Highlights:

General findings

Headline inflation has declined since the start of the year, but remained elevated at an average of 7.9 percent in the first four months of 2023. It exceeded the target range of 2-4 percent, driven by food inflation (9.7 percent) and utilities inflation (7.8 percent). Core inflation, which excludes volatile food and energy commodity items, rose to 7.9 percent in April, a reflection of underlying price pressure.

To combat high inflation, the government lowered tariffs on key agricultural commodities and approved a targeted cash transfer program to mitigate the impact of inflation on the poor.

Improving public spending efficiency through better targeting of social protection measures is essential to protect the poor and vulnerable from economic shocks amid limited fiscal space. An efficient social protection targeting, and delivery system would help protect poor and vulnerable households amid the government’s efforts to rebuild fiscal buffers. During the pandemic, the country demonstrated the capacity to scale up social protection programs but was hindered by implementation challenges, delays, and the sheer magnitude of the pandemic shock.

Ensuring a resilient delivery of social protection measures would require the: (i) adoption of the national ID system for social protection delivery; (ii) enhancement of the targeting system; (iii) development of digital platforms and tools; (iv) continued innovation of digital government-to-person payment methods; and (v) strengthening of contingency financing mechanisms and readiness for disaster response.

Focus on addressing the challenges to food security

Box 1 on p.24-25 deals specifically with addressing challenges to food security in the Philippines.

Over the short term, the government has approved several measures in response to high food prices and alleviated concerns around rising food insecurity, both on the production and on the consumption sides.

Over the long term, policy space to address inflation and food insecurity needs to be broadened or rebalanced, as food policy is intrinsically multi-sectoral and requires long- term structural changes. Successfully addressing inflation and food insecurity requires a shift from protecting a specific product (e.g., rice) and type of farmer to improving the overall resilience, competitiveness, and sustainability of the agriculture sector. Also, the process of agricultural transformation requires policies and other interventions that extend beyond the scope and mandate of the Department of Agriculture and its affiliated agencies. Changes in the structure and focus of agriculture are intertwined with parallel developments in the management of water and other natural resources (Department of Environment and Natural Resources), agri-food logistics (Department of Transport), small and larger industry development (Department of Trade and Industry), and nutrition and food safety (Department of Health). In addition, policies and programs to scale up climate-smart agriculture are expected to increase the resilience of the agri-food system to weather shocks and reduce GHG emissions.