,” he said. “On the other hand, government refuses to accept how the higher taxes from TRAIN have driven prices up and will do so again in less than a month.”

Africa said that government’s decision to push through with the next tranche of fuel excise taxes next month in January 2019 shows its insensitivity to the plight of millions of poor Filipinos.

He said that real steps to curb inflation begin with stopping TRAIN, and giving meaningful support to domestic agriculture and Filipino industry. #

 

TRAIN Package 1A: From the poor to the rich

Government’s continued implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) means that TRAIN’s taxes will keep raising prices next year and make inflation higher than it should be.

Read: TRAIN still inflationary with lifting of fuel excise suspension

TRAIN still inflationary with lifting of fuel excise suspension

Research group IBON said that government’s continued implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) means that TRAIN’s taxes will keep raising prices next year and make inflation higher than it should be.

The group said that lifting the fuel excise tax suspension shows the Duterte administration’s insincerity and insensitivity in addressing the inflationary impact of the tax reform program, particularly on poor Filipino households.

The administration’s interagency Development Budget Coordination Committee (DBCC) recently announced its plan to recommend that the second tranche of fuel excise tax be implemented, backpedaling on its previous suspension proposal.

The DBCC cited the lowering of Dubai crude oil prices and consideration of possible foregone revenues as reasons for its latest recommendation.

IBON however said that not going through with the suspension means new inflationary pressure next year from the second round of oil excise taxes in January 2019 on top of the now built-in additional prices from the first round in January 2018.

The liquid petroleum gas (LPG) excise tax of Php1.00 per kilogram (kg) in 2018 increases to Php2.00/kg in 2019, and Php3.00/kg in 2020. Diesel excise tax of Php2.50/liter in 2018 increases to Php4.50/liter in 2019, and Php6.00/liter in 2020.

Kerosene excise tax of Php3.00/liter in 2018 increases to Php4.00/liter in 2019 and Php5.00/liter in 2020.

The gasoline excise tax meanwhile is set to increase from Php7.00/liter in 2018 to Php9.00/liter in 2019 and Php10.00/liter in 2020.

IBON said that another fuel excise tax hike further increases costs of production. This will create a domino effect that will sustain the high prices of goods and services that many Filipinos, especially the poor, suffered this past year.

IBON estimates that the poorest 60 million Filipinos have already endured real income losses of anywhere between Php2,500 to Php6,800 due to worsening inflation since the onset of 2018.

The group added that it is premature to think that oil prices are going to stay low or that the peso will not continue to depreciate.

Oil prices remain volatile and could still increase next year with US sanctions on Iran gaining traction, possible Organization of Petroleum Exporting Countries (OPEC) production cuts, and untoward geopolitical events.

IBON insisted that the administration can do much to moderate inflation by suspending the inflationary taxes of TRAIN package 1.

IBON said that government should stop imposing higher consumption taxes such as the fuel excise which burdens the majority of poor Filipinos who can ill afford this amid low wages and growing joblessness. 

 

Instead, the government should improve revenue collection by cracking down on tax evaders and corruption in the Bureau of Internal Revenue (BIR) and Bureau of Customs (BOC). 

 

It should also build a tax system that raises revenues more from higher income, wealth and property taxes on the rich.#

Bayan Muna proposes free funeral services for ‘extremely poor’ families

Bayan Muna called for the fast-tracking of a bill aimed at giving substantial discounts for funeral services for the poor.

As high inflation rates affect even the dead, House Bill 3028 should be immediately passed to give indigent families a 50 percent discount in funeral services, Bayan Muna explained.

Authored by Bayan Muna Representative Carlos Isagani Zarate, the proposed measure aims to alleviate the rising costs of services due to the Rodrigo Duterte government’s Tax Reform for Acceleration and Inclusion (TRAIN) law, the group added.

Hindi lang mga buhay ang nasasagasaan ng TRAIN, pero pati mga patay na rin. Sa minimum ay tumaas ng P1,000 ang funeral services sa ngayon, hindi pa kasama dito ang kabaong, lupa sa sementeryo at mismong pagpapalibing,” Zarate said.

