HOUSE Committee on Ways and Means Chairman Joey Sarte Salceda on Tuesday said that January’s inflation levels will surely go down by February but that fish and egg prices will likely remain elevated throughout 2023 unless corn prices and supply improves.
Salceda issued this statement as the country’s headline inflation rate in January 2023 hit 8.7 percent from 8.1 percent in December 2022.
The lawmaker said he’s sure that the overall price level in February and every month this year will be lower than 8.7 percent. He added that vegetable prices, especially onion, will go lower, especially during the harvest season.
Nonetheless, he said he expects 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 percent and have continued to accelerate month-on-month by 1 percent.
Salceda said this level will drive prices of fish as corn accounts for 60 percent to 70 percent of costs in aquaculture. The lawmaker explained that “every 1 percent increase in corn prices leads to a P2 to P5 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,” he 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 2 pesos more expensive than domestic corn. So, it should be okay to import,” he added.
Off the table
SALCEDA also said that the government’s 2-percent to 4-percent target inflation band might be difficult to achieve given that some price drivers are “structural.”
“You can be sure 8.7 percent will go down; but there’s a floor,” Salceda said.
“All in all, it looks like 8 percent is a cyclical level, but 5 percent is structural. So, that makes your 2-percent to 4-percent 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.
But Salceda 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,” he said.
“But inflation is not due to accelerated demand. It’s supply. Monetary policy adjustments will have limited effect in that regard,” Salceda added.