BSP chief blames onions, supply shock for off-target inflation as economic team woos German investors

Metro Manila (CNN Philippines, January 24) — President Ferdinand Marcos Jr.’s economic managers are making the rounds of two of Europe’s biggest economies to woo foreign investors days after the conclusion of the World Economic Forum (WEF) in Davos, Switzerland.

Bangko Sentral ng Pilipinas (BSP) chief Felipe Medalla told German investors on Monday that the Philippines could bring inflation back to its target range of 2-4% by the third quarter of this year.

Medalla pointed out that the “supply shock” was “worse than before” and blamed the off-target inflation partly to the shortage of onions.

“We were initially expecting to go back to 3% per month in inflation but that was delayed by two months because of shortages of vegetables. Well of course, the big news in the Philippines was shortage of onions,” Medalla told a German audience during Monday’s economic briefing that counted global banks and private equity firms.

“So as policies to prevent supply shocks from generating more inflation because inflationary expectations have gotten out of control and as you can see, this is one of the reasons we’re quite aggressive,” he added.

Onion prices earlier zoomed by as much as eight times in December to nearly ₱800 per kilo before the Department of Agriculture set its suggested retail price at ₱250 per kilo. 

Joining Medalla were Socioeconomic Planning Secretary Arsenio Balisacan, Finance Secretary Benjamin Diokno, and Budget Secretary Amenah Pangandaman – all were part of Marcos’ official delegation to the WEF.

Diokno also touted the Marcos administration’s proposed Maharlika Investment Fund (MIF) as a “vehicle” that will channel investments into infrastructure.

Congress is still tackling the fund’s final shape with the MIF bill so far only hurdling the House of Representatives.

Critics last week then lambasted the Marcos government’s soft launch in Europe as “premature” and appeared to be arm-twisting lawmakers.

The Marcos administration has at least 3,600 projects in the pipeline – a fraction of that will be big-ticket or flagship projects that could be rolled out or even completed by 2028, according to Balisacan.

Diokno tells German investors that the Philippines’ rewriting the Public Service Act makes the economy a fertile ground for investments in toll roads, railways, and shipping as these sectors now allow 100% foreign ownership.

The economic team also asked the German audience to consider investing in the Philippines’ renewable energy projects.

Germany’s financial hub Frankfurt, home to the European Central Bank, is the first leg of what the economic team dubbed as “Philippine Economic Briefing.”

Economic managers are scheduled to hold the same briefing in London on Jan. 26 before flying back to Manila.