“Our bill also mandates that dead persons belonging to ‘extremely poor’ families should be given free funeral services,” he added.

The government announced that inflation rates in the third quarter of the year has risen to more than six percent, driving prices of goods and services higher.

Bayan Muna said the House of Representatives shall tackle the proposed measure when it resumes its session this month.

“We hope that the House leaders would also fast track the bill’s passage so that poor families would not have to shell out more just to bury their loved ones. They are already grieving from their lost, it is doubly tragic that they should also be burdened to bury their dead,” Zarate said. # (Raymund B. Villanueva)

Suspend rate hike, scrap concession agreement with water firms, govt told

The Water for the People Network (WPN) said that government should not accede to the ruling of an international arbitral court granting the Maynilad Water Systems, Inc. petition to collect its corporate income tax (CIT) from consumers. 

The water rights group agreed that any impending water rate increase amid the ongoing dispute on pass-on CIT should be deferred.

The group likewise urged the scrapping of the concession agreement (CA), which it said allows onerous grounds for price hikes.

The Singaporean Supreme Court finalized an International Chamber of Commerce (ICC) arbitration decision that Maynilad may recover its CIT through pass-on charges.

Maynilad has demanded that the Philippine government pay Php3.4 billion in indemnification for non-recovery of its CIT for the period March 11, 2015 to August 31, 2016.

This is after the Metropolitan Waterworks and Sewerage System Regulatory Office (MWSS-RO) refused to honor an arbitral decision favoring Maynilad while that for Manila Water remained pending.

As per CA with the Philippine government, both Maynilad and Manila Water took to international arbitration in 2013 to contest the RO’s rejection of their petitioned rate increases for the rate rebasing period of 2013-2018.

The firms’ petitions included CIT recovery and other expenses unrelated to the delivery of water services.

For the period of 2018-2022, the MWSS Board has already approved the RO’s rate rebased tariffs, which again reportedly disallows CIT recovery. The MWSS-RO announced a staggered Php5.73 per cubic meter (cu. m.) rate increase for Maynilad and Php6.22/cu. m. for Manila Water.

These are lower than the firms’ petitioned rates, wich for Maynilad still included the CIT.

The WPN urged the MWSS Board in a letter to uphold the decision to prohibit CIT recovery because it is unjust to consumers.

“In the first place, it is very wrong to pass on the burden of paying the CIT to consumers,” said the group.

The concessionaires are technically public utilities providing a very basic need such as water, said WPN. Aside from mandating the periodic alteration of basic charges through rate rebasing, the CA ensures the concessionaires’ steady flow of revenue and profit-making with other increases based on inflation, an environmental charge, and value added tax, noted the group.

WPN supports the MWSS-RO plan to suspend the impending rate hike this year should Maynilad insist on collecting indemnification from the government.

“The amount being demanded by Maynilad alone could reach Php40 billion, tantamount to an increase of about Php5.00/cu. m. on current average tariffs. Any rate hike today is also insensitive due to the soaring prices of goods and services,” said the group.

Inflation has risen to 6.7 percent in September from 6.4 percent in August.

Aside from pushing for the prohibition of the CIT and rate hike suspension, WPN stressed that strategically, government should review and repeal the CA altogether.

 

“It is the basis of the enrichment of private water firms at the expense of consumers. Government should instead ensure control over water resources to have these safe, accessible and affordable for the public,” WPN said. #

IBON — Php238 NCR wage hike doable without worsening inflation

As the Metro Manila regional wage board deliberates a minimum wage hike for later this month, research group IBON said that a much-needed Php238 minimum wage increase is possible and need not be inflationary.

Millions of Filipino workers including in the National Capital Region (NCR) are burdened by high prices of goods and services.

The group said that the wage hike is possible and will not be inflationary if only companies are willing to take a small cut in their profits.

The government can meanwhile support smaller establishments to be able to afford the wage increase.

The purchasing power of poor and middle income households in NCR is eroding due to high inflation this year on top of the accumulated erosion from inflation in previous years.

