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Although the Philippines economic growth was not as expected through the 2nd quarter, it still remains rather sturdy. Median forecasts from a poll of economists had predicted a GDP increase of 6.7 percent. What we actually saw, however, was a growth of 6 percent. According to officials, rising inflation has undermined growth and that gross domestic product growth would now have to rise to 7.7 percent in the latter half of 2018 if the government target of 7-8 percent is to be met.
The Bangko Sentral ng Pilipinas (BSP), Philippines central bank, raised its policy rates to 4 percent, which is the largest rate increase in a decade. It has been said that investors have increasingly become more reluctant, which has, of course, had an impact on potential further economic growth in the country.
Foreign investment is said to be at its lowest point in over 8 years, and if this continues then it is expected to have further impact on GDP growth.
What has caused inflation rises, and how does it impact the population?
The higher costs of fuel and food has seen inflation rise to 5.7 percent in July, which according to the government is the single fastest rise in more than 5 years. This rapid inflation rate hike has also meant that the purchasing power of an average family dropped from P10,000 in 2017 to just P9,430 by the end of July.
Metropolitan Manila saw some of the most drastic changes, with the costs of basic services and goods rising to 6.5 percent. For some perspective, just one year ago this percentage was at just 2.9. Amid consumer prices rising further across the country, economic managers have tried to reassure consumers that steps were being taken to bring inflation under control and that it would have tapered off by the end of the year.
The Philippine Statistics Authority (PSA) has stated that the increasing costs of food and beverages have directly contributed to the increased costs of basic services and goods. Reduced grain inventory has also contributed to the rising costs, as well as reduced ‘buffer stock’ of the NFA (National Food Authority).
Declining rice inventory has been brought on by severe weather in the Philippines and surrounding, rice producing, countries such as Vietnam and Thailand. Naturally, this has had a negative impact on the price of rice as it is not as readily available as it once was. According to the Finance Secretary, the Budget Secretary and the socioeconomic Planning Secretary (Carlos Dominguez III, Benjamin Diokno, Ernesto Pernia respectively), the rice inventory had dropped from 2.91 million metric tons to 2.36 million metric tons.
Not only has the rice inventory dropped since June last year, the so-called National Food Authority rice buffer has also almost entirely been depleted.
With the area already seeing 12 cyclones this year, with an average being 20, the rice shortage is not expected to improve soon meaning prices are likely to rise even further.
Public transport costs have also risen, with the minimum fare for a Jeepney ride rising from ₱8 to ₱9 since last month. This rise was brought on by increasing fuel prices, the effect of which, as well as the fare increase, has even further driven inflation.
July also saw the excise on a pack of cigarettes rose to P35 at the same time minimum fares increased. This is a rise of P5 per pack from January 2017. The Tax Reform for Acceleration and Inclusion Act, brought into being at the start of the year, raised or implemented new excise on, oil products, vehicles, sugary soft drinks, cigarettes and various other goods. This step was taken in order to compensate for the higher tax exemptions on personal incomes.
Carlos Dominguez, the country’s Finance Minister said at the finance committee meeting that the rise of inflation had been contributed by 0.5 percent by the TRAIN law alone.
The Philippine Statistics Authority has identified these commodity groups, among others, have been the cause of the higher prices being seen in Metropolitan Manila…
With prices increasing across the board, people have been seeing their personal income reduced as much as P2,700 in just the first 6 months of 2018. Around 60 million people have seen their income reduced from somewhere between P993 and P2,715 as a direct result of inflation being much higher than was expected.
The Ibon Foundation, a research group, found that major contributing factors of rising inflation with the increasing costs of oil, the TRAIN law and the continuing depreciation of the peso.
Several labour groups in the country say that the research group’s estimate has shown that the increase in the minimum wage, from P9 to P56 while substantial was not enough to make up for the P165, minimum, that workers across the country were losing every single month to inflation.
A spokesperson for the Nagkaisa labour coalition, Rene Magtubo, has said that the government needs to speed up its plan to, essentially, flood the market with basic goods in order to fight the rising inflation. These basic goods include cooking oil, sugar and rice which would be made available at more affordable prices.
These measures will undoubtedly make things easier for those that really need the extra help, but let’s hope that this all happens sooner rather than later.