00:00Hi, sir. Thank you for doing this.
00:01Mr. President, between Middle East-driven energy shocks and a slowdown in infrastructure spending
00:07following the flood control corruption scandal, inflation, and a record low peso,
00:12it's squeezing Filipino households.
00:14What immediate measures will you take to lower fuel, power, and food costs over the coming year
00:20without widening the fiscal deficit?
00:22Well, I think I mentioned several of these measures that we have undertaken in the last
00:30State of the Nation address, and that is to ease the burden of taxation to certain sectors
00:36of the economy, especially those who are paying less than $300,000, who are earning less than
00:45$300,000, the removal of the corporate tax on the MSMEs, the continuing provision of benefits
00:52for people.
00:53Now, you're absolutely right because the growth rate is dependent, is heavily dependent on
01:02public spending, and that has been delayed, and this is what really happens.
01:08Usually, when the NEP is issued, the contracts that are contained within the NEP are already
01:16bidded out, so that when January 1st comes, the project can proceed.
01:24So, it's a way of saving time and making sure that the project proceeds immediately.
01:30With what happened last year, where we had to re-examine the budget very, very closely,
01:35those projects, those contracts were not bidded out, and they were bidded out towards the end
01:42of the first quarter of this year.
01:47That is what happened, that's why it delayed the public spending.
01:52Now, public spending has not, we have done, taken very many measures to accelerate the rate
01:59of public spending, and as of the end of the second quarter of this year,
02:05we are only at a shortfall of about 7% year on year in terms of public spending.
02:11We will make that up for the rest of the year, so that the inflation rate, sorry, the rate
02:19of growth should, the growth rate, the GDP growth, of GDP growth will show an increase because
02:26of the increase in activity.
02:27So, this is what we are also running into, because we had, as I said, accelerated public
02:36spending.
02:36What we are running into very much is the absorptive capacity, not only of the government
02:42agencies, but also of the contractors.
02:44They can only do so much work.
02:47So, throwing money at the problem simply doesn't solve it, doesn't make anything better.
02:51And that is the balance that we have been, that we have tried, that we are trying to manage
02:57right now.
02:58But again, the, in terms of public spending, we are, we are pretty much on current in terms
03:08of our scheduling.
03:10And we will be, again, confident we will be able to catch up and exceed the year on year
03:16public spending by the first quarter, by the last quarter of this year.
03:20And that will, that the, the effects of that will show in terms of the growth rate.
03:25And the, in terms of inflation, inflation, we actually, we had, we, we had our core inflation
03:33at the beginning of the year was at 2.2 and a half percent, more than 2.6 percent.
03:39It is only when the, it is only when the, it is only when the war started in the Middle
03:45East.
03:46And as you know, core inflation does not include our fuel and food.
03:51And that, those are precisely the two commodities that increased dramatically in price.
03:59We were, we were, we were working with the, the price of, of, of, oil of, at, when we start
04:11before the war started, we were at about 72, 72 and change.
04:16And now it reached about over a hundred.
04:19Now, when they say, when they say Brent crude is at a hundred, that doesn't mean that you
04:23can buy it at a hundred, you're paying a hundred and eighty.
04:25And that's the real, that's the real inflation in those prices.
04:29And that shock was immediately felt, um, in, in all of it, in all that we were doing.
04:35And it's not only, it is, it is not only, it was not only the, um, uh, the pricing that
04:42increased, it was also, it was also the supply that decreased.
04:46So the demand and supply forces immediately came into play.
04:50And that's what, that's what the, that's why the inflation went up, that's why the inflation
04:54went up, uh, our, our headline inflation went up, uh, because of those two, mainly because
05:01of those two items.
05:03Now, so that is why we, again, part of the public expenditure that I spoke about was direct
05:08benefits in terms of, in terms of what, uh, we refer to as direct transfer payments,
05:14benefits because, uh, uh, we subsidized, uh, the, the, uh, price of diesel, uh, we put, uh,
05:21we, especially in the transport sector, we, uh, we, we put them under contract so that every
05:28kilometer that they make, uh, that they, that they are, are, are running, uh, they get an extra
05:34benefit from, uh, from the government.
05:36So all of these things were, were really to, to, to, to try and bring those levels down.
05:43We are now running, uh, our inflation, uh, went down a little bit in the last quarter by
05:48about 0.2, 0.3%, uh, but we're still quite high.
