BSP’S inflation tack: Junk NTB, hike imports


THE national government should remove non-tariff barriers (NTBs) and allow more imports to bring down commodity prices nationwide, according to the Bangko Sentral ng Pilipinas (BSP).

In the Philippine Economic Briefing in Frankfurt, Germany, BSP Governor Felipe M. Medalla said inflation in the country is still traceable to supply shocks that have caused shortages in certain commodities.

Non-tariff barriers are measures that hinder the importation of goods. These prevent the entry of foreign goods into the Philippine market.

“Obviously the solution, to me, is to import more and get rid of all the non-tariff barriers because the main reason [imports are low] is it’s so hard to get import permits. [But] I’m satisfied that the government is now doing everything it can to speed up the importation,” Medalla said.

These efforts, Medalla said, would help bring the country closer to the midpoint of the 2 to 4 percent BSP inflation target by 2024. By the last quarter of the year, inflation nationwide could already be below 4 percent.

Based on the country’s history, Medalla said the longest time the country has seen inflation of above 4 percent is 15 months. The country has also experienced, at its worst, four large shocks in a span of only four months.

Medalla said it took around 16 months before the base effects created from these shocks wore off. But since most of these past shocks have not been accompanied by wage price inflation, secondary inflation effects did not emerge.

Still, Medalla said the recent supply shock that the economy experienced “is worse than before.” This means, the supply shock impact on inflation may last 16 months to as long as 18 months before it wears off.

“This is the disadvantage of being a credible central bank. Eventually supply shocks, the effects of supply shocks disappear. Of course, it’s hard to rule out another supply shock,” Medalla said.

Investor concerns

Among the concerns raised by investors in the President’s economy is the 60-40 percent rule on foreign ownership in sectors such as construction. Medalla said some of these laws are “unfortunately” embedded in the Constitution.

Nonetheless, National Economic and Development Authority (Neda) Director General Arsenio M. Balisacan, who was also the first to chair the government’s anti-trust body, the Philippine Competition Commission (PCC), said the government is making progress in changing these restrictions.

Balisacan said the PCC recently launched a case in the courts to challenge regulations that big foreign companies are less preferred over domestic firms. He said the PCC is firm in saying that foreign and domestic companies should operate on a level playing field.

“In the Philippines, there are remnants of protectionism and this government is doing its best to get to the bottom of things. Unfortunately, some things are embedded in the Constitution,” Medalla said.

Proof of these efforts is the change in tack of the government when it comes to renewable energy. The previous administration’s stance was that renewables were a natural resource and therefore should be owned 100 percent by Filipinos.

However, Medalla said, the current Energy Secretary Raphael Lotilla said since renewables use natural resources, these should be open to the use of all people. Such a stance could open the doors for greater foreign participation in the sector.