Food imports may help tame prices in short term — analysts

By Luisa Maria Jacinta C. Jocson, Reporter
IMPORTS of key agricultural commodities may help tame prices in the short term, but the government should address supply-side constraints to ensure inflation eases from recent 14-year highs, analysts said.
This as the Philippine government recently approved imports of onions and sugar to address supply shortages that have pushed prices higher.
“Imports can decrease inflation in the short run, but it can never be a solution in the long run. Once import prices rise, due to global stagflation and higher oil prices, these imports will only contribute to greater inflation,” Leonardo A. Lanzona, who teaches economics at the Ateneo de Manila University, said in an e-mail. 
Soaring food prices have fueled inflation in recent months. Inflation accelerated to a 14-year high of 8.7% in January, from 8.1% in December amid higher prices of vegetables, eggs and fish. Analysts in a BusinessWorld poll last week expect inflation to further quicken to 8.9% in February.
“Anything, really, that the Philippines can do now to better facilitate food imports should go a long way in addressing the country’s inflation problem. The potential certainly is there for food imports to provide a relatively quick fix, too,” Pantheon Chief Emerging Asia Economist Miguel Chanco said in an e-mail.
Makoto Tsuchiya, assistant economist at Oxford Economics, said that non-monetary measures such as importation will be able to rein in supply-push inflation.
“Given the lack of supply of food is pushing up prices, it makes sense that importation should bring down inflation by boosting supply. At the same time, it is important to make sure such a policy is implemented appropriately, as the inability to get them where they are most needed will render the policy less effective,” he said in an e-mail.
Finance Secretary Benjamin E. Diokno earlier said there is a need to implement direct, non-monetary measures to address supply issues and rising inflation. He said the Bureau of Customs (BoC) needs to ensure imports “reach the intended markets as soon as possible.”
Analysts said it is important that imports will arrive on time.
“Otherwise, it will defeat the purpose of importing food or agricultural products to supplement existing domestic supply,” University of Asia and the Pacific Senior Economist Cid L. Terosa said in an e-mail.
The BoC said in a Viber message that it “recognizes its role in the fight against inflation.” It said it has instructed Customs staff at ports to ensure shipments coming into the country are released “efficiently and expeditiously to prevent any additional burden or cost against our stakeholders.”
“Moreover, the Commissioner put the BoC’s Intelligence and Enforcement Groups on task to monitor shipments closely so that any implemented trade facilitation measures are not abused to bring in illicit goods,” it added.
In an e-mail, Moody’s Analytics Senior Economist Katrina Ell said government efforts to increase imports of some items such as onions and refined sugar will help ease supply constraints.
“But it is critical that these imports are appropriately distributed to ease supply shortages. Without appropriate distribution, supply constraints will linger for longer,” she said.
Ms. Ell also noted that replenishing stockpiles is also appropriate to “smooth further supply constraints into the second half of 2023.”
For Mr. Lanzona, relying on imports places a “heavy toll on producers which can permanently disrupt the local supply chains and cause inflation in the long run.”
“The failure is this government’s insistence that they are doing well in terms of policy when obviously they have a clear inflation plan other than to adjust aggregate demand,” he added.
Mr. Terosa recommended other non-monetary measures like securing the distribution network as imports arrive for local distribution.
“Transportation and storage facilities have to be prepared for the influx of imports and their timely distribution. An efficient logistics system is therefore another non-monetary measure needed to bring down inflation,” he added.
Fitch Ratings Asia and the Pacific director Krisjanis Krustin in an e-mail recommended binding import restrictions and addressing inefficiencies in the domestic food supply chain.
“Over the long term, building the agriculture system that is more resilient to climate-related events should help stabilize prices, but such a policy usually takes a long time to bear fruit,” Oxford Economics’ Mr. Tsuchiya said.