At the national level, IBON estimates that the country’s poorest 14 million households have already lost anywhere from Php1,800 to Php4,725 cumulatively from January to September this year because of inflation.

The erosion in purchasing power in NCR is likely to be even greater. Monthly inflation in the first nine months of the year averages 5.0 percent nationwide but is higher at 5.6% percent in NCR.

IBON said that NCR firms have more than enough profits to support a Php238 minimum wage hike.

The latest data from the Philippine Statistics Authority’s (PSA) Annual Survey of Philippine Business and Industry (ASPBI) reports that NCR firms (with 20 and over employees) had combined profits of Php903 billion in 2015 while giving an average daily basic pay (ADBP) of Php530.

Using ADBP as a proxy for workers’ wages, raising the NCR minimum wage to Php750 and ensuring that workers get this will cost just Php132 billion which is just 14.6 percent of their profits.

In effect, NCR firms can pay the Php750 minimum wage and not have to pass this on to consumers as higher prices if they accept a slight cut in their profits.

Large corporations can readily give this substantial wage hike, said the group, but government should ensure assistance to micro, small and medium enterprises (MSMEs) so that they can afford this.

This can come in the form of tax breaks and incentives, cheap credit, subsidized fuel and utilities, and technology and marketing support, among others.

IBON added that the large wage hike is also justified by growing worker productivity.

Between 2009 and 2017, labor productivity in NCR grew by 35 percent from Php456,059 per worker to Php614,297.

However, that same period, the real value of the mandated minimum wage only increased by 11 percent and of ADBP by 16 percent, both measured in real terms at constant 2012 prices.

This implies that a large part of productivity gains go to employers as profits rather than to workers as higher wages.

IBON stressed that it is more urgent than ever in these times of economic crisis for the government to ensure the poorest working class Filipinos do not suffer needlessly and for those with the capacity to adjust, such as enterprises and the wealthy, to contribute to a more equitable economy. #

Inflation worsening: Gov’t should act fast as households’ incomes hemorrhage

Research group IBON said that inflation has not tapered off as government projected but has accelerated in September, highlighting government’s continued neglect in addressing rapidly rising prices of goods and services.

The group said that government continues to push failed neoliberal measures, while feigning concern for Filipino families struggling with a quickly falling purchasing power.

Sonny Africa, IBON executive director, said, “The purchasing power of Filipino families continues to fall because the Duterte administration is more concerned about managing the political backlash of rising prices than genuinely addressing the burden on the country’s poorest families.”

The Philippine Statistics Authority (PSA) reported that the headline inflation rate accelerated to 6.7 percent year-on-year in September 2018, higher than the 6.4 percent in August.

Africa said that this is also more than double the 3.0 percent in the same period last year and over five times the 1.3 percent in June 2016 at the start of the Duterte administration.

The inflation rate for the poorest 30 percent of families is however likely even higher and some 8.5 percent or more.

Africa said that inflation has not moderated because the government refuses to suspend implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) law or to implement price ceilings on basic necessities and prime commodities.

“Doing these would have sent a strong signal of the administration’s sincerity in addressing rising prices and would bring immediate relief for tens of millions of Filipinos,” stated Africa.

Instead, inflation has already eaten up thousands of pesos in the purchasing power of the incomes of the poorest households who are already under-consuming and have low standards of living as it is.

Africa estimated that each of the country’s poorest 30 percent of households have lost at least Php1,800 to Php2,916 already from the start of the year until September due to inflation.

These are households assumed to be earning some Php12,835 or less monthly.

Less poor and middle income households have also seen their purchasing power eroded.

The next 30 percent of households have lost Php3,418 to Php4,725 since the start of the year.

These are the households earning up to around Php21,119 monthly.

IBON estimates the erosion of purchasing power by deflating household incomes with reported monthly inflation rates.

The impact on the poorest households is also underestimated by the unavailability of inflation rates for low income groups.

The administration has been promoting measures such as importation of agriculture products and the public utility vehicle modernization as ways to mitigate high inflation.

But Africa said that these government measures are tepid because the economic managers only see the numbers as cold statistics and callously insist that the situation is manageable.

