World Bank Director pushes for Philippines to Protect Vulnerable Sector

The World Bank has urged the Philippines and its neighbors to introduce additional agriculture reforms to maintain the stability of food prices in the long run.

World Bank country director for the Philippines, Ndiamé Diop, stated last Thursday that core inflation remains between 2-3% in the Philippines, Malaysia, and Thailand. However, core inflation does not account for volatile items such as food and oil prices.

“[It meant] that domestic demand is still subdued and second-round inflation pressures are so far manageable,” Diop said.

Diop also noted that the Philippines and Thailand are net importers of gas and oil and that the rising inflation of the countries is driven by a sharp increase in international prices spiling over to electricity and transportation costs.

“Given these drivers of inflation, monetary tightening is unlikely to really reduce headline inflation today, but it will hurt economic growth [as] outputs in all the three countries are still below their 2019 levels, and the economic recovery remains quite fragile. [Their] central banks have rightly maintained an accommodative stance. However, there are some global pressures, and it is important to remain alert and balance external pressures with domestic needs,” Diop said.

According to Diop, this inflation is best counteracted by targeting cash transfers to vulnerable households and sectors. “It’s the least fiscally costly way to mitigate the impact of inflation, and it is much better than universal and untargeted subsidies, which are really not sustainable, especially in a period where fiscal space is very limited,” he stated.

Diop cites the Philippines as the country’s main tool to address high inflation is cash assistance to the poor as well as the agriculture and transport sectors.

Source: Inquirer