Not yet time to rest

DAYS after the President’s second SONA where he pointed to inflation as the biggest headache during his first year in office, then claimed that it was tamed by government actions, the newly-appointed Bangko Sentral governor declared that “it was too soon to declare victory.”

Gov. Eli Remolona was among bankers on the occasion of the 30th anniversary of the Bangko Sentral which took over the insolvent Central Bank by way of Republic Act 7653 authored principally by then Sen. Franklin Drilon and signed into law by Pres. Fidel V. Ramos on June 13, 1993.

A bit of historical trivia: Before the “bagong” BSP, we had the Central Bank of the Philippines, a creation after many years of planning dating back to the Commonwealth. Republic Act 265, or the Central Bank Act of 1948. was signed into law by then Pres. Elpidio Quirino in June of 1949, after the untimely death of Pres. Manuel A. Roxas, its first and long-time governor being Miguel Cuaderno.

That Central Bank had to be re-capitalized by the government after the financial crisis of the early 1980s highlighted by the assassination of Benigno S. Aquino Jr. which bled our monetary system into a fatal spiral of sky-high interest rates and the inability to settle our foreign debt payments during the last years of martial rule.

Legal lending was a high of 36 percent if you could get a loan, and Bobby Ongpin tried mightily to siphon off dollars to finance our imports through the “Binondo central bank.”

While so-called “headline” inflation has gone down from a high of 8.7 percent in January this year to 5.4 percent in June, “core” inflation, which excludes items that are subject to volatile movements, such as food and energy, remains quite high at 7.7 percent average for the first half of the year, as observed by Remolona.

Core inflation includes rentals, transport, clothing, and the recurring costs of doing business.

It’s not yet time to rest, the new BSP governor tells us.

True enough, bad news came in like a torrent this July, and the Chinese ghost month is still two weeks away.

Cry for the benighted land and its future, with its brains and brawns leaving the Philippines because it’s so hard to love

On the local scene, El Nino has been preceded by destructive typhoons, especially the last one, Egay, which hit Northern Luzon, one of our major food basket areas. Rice, corn and vegetable crops have been destroyed.

On the international scene, Russia is hitting Odessa and Ukrainian ports, backing out of an arrangement brokered earlier allowing grain shipments from the embattled zones to freely exit towards the rest of the world.

That will cause a wheat shortage, which will trigger upward price movements on other staple grains, rice and corn included.

India, which exports 40 percent of the world’s thin rice trade, has banned exports of long grain and broken rice, along with wheat, to ensure domestic food security.

This will cascade into other exporting countries, such as Thailand, Vietnam, the United States, Pakistan and Brazil.

Production figures in these countries are either on the decline, or stagnant.

China with its huge population is expected to bid high for Asia’s rice supply.

Then again, OPEC and Russia are continuing their production cuts which will impact on energyimporting countries like ours.

In fact, the news last Friday announced huge pump price increases effective this week.

So while core inflation remains high, the impact of oil and food will be the major worries for the Philippines, as we have entered the typhoon season in an El Nino year which will get worse in the fourth quarter of 2023 and well into next year.

Then again, while oil demand went down with the Chinese economy still in the doldrums, winter is fast approaching, when demand for oil goes up in countries north and south of the equatorial band.

So the rosy expectations the President announced before Congress are not likely to materialize, as inflation continues its deadly upswing in the coming months. And it will be felt most in the urban centers which depend on food from the agricultural regions and consume much more oil for transport and energy requirements.