“The measures are weak, slow to take effect and oblivious to the worsening conditions of tens of millions of the poorest Filipinos,” said Africa.

Africa also said that lower inflation in the National Capital Region (NCR) may reflect how the government is just managing the political impact of inflation.

“Reported NCR inflation of only 6.3 percent could be because the administration diverted food supplies to NCR to lower food prices here but at the expense of the regions,” said Africa.

Food inflation in non-food producing NCR is conspicuously moderated. There was a just 0.6 percentage point increase in NCR versus 1.5 percentage point increase outside NCR, and 1.2 increase nationwide.

“The government should provide real relief to millions of poor Filipinos and middle class. This includes immediate price controls, stopping TRAIN’s consumption taxes, and a meaningful wage hike. Steps must also be taken to strengthen domestic agriculture and Filipino industry,” he said. #

 

‘Sobra ang dagok’

“Dati, itong pechay-baguio, ang kuha namin ay nasa P90 lang. Ngayon, nasa P150 na. ‘Yung repolyo, dati P80. Ngayon, P180 na. Sobrang laki ang itinaas, kaya sobra rin ang nararamdaman namin na dagok.”–Mang Ricky, tindero ng gulay, Sitio San Roque, Quezon City

Government losing control of economy –IBON

The Duterte administration is losing control over the Philippine economy and the poorest Filipinos are suffering for this, research group IBON said upon the release of the August inflation rate.

The greatly accelerating inflation is only the latest in a series of bad economic news about the economy’s so-called fundamentals.

The Philippine Statistics Authority (PSA) reported that the headline inflation rate in August 2018 accelerated to 6.4 percent or its highest in almost a decade from 5.7 percent in July.

This is more than double the 2.6 percent inflation in August 2017.

Inflation was highest in alcoholic beverages, tobacco and narcotics at 21.6 percent year-on-year but inflation also worsened among food and non-alcoholic beverages, especially vegetables (19.2 percent), corn (12.6 percent), and fish (12.4 percent).

Meanwhile, from July to August 2018, steepest inflation occurred in vegetables (4.9 percent) and rice (2.1 percent).

IBON said that the rapid rise in food prices hits poor families the worst because food takes up a greater portion of their expenditure compared to higher income families.

The bottom 30 percent income group spends 59.7 percent of their expenditures on food, compared to just 30 percent for the upper 70 percent income group based on the 2015 Family Income and Expenditure Survey.

IBON estimates that the poorest six deciles of Filipino families with monthly incomes ranging from Php7,724 to Php21,119 have suffered income losses of around Php1,455 to Php3,781 due to inflation from January to August this year.

Other indicators of macroeconomic fundamentals are no better, IBON said.

The high August inflation comes on the heels of second quarter gross domestic product (GDP) growth which was the slowest in 12 quarters, the peso falling to its lowest in 13 years, first semester remittance growth the slowest in 17 years, trade and balance of payments deficits the worst in the country’s history, and gross international reserves (GIR) that are the lowest in nine years.

IBON added that the more rapid inflation means that prices are higher than ever and will remain high even if inflation tapers off in the coming months as government projects.

The government needs to become more decisive in addressing increasingly unaffordable goods and services, IBON said, adding immediate and longer term measures can be taken.

The most immediate is to stop implementation of the TRAIN law and particularly its inflationary consumption taxes, IBON stressed.

This will not arrest inflation completely but it will take away the most recent inflationary pressure that is also the one most directly within the government’s control. The government can also consider price controls, said the group.

The president has the authority to impose price controls not just in the case of calamities but also when there is illegal price manipulation and if prices of basic commodities are already deemed at unreasonable levels, it said.

The long-term solution however, IBON underscored, is to strengthen domestic agriculture and Filipino industry. These are essential to provide cheaper food, goods and services in the domestic market. This will also lessen imports and lower pressure on the peso to depreciate.

The group also said that another solution is to reverse the privatization or commercialization of water, power, education and health to take away the profit premium making these services more expensive.

These are steps that the Duterte administration’s economic managers hinder due to their stubborn adherence to failed neoliberal policies, said IBON.#