The next administration should successfully develop the country’s domestic resources such as energy, minerals, and agriculture to counter the increasing threat of an ‘elevated inflation.’
Albay Rep. Joey Sarte Salceda, a noted economist who chairs the House ways and means committee, stressed this as he predicts that commodities will have high prices over this decade, which is going to be a global trend.
Salceda said lawmakers who will be part of the incoming 19th Congress are now looking and preparing themselves to address difficulties that would likely emerge when the administration of presumptive President Ferdinand Marcos Jr. begins on June 30.
He said these difficulties would primarily concern the effects of economic developments around the world which are seen to be heading to a regime of high inflation.
He said although the Philippines has not been as badly hurt by inflation compared to other countries, the “damage will be far-reaching with inflation over the decade expected to average about 5 percent or more per year, well above the 3 percent average over the past 10 years.”
Salceda said this trend is happening worldwide although the Philippines has fared “much better than much of the rest of the world,” where the global inflation rate was 9.2 percent and the Philippine rate was just 4 percent in the last quarter.
“And, other than doing no more harm, there’s not much we can do about it, since most of the price increases are from external prices such as petroleum prices. Commodities will have high prices over this decade. That’s going to be a global trend,” he said.
“The only way to balance that out is to increase our output of commodities, so our farmers and the domestic commodities sector will benefit from high prices. That’s why expanding current output in agriculture and mining, as well as generating new outputs from oil and gas resources, will be crucial both for the next administration and the one after that,” he said.
Salceda said serious efforts to gain more revenue from oil and gas exploration and higher mining output would be “crucial” for the country to “barrel through what is shaping up to be a high-inflation decade.”
He said one estimate says there is as much as “$26 trillion in untapped hydrocarbon deposits within our exclusive economic zone, and around $1 trillion in untapped mineral deposits in the country.”
He also noted that the country’s agricultural potential is also at around “$112.8 billion in value-added every year if we are able to produce efficiently in our farms. Right now, actual agricultural value added is just at $35.6 billion or just 31.5 percent of our viable agricultural potential. And mind you, my estimate is very conservative, using just 80 percent of our agricultural land,” Salceda said.
He proposed the harmonization of tax and production sharing agreements on oil, gas and mining and the setting up of a Natural Resource Trust Fund that will invest the proceeds of resource extraction.
“Extractives are non-renewable sources, so the global best practice is really to continue benefiting from them by investing revenue from these sectors,” he said, noting that this is being done in Norway, whose oil fund is the world’s largest pension fund.Salceda advised the incoming leadership “not to use all of these revenues as current budget support, learn from the past and set some aside part of the revenue for when prices, including those of oil, gas and mining products inevitably fall in the future.”