BSP sees end of rice QRs help­ing ease in­fla­tion

Business World - - THE ECONOMY - By Melissa Luz T. Lopez Se­nior Re­porter

THE gov­ern­ment must find a way to sup­port lo­cal farmers to cush­ion the blow from the in­flux of cheap rice, the Bangko Sen­tral ng Pilip­inas (BSP) said as it backed the lift­ing of rice im­port re­stric­tions by July.

“The Mon­e­tary Board noted that the re­moval of quan­ti­ta­tive re­stric­tions on rice im­por­ta­tion will have ben­e­fi­cial ef­fects on in­fla­tion. En­hanc­ing eco­nomic ef­fi­cien­cies in the rice sup­ply chain would trans­late to rice af­ford­abil­ity for con­sumers, in­clud­ing farmers,” read the high­lights of the BSP’s lat­est pol­icy re­view which was pub­lished yes­ter­day.

The off icials were re­fer­ring to the quan­ti­ta­tive re­stric­tions (QR) on rice im­ports, a pref­er­en­tial trade deal se­cured by the Philip­pines since 1995 that seeks to guard lo­cal farmers from cheaper sup­ply from abroad. The lat­est ex­ten­sion will lapse by end-June.

The Mon­e­tary Board kept in­ter­est rates un­changed dur­ing its March 23 meet­ing, with in­fla­tion seen to re­main man­age­able over the com­ing year de­spite a faster climb in prices ob­served dur­ing the past few months.

The BSP’s de­ci­sion came a week af­ter a fresh 25-ba­sis-point in­crease was an­nounced by the Fed­eral Re­serve, a move widely ex­pected by the mar­kets.

In­fla­tion has av­er­aged 3.2% dur­ing the first three months of 2017, still within the cen­tral bank’s 2- 4% tar­get band even as price in­creases have been on an up­trend since Novem­ber last year. Con­sumer prices rose by 3.4% in March, the fastest pace in over two years, ac­cord­ing to the Philip­pine Sta­tis­tics Author­ity.

BSP Deputy Gov­er­nor Diwa C. Guini­gundo said last month that rice, the coun­try’s sta­ple grain, ac­counts for nearly a 10th of the con­sumer bas­ket used to track price move­ments.

Once the QR scheme is lifted, in­di­vid­u­als and busi­nesses can im­port rice but will pay a 35% tar­iff. This is against the cur­rent prac­tice where the Na­tional Food Author­ity (NFA) lim­its the vol­ume of rice im­ports ev­ery year and im­poses higher tar­iffs on amounts that go be­yond the min­i­mum vol­ume set by of­fi­cials, done to pre­vent the in­flux of cheap rice and shield lo­cal farmers.

Rice im­ports have be­come a sen­si­tive is­sue among state of­fi­cials, re­sult­ing to a re­ported rift be­tween Agri­cul­ture Sec­re­tary Em­manuel F. Piñol and Cabi­net Sec­re­tary and NFA Coun­cil head Leon­cio B. Evasco, Jr. over con­flict­ing poli­cies.

The BSP of­fi­cials said the na­tional gov­ern­ment must en­sure that it pro­vides some re­lief to lo­cal farmers who could suf­fer from the in­flux of cheaper rice from abroad.

“[T]he neg­a­tive im­pact on the coun­try’s agri­cul­ture sec­tor of the pos­si­ble in­flux of cheaper rice im­ports should be com­pen­sated by a com­pre­hen­sive gov­ern­ment sup­port pack­age that will boost agri­cul­tural pro­duc­tiv­ity and in­crease the com­pet­i­tive­ness of the sec­tor,” the re­port read.

Mr. Guini­gundo ear­lier said that im­port tar­iffs col­lected by gov­ern­ment should be “fun­neled back” to the agri­cul­ture sec­tor by way of ir­ri­ga­tion and farmto-mar­ket roads that would help boost pro­duc­tiv­ity, among others.

The cen­tral bank ex­pects in­fla­tion to con­tinue ris­ing and peak within the third quar­ter, with the full-year av­er­age likely to set­tle at 3.4%. In­fla­tion is likely to trend higher for the months ahead, with the BSP cit­ing pos­si­ble in­creases in power rates and trans­porta­tion fares, as well as the “tran­si­tory” im­pact of the tax re­form pro­gram pend­ing in Congress.

Up­beat do­mes­tic ac­tiv­ity is also ex­pected to be sus­tained over the near term, al­low­ing the BSP to hold fire on in­ter­est rate ad­just­ments as the lo­cal econ­omy would not need a fresh stim­u­lus.

The Philip­pine econ­omy ex­panded by an up­wardly-re­vised 6.9% in 2016. Growth is ex­pected to hit the gov­ern­ment’s 6.5-7.5% goal this year, with So­cioe­co­nomic Plan­ning Sec­re­tary Ernesto M. Per­nia say­ing that the econ­omy likely ex­panded by “around 7%” dur­ing the first quar­ter.

“Lat­est in­di­ca­tors of do­mes­tic de­mand con­tinue to broadly point to firm growth prospects over the pol­icy horizon,” the BSP added, not­ing strong fig­ures re­ported for fac­tory out­put, car sales, and pub­lic spend­ing.

Busi­ness optimism was also steady dur­ing the quar­ter, sup­port­ing over­all growth prospects.

The BSP will hold its next pol­icy meet­ing on May 11, which will again come a week af­ter the Fed’s two-day re­view.

Econ­o­mists ex­pect as much as two rate hikes from the BSP this year, which comes at a time of a change in the cen­tral bank chief as Gov­er­nor Amando M. Te­tangco, Jr. com­pletes his sec­ond and fi­nal term by July 2. Pres­i­dent Ro­drigo R. Duterte has yet to name Mr. Te­tangco’s suc­ces­sor.

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