OPINION | Pivot to fighting inflation from fighting COVID [Introspective By Calixto V. Chikiamco] READ:
retty soon, we will be looking at the COVID pandemic in the rear-view mirror. COVID may still be around, debilitating people and even causing deaths, but it won’t be the unknown and fearsome menace it once was. Not only has mankind developed vaccines and lessened its sting, but also doctors now know how to treat it, with old and new medicines. Down the road, there will be nasal vaccines, omni-variant vaccines, more anti-inflammatories, and antibody treatments, as well as protease inhibitors.
However, most of the inflation is currently coming from higher food costs, which hurt the poor the most. According to Dr. Bruce Tolentino, an agricultural economist and member of the Monetary Board, food contributes to 47% of inflation. Since the RTL or Rice Tariffication Law, rice has been a net zero contributor to inflation. On the other hand, meat and fish prices have become major drivers of inflation.
The high domestic prices for meat lead to tremendous welfare losses. The biggest negative effect is on children and teenagers, where protein malnutrition is most pronounced. Citing studies by nutrition scientists, Dr. Adriano says that 47% of Filipino teenagers suffer from inadequate protein intake. He says this is probably the reason why Filipino teenagers perform poorly on the PISA test compared to their global peers. Studies show a high correlation between poor performance and meat prices.
The way forward is to adopt the RTL model, i.e., liberalize the importation of corn and impose tariffs where the revenue from the tariffs can be channeled to increasing productivity. Contrary to the zombie scenario peddled by the protectionists, the RTL didn’t result in many farmers going bankrupt. On the other hand, productivity increased, and domestic rice prices stabilized, leading to rice prices being a zero contributor to inflation.
The country, being a net importer of oil, can’t do anything about the surging high oil prices. Instead of reducing oil taxes, which will widen ourcit and do great damage to the economy, the government can offset the sting of high oil prices by lowering the price of food. It has the power to do so by liberalizing corn importation.
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