* My column in BusinessWorld on July 9, 2019.
The Philippine Statistics Authority (PSA) has reported
that the country’s lowest inflation rate this year and last year, or over the
span of 18 months, was 2.7% in June. This is indeed good news and can be traced
to two major factors.
One, lower world oil prices. The WTI (West Texas
Intermediate) June average price was only $54.7 a barrel vs. April’s $63.9 and
May’s $60.8 a barrel. Two, the implementation of the Rice Tariffication Law
(RTL, RA 11203) where the quantitative restriction (QR) over rice was removed
and larger supply of cheaper imported rice from our neighbors came in.
Still, the Philippines has the highest inflation rate
among more mature East Asian economies year to date 2019 where six of the 11
economies listed have inflation rate of below 1% (see Table 1).
China is feeling the pinch this year thanks to its trade
conflict with the US — its inflation rate was rising consistently from 1.5% in
February to 2.7% in May.
I checked the monthly inflation rate by commodity groups
and compared the Philippines’ numbers with those of the National Capital Region
(NCR). Of the 11 groups, eight have similar country and NCR values, but three
groups diverge or look like outliers. These are Alcoholic Beverages and Tobacco
(ABT), Transport, and Education. The difference between NCR and Philippine
inflation is derived in Table 2.
Let me focus on the higher inflation for Transportation
in the NCR vs Philippines overall, in relation to the transportation network
vehicle service (TNVS) “strike” yesterday due to the more costly restrictions
of the Land Transportation Franchising and Regulatory Board (LTFRB),
The inefficient public transport system in the NCR and
other big cities in the country force many people who do not want the
inconvenience of taking multiple rides from house to work, grocery or school
and back, to drive their own cars or motorcycles. Which further worsens traffic
congestion.
The alternative to driving one’s own car or motorcycle in
heavy traffic (then endure the difficulty of finding often expensive parking)
is to take a taxi or TNVS. Most car owners prefer TNVS than taxis because of
transparency, safety, and tech-based convenience. When there are not enough TNVS
around, the waiting time and fare go up, which contributes to high transport
inflation in NCR.
Beyond the low world oil prices, RTL, reducing interest
rates or certain taxes, there are administrative measures that can help bring
down inflation. In this case, the LTFRB should expand, not restrict, the supply
of TNVS, taxis, and buses with deregulated routes and fares. More competition
will bring down public transport costs, and more people will leave their cars
or motorcycles at home on weekdays.
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See also:
BWorld 344, Earthquakes and steel, July 04, 2019 BWorld 345, Inflation in transportation sector, July 05, 2019
BWorld 346, Solar para sa politika, Part 2, July 06, 2019
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