Rice tarrification to lower inflation

RICE tariffication will help mitigate the impact of tax reforms on consumer prices and also lower inflation, a senior Bangko Sentral ng Pilipinas (BSP) official said on Friday.

In a press briefing, central bank Deputy Governor Diwa Guinigundo said that amendments to Agricultural Tariffication Act, which will finally scrap quantitative restrictions (QR) on rice, would have a positive effect on inflation management.

“Based on our initial forecast, if Congress is able to pass this tariffication bill, it will slice off about 1 percentage point from inflation” Guinigundo told reporters, as rice comprises about 9 percent of the total consumer basket.

“To me, it is a really game changer should Congress succeed in passing the

bill on rice tariffication. It is very important and we should see some mitigation of inflation resulting from the tax reform package,” he added.

The Finance department has said that the removal of the rice QR could slash retail prices of the staple by as much P7 per kilo.

Amid concerns that scrapping the QR would burden local farmers, the National Economic and Development Authority has also said that at least 39 rice-producing areas will continue to be competitive should imports be slapped with tariffs.

In its Fourth Quarter Inflation Report released also on Friday, the BSP said that latest forecasts show inflation likely settling above the midpoint of the 3.0-4.0 target range in 2018 to 2019.

The transitory impact of the government’s fiscal reform program and pending peti- tions for higher transport and power rates were tagged as the main upside risks.

“In terms of inflationary impact, higher consumption taxes, together with the demand stimulus from the fiscal reform program, are expected to initially generate higher inflation,” the report states.

However, the prevailing outlook supports keeping policy rates steady.

MAYVELIN U. CARABALLO