* My column in BusinessWorld on June 06, 2019.
The May 2019 inflation is 3.2%, so this makes the year to
date (Ytd) or January-May 2019 inflation rate 3.5% — which all makes the
Philippines the inflation valedictorian of East Asia, this year and last year.
While big rise in prices Ytd 2019 were recorded in
alcoholic beverages and tobacco (11.7%), the food and non-alcoholic beverages
also registered a high rate of 4.0% and health 3.9% the past five months (see
table 1).
Dutertenomics will still not admit that their multiple
tax hikes (especially oil taxes) under TRAIN law is responsible for the
continuing price hike penalties on Philippine consumers.
The government also boasted recently that after Moody’s
BBB+ stable ratings upgrade, Fitch recently affirmed its BBB stable ratings.
Which implies that their macroeconomic management of the country is good and
wise.
Not so fast. Take these two recent stories in
BusinessWorld and I quote portions of the report:
(1) “Fitch Ratings cuts PHL growth forecast on budget
delay” (April 25, 2019)
“Fitch Ratings — which in December affirmed the
Philippines credit rating at “BBB,” a notch above minimum investment grade,
with a “stable” outlook — slashed its economic growth forecast for the
Philippines to 6.2% for this year from the 6.6% projection it gave in
December…”
(2) Moody’s cuts 2019 PHL GDP forecast to 6% (May 30,
2019)
“…it is probable that they will not be able to fully
execute the budget amount, so I think that’s the part of the reason why we
think there’s still going to be a deceleration in growth versus 2018,” Mr. De
Guzman said.”
NEDA-DOF-DBM still target a 6-7% GDP growth this year but
actual Q1 growth was a low 5.6%. Fitch and Moody’s project 6.2% and 6.0%
respectively for full year growth.
On the credit ratings, the Philippines experienced
mediocre if not negative outlooks under the Estrada and Arroyo administrations,
then things improved to upgrades of BB+ and BBB- under the Aquino
administration. So the Duterte administration simply inherited the momentum
from its predecessor (see table 2).
Dutertenomics has a chance to significantly bring down
the country’s inflation rate to 2% or lower in the latter half of the year by
legislating tax cut somewhere. That measure should include a VAT cut from 12%
to 10%, better if 8% in exchange for drastic reduction in exempted sectors.
VAT is anti-poor, anti-rich, anti-consumers and only
pro-government. Poor farmers and fisherfolks, poor urban workers and students
use commodities that are slapped with 12% VAT — like oil and spare parts for
their tractors and pumpboats, motorcycles and tricycles, jeepneys and buses.
The various tax hikes under TRAIN law to “compensate”
personal income tax cut was wrong. It has resulted in making the Philippines
the inflation valedictorian of the region. This mistake should be corrected by
having a VAT cut, which will significantly reduce price pressure on the
consumers.
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See also:
BWorld 333, The Public Service Act and provincial tourism, June 03, 2019
BWorld 334, US-China relations at Jeju Forum, June 04, 2019
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