NextGen Day

MANILA – Finance Secretary Carlos Dominguez III has informed President Rodrigo Duterte that the current Russia-Ukraine issue will have only a transitory impact on the Philippines and that a comprehensive set of measures is now being executed to mitigate the impact on the economy and people.

Despite the negative consequences of the crisis, such as higher energy and food costs, Dominguez is optimistic that the government will be able to keep inflation within the target range of 2 to 4% and achieve its aim of increasing the GDP by 7 to 9% this year.

“It’s important to note that we don’t expect this crisis to persist long. There may, however, be some long-term consequences. “We have survived similar crises in the past, such as the Gulf War in 1990, the oil price shock of 2008, and the first Russia-Ukraine crisis in 2014,” Dominguez remarked during the President’s televised meeting with Cabinet officials Monday night.

Duterte convened the meeting to discuss with his economic advisers the government’s efforts to mitigate the consequences of rising basic commodity prices, including the granting of subsidies to affected sectors.

He claimed that the Asian financial crisis of 1997 and the global financial shock of 2008 had far more severe, immediate, and prolonged economic repercussions on the Philippines, but that the country overcome both.

“We are sure that, based on previous experiences, we have the skills and preparation necessary to assist our people in navigating this crisis,” said Dominguez, who leads the President’s economic team.

He said that the crisis between Russia and Ukraine would have no direct impact on the Philippines’ economy because neither country is a big commercial partner.

“Instead, the Philippine economy will almost certainly suffer collateral damage; it’ll be as if we’ve been hit by a ricocheting bullet,” he warned.

These “indirect shocks,” according to Dominguez, will most likely be felt through four primary channels: commodities, financial markets, investments, and the country’s fiscal health.

The first effect would be on fuel and food prices, as Russia is the world’s greatest exporter of natural gas and wheat, while Ukraine is the world’s fourth-largest exporter of grain.

As the crisis drags on, Ukraine’s and Russia’s primary trading partners — namely the European Union (EU) — will seek to trade with other countries such as the United States (US) and China, driving up commodity prices in these markets.

According to him, the battle will certainly result in a rise in interest rates or borrowing costs, which were already predicted to rise previously to the crisis due to the US Federal Reserve’s tightening of monetary policy.

“The conflict would enhance the perception of risk in investments,” he added, implying that investors may become more cautious or postpone planned investments as a result of global uncertainty generated by the crisis.

“It will take a long time for investor and consumer confidence to return to normal once sanctions are applied,” Dominguez warned.

In terms of the country’s fiscal health, Dominguez warned that the government’s support for vulnerable citizens and vital sectors most affected by the crisis will put even more strain on the country’s finances.

He believes that the actions described by National Economic and Development Authority (NEDA) Secretary Karl Kendrick Chua to manage these possible shocks will assist insulate Filipinos from the crisis’ negative impacts.

“We are convinced that, with the steps Secretary Chua has presented, we will be able to keep inflation within our goal range of 2 to 4% and maintain our growth path of 7 to 9% this year,” Dominguez added.

To promote domestic economic activity and mitigate external concerns, Chua proposes that the entire country be moved to Alert Level I and that all schools be opened to in-person classes.

He also mentioned the need to increase fuel subsidies to the public transportation sector and farm producers, as well as the expansion of the oil buffer stock, the continuation of oil companies’ promotional fuel discounts, energy conservation, the suspension or removal of pass-through fees imposed on truckers by local government units (LGUs) and other entities, the implementation of service contracting in all public transportation routes, and the promotion of the use of electric vehicles.

Chua also recommended increasing the liquified petroleum gas (LPG) buffer stock from seven to fifteen days, expanding supply and lowering coal prices by lowering the most favored nation (MFN) 7 percent tariff rate to zero until December 2022, and maintaining the coal buffer stock at the current 30 days minimum inventory, citing Cabinet proposals.

Chua said the EDC proposed promoting energy conservation measures such as the use of technology for energy savings, staggering the increase in the power generation charge, and allowing foreign ownership of microgrids, solar, wind, and other renewable energy sources to reduce the impact on electricity consumers.

Chua said the EDC advised launching the second phase of the “Plant, Plant, Plant” program, subject to funding availability; and offering targeted fertilizer vouchers to farmers, as well as extending supply through bilateral conversations with fertilizer-producing countries.

The following are the EDC’s other recommendations:

The Department of Agriculture (DA) and the National Food Authority (NFA) will constantly monitor rice inflation and buffer stock, respectively.

Obtain concessional loans from the Land Bank of the Philippines (LandBank) and the Development Bank of the Philippines (DBP) to assist LGUs in increasing rice buffer stock, notably in the procurement of post-harvest facilities and warehouses;

Accelerate the implementation of the Rice Competitiveness Enhancement Fund (RCEF) and other aspects of the national rice production program to boost local production;

Streamline the issuing of Sanitary and Phytosanitary (SPS) import approval for rice, particularly for shipments arriving in July for the lean season;

Extend the MFN 35 percent tariff rate on rice until December 2022 to increase supply and lower prices;

Increase maize supply and lower prices by lowering the MFN tariff to 5% in quota and 15% out of quota until December 2022, with a minimum access volume (MAV) of 4 million MT.

Import more feed wheat and increase cassava production (as a feed substitute);

Extend the reduced tariff of 15% in-quota and 25% out quota with a MAV of 200,000 metric tons (MT) through December 2022 to increase pork supply and slash costs.

Increase the speed at which imported pork is released from cold storage;

Pass the bill relating to cattle and dairy;

Remove all non-tariff restrictions on pork and fish;

Issue a Certificate of Necessity to Import (CNI) for small pelagic fish (such as galunggong) that will be valid from the second to fourth quarters of 2022. To close the 200,000 MT supply deficit, the supplier needs an additional 140,000 metric tons (MT).

Accelerate the release of SPS certifications for chicken from National Meat Inspection Service (NMIS) cold storage warehouses in order to bring inventory levels up to pre-pandemic levels;

resolving the temporary restraining order on sugar imports;

Allow industrial users to import directly: set a domestic-to-import ratio of 1:1;

Expand wheat sources (e.g., India);

Support the Department of Trade and Industry’s (DTI) mass-based Pinoy yummy project, which sells bread at cheaper prices in collaboration with the private sector;

Promote non-wheat flour alternatives like Sagip-Nutri flour (made from cassava, sweet potato, monggo, and other root vegetables) and banana flour.

Reiterate the draft Strategic Investment Priority Plan’s inclusion of renewable energy (RE) and agriculture (SIPP).

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