Inflation and pork tariffs

PHILIPPINES - In Brief 06 May 2021 by Romeo Bernardo

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Yesterday’s announcement of a 4.5% headline inflation rate in April, itself unsurprising, appeared to have impelled the executive and legislative departments to come to an agreement on a revised import regime for pork products. The data showed that with the expiry of the 60-day price freeze on pork and poultry in early April, meat prices rose by another 1% bringing the annual change in the meat price index to a record high of 22%. The agreement struck was a middle ground between the existing trade regime and what the President set under an Executive Order released last month.TABLE 1.Pork tariff schedule*Proposed to Congress sent in a separate letter.The slashing of tariff rates under E.O. 128 to accompany the initially proposed over sevenfold increase in MAV was intended to bring domestic pork prices down to 2018/19 levels[1] or about 15-20% lower than the current suggested retail price of P270/kilo. While the compromise formula will reduce pork prices by less and it will take some months for local prices to fully reflect the volume and tariff adjustments, our back of the envelope estimates based on landed costs suggest that the reduction would still be meaningful, considering especially the knock-on effects on other meat prices which make up 6.25% of the CPI basket. The compromise agreement is still subject to approval processes but we expect this to be done relatively quickly[2] and market prices possibly starting to adjust early in anticipation. Aside from the anticipated decline in pork prices, we expect the current lockdown to also have a dampening effect on still weakly recovering demand. We note that goods inflation (excluding food and energy) came to an abrupt ...