Salceda

Inflation to ‘go down by’ February – Salceda

February 7, 2023 Ryan Ponce Pacpaco 253 views

HOUSE Committee on Ways and Means Chairman and Albay 2nd District Representative Joey Sarte Salceda on Tuesday said the “January inflation levels will surely go down by February” but fish and egg prices will likely remain elevated throughout 2023 unless corn prices and supply improve.

“I am sure the overall price level in February and every month in 2023 will be lower than 8.7%. Vegetable prices especially onion will go lower, especially during this harvest season. But I expect fish prices, as well as egg and dairy prices, to remain elevated. Corn drives those prices, and corn prices – imported or domestic – are expensive,” Salceda said.

Corn prices have a year-on-year inflation rate of 16% and have continued to accelerate month-on-month by 1%.

Salceda says, “this will drive prices of fish, because corn accounts for 60-70% of costs in aquaculture. Every 1% increase in corn prices leads to a P2-5 price increase in tilapia prices.”

“Egg is exacerbated by problems in poultry supply and smuggling of frozen chicken, which kills domestic raisers. But egg supply issues are not isolated. Nearby areas like Guam are already experiencing shortages,” Salceda said.

“So, I would repeat my initial suggestion to look into corn tariffs and try to direct as much of it towards increasing production. Imported corn isn’t also cheaper than domestic corn once landed. In fact, in some cases, imported corn is two pesos more expensive than domestic corn. So, it should be okay to import,” he said.

Salceda said the 2-4% target might be difficult to achieve, 5% inflation “structural.”

He also said that the government’s 2-4% target inflation band might be “difficult” to achieve given that some price drivers are “structural.”

“You can be sure 8.7% will go down, but there’s a floor,” Salceda said.

“All in all, it looks like 8% is a cyclical level, but 5% is structural. So, that makes your 2-4% inflation target almost off the table unless you make decisive efforts on the key drivers. High corn prices: that’s enemy number one,” he said.

“The BSP will try to keep prices under control. Definitely another 50 basis point hike in interest rates during the February 16 Monetary Board meeting will be taken up, perhaps announced,” Salceda said.

“But inflation is not due to accelerated demand. It’s supply. Monetary policy adjustments will have limited effect in that regard,” he said.

AUTHOR PROFILE