DIFFICULTIES in importing food as a result of non-tariff barriers (NTBs) have contributed to rising inflation in the country, according to the National Economic and Development Authority (Neda).
Socioeconomic Planning Secretary Arsenio M. Balisacan recently told reporters that if “inflexibilities” in importation persist, there would be more pressure on the Bangko Sentral ng Pilipinas (BSP) to raise interest rates.
Balisacan said these supply side issues should be addressed to contribute to efforts to cool inflation. Some of these examples are sanitary and phytosanitary measures that are turned into NTBs.
“If you address those supply side issues, there will be less pressure for BSP to use interest rate as a cure for inflation. In fact, a big part of that inflation is coming from the supply side,” Balisacan explained.
Balisacan cited other supply issues that affect inflation: typhoons and diseases such as African Swine Fever and Bird Flu. These will affect the level of supply of these products, he said.
In order to cushion the impact on supply, Balisacan said the country needs to import products that would be affected. However, due to what he termed as “inflexibilities” in terms of importation which includes the lobby of associations from the private sector, it becomes difficult to import and this increases commodity prices.
There are also times when SPS measures prevent importers from being able to bring in products that could reduce prices of goods that are in short supply.
“Kung nagkaron tayo ng mga ganung [if we encounter those] shortfalls, it’s so difficult to bring in the imports. The importer needs to secure [many] permits to bring in the [products],” Balisacan also said.
Hiking interest rates, Balisacan said, will also affect the country’s growth. With high interest rates, investments would have less incentive to locate in the Philippines.
The Monetary Board’s decision to raise the country’s benchmark rates by 50 basis points (bps) on Thursday would likely have an impact on the country’s growth rate in the next two years.
Bangko Sentral ng Pilipinas (BSP) Governor Felipe M. Medalla said the impact of the recent interest rate hike would be 19 bps in 2024, or a reduction of a percentage point from GDP growth.
In 2023, the impact would be less at 7 bps or less than a percentage-point reduction due to the lag time in the impact of the rate hike on growth.
The Monetary Board decided to raise the BSP’s overnight reverse repurchase facility by 50 basis points to 5.5 percent, effective 16 December 2022. Accordingly, the interest rates on the overnight deposit and lending facilities will be set to 5 percent and 6 percent, respectively.