By Billy Begas
Former House Committee on Ways and Means chairperson Joey Salceda said the country can overcome a potential stagflation arising from the Middle East crisis by applying supply-side strategies similar to those used during the Arroyo administration’s response to the 2008 oil shock.
Salceda highlighted the importance of fighting and defeating stagflation, a situation marked by high inflation, high unemployment, and weak demand in the economy.
He said the US-Israel and Iran war “poses a credible stagflation threat to the Philippine economy.”
The former solon noted that Brent crude has already risen more than 40% since Operation Epic Fury began on February 28, due to disruptions in oil supply that are unlikely to be resolved quickly. He added that Iran could prolong the conflict until the November 2026 US midterm elections and hopes that the new Congress will hand a better deal.
Drawing lessons from the stagflation experienced during the Arroyo administration amid the 2008 oil shock and global financial crisis, Salceda said the correct response to stagflation is supply-side, not demand-side.
“In 2008, the government did not increase total spending. It reprioritized existing appropriations toward fast, off-the-shelf, shovel-ready programs with direct food supply impact. The Philippines was the only comparable Southeast Asian economy that posted no negative growth quarter during the 2008 to 2009 global contraction,” Salceda said.
He said the Philippine inflation, which had averaged 2.8% in 2007, surged to 9.4% across the first eleven months of 2008, even as GDP growth decelerated from 7.5% to 4.6% over the same period.
To prevent stagflation, Salceda suggested to the Marcos administration not to increase the budget deficit.
He also recommended releasing the non-flood control infrastructure appropriations currently tagged ‘For Later Release’ in the 2025 budget, prioritizing projects with simple engineering requirements, no right-of-way problems, and agricultural supply chain relevance.
He said oil companies should be required to disclose actual crude acquisition costs to the Department of Energy (DOE) under confidentiality, and allow only cost-plus retail pricing.
He said the Department of Agriculture (DA) should accelerate the seed, fertilizer, and crop insurance to major producing provinces before the next planting cycle, aside from clearing fertilizer import bottlenecks at the Fertilizer and Pesticide Authority and Bureau of Customs through agency directives.
Salceda added that the Bangko Sentral ng Pilipinas should maintain credit easing, targeting productive sectors through the rediscounting facilities instead of implementing broad monetary accommodation.
He said the government should start contingency planning for overseas Filipino worker remittance deceleration from the Gulf, which in 2008 dropped from nearly 20% annual growth to single digits.
Salceda said the Philippines has the institutional capacity for fast, decisive executive action without the political and constitutional frictions that most economies lack.