High food prices to continue driving inflation — NEDA

INFLATION will remain elevated in the coming months as food prices stay high, according to the National Economic and Development Authority (NEDA), which is supporting the reduction of tariffs to boost local food supply.

NEDA said in a report on Monday rising food costs due to prolonged supply-side issues, coupled with the steady increase in global oil prices, would largely drive this year’s overall inflation to go beyond the 2-4% target.

However, it said supply-side price pressures are still considered “transitory” and are projected to subside later in the year.

“In the near term, transitory factors will continue to put upward pressure on inflation. Accordingly, the government’s continuous efforts to address food security, by easing supply restrictions and increasing production will be crucial,” according to the report.

Headline inflation eased to 4.5% in March from 4.7% in February, mainly because of the slower rise in food prices. This snapped the five straight months of acceleration or since the rising trend began in October 2020.

Inflation will average 4.2% by yearend, breaching the 2-4% annual target, according to central bank forecasts

“To address the increase in overall inflation, the government needs to proactively manage the increase in food prices and prevent further second-round effects to protect the purchasing power of households, especially the poor,” the NEDA said.

Aside from boosting production of key agricultural goods, NEDA noted that measures that will lower the tariffs and raise minimum access volume (MAV) on imported meat could help stabilize food prices.

The continued spike in food prices was largely attributed to the pork shortage due to the African Swine Fever (ASF) outbreak.

This prompted President Rodrigo R. Duterte to issue Executive Order 128 on April 7, lowering the tariff rates on pork imported within the MAV quota to 5% in the first three months, and rising to 10% in the succeeding nine months.

He also lowered the tariff rates on out-of-quota pork imports to 15% in the first three months, rising to 20% in the succeeding nine months.

However, lawmakers are calling on the withdrawal of the EO, saying this would lead to huge revenue losses for the government. —