05:52We're still at 6, 6, more than 6, 6.3, 6.4%, depending on how you calculate it.
05:59So we are hoping, uh, that because we, the, the price of oil now, at least on the world
06:07market is running in the eighties, it is still fluctuates.
06:11Um, uh, and it is that it, it is not so much now that the uncertain, the, the price that
06:18is determining all of that, it is because of, uh, uh, it, it, it is, it is because of the
06:26uncertainty that the price is, uh, becoming, uh, is so volatile and that volatility, uh,
06:33erodes confidence and that erosion and confidence means people do not spend their money, uh, because
06:40they don't know what is going to happen, uh, next month or, uh, two months, three months
06:45from now.
06:46And that is, that is what we are, that is what we are having, that's what we are having
06:50to deal with.
06:51Uh, and what we are trying to, what they, what we are trying to do with the economy is to
06:55bring
06:55stability back into our, our economic system so that, um, uh, people, households, uh, business
07:06people can plan, uh, and in that way we'll be more, we'll be more, uh, the, the, the, the
07:14atmosphere or the, the, uh, uh, the sentiment will be more conducive to investment and savings,
07:22which is what we are trying to increase.
07:24So, the, so we focus on those with, who were spending a large percentage of their income
07:34on precisely food and fuel.
07:37And that's, those are the areas that we, uh, that we focus on, uh, in terms of supply of
07:43oil, in terms of the pricing of oil, we do it for provided subsidies, we provided incentives.
07:48And in terms of food, uh, we were very, uh, we were also very focused on keeping the pricing
07:56down.
07:57Uh, we, we lowered the tariffs on imported rice.
08:02We keep, uh, the project, the program, we have expanded the program of 20 peso rice.
08:07Um, and we are providing, uh, benefits now to seven and a half million families, uh, Filipino
08:15families.
08:16Uh, so the usual calculation is to multiply that by four or five to see how many actual
08:22people are, are, are, are, are being, uh, uh, have, have, have, are feeling the effects
08:27of those measures that we are taking.
08:28So, um, again, it is, uh, I, I'm the, we hope that this is not a new normal, that it
08:38will be like
08:38this forevermore, we are hoping that the, the, the situation in, uh, the Strait of Hormuz improves.
08:46We hope that the situation, uh, uh, in all of, uh, the, the waterways that are being used,
08:54uh, to transport petroleum products are, are, uh, uh, are, uh, stabilized, uh, so that we can,
09:02we can, we can now count on, uh, uh, some, uh, uh, assumptions that we can make, that we
09:09can make so that we can plan on the national and economic development.
09:13So there are many, many moving parts here, uh, many of them, uh, out of our control, but
09:19we are trying to be as agile as possible and to prepare in the longer term for the possibility
09:27of this happening again, uh, so that, let us say, uh, this, this particular situation is, is, is
09:35normalized, uh, something else happens, like something like COVID happens, um, once again,
09:40uh, then we will, we have now developed many, many, many other options. We have approached what
09:47we refer to as non-traditional, um, partners in terms of, uh, agreements, economic agreements,
09:54trade agreements, uh, those that we, we put in during the, during the onset of the emergency,
10:00and what we now are counting on, uh, uh, uh, as a, as a, as regular suppliers for petroleum products,
10:08for food, uh, trade in general, uh, that they widen, widen the footprint, and the wider the footprint,
10:16the more stable the economy should be. Uh, in terms of the exchange rate, it is a strong dollar.
10:22Uh, we, the, the, the, the peso, we are, we are, we are trying to, to defend the peso, but
10:30we,
10:30it's not something that we are spending all our money on at all, by any means. Uh, and if you,
10:38as you,
10:38as you know, the dollar is usually regarded as a safe harbor during times of uncertainty, and that's
10:46why people have invested in, uh, that's why the foreign exchange, uh, for the dollars, the dollar
10:52value has increased vis-a-vis relative to many, many, in fact, most, uh, most currencies around the
10:59world, uh, because of that. The strange, uh, uh, there's a strange phenomenon that we cannot quite
11:07figure out yet. Usually it's dollar and gold, uh, the safe harbor, but gold's not behaving like it
11:13usually does. So that's, that's not something that, uh, we bother ourselves about.
11:17That's sort of about...
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