by Napoleon Santos

Rising inflation in 2018 has prompted public alarm and criticism of the government’s handling of the economy. Data from the Philippine Statistics Authority show that inflation, the increase in prices of goods and services, has risen steadily since January’s 3.4% to its peak at 6.7% in both September and October.

A closer look at the October inflation data reveals that 11 out of 17 regions have far higher inflation rates than the national average (Table 1). Bicol Region saw a 9.9% increase year-on-year, followed by the MIMAROPA Region at 9.0%, and Ilocos Region at 8.6%.

Table 1. October 2018 Inflation Rates, by region (PSA, 2018)

Philippines6.7
NCR- National Capital Region6.1
Areas Outside NCR6.8
Cordillera Administrative Region (CAR)5.2
  I  –  Ilocos Region8.6
  II  –  Cagayan Valley8.0
  III  –  Central Luzon4.4
  IV-A  –  CALABARZON  6.1
  MIMAROPA Region9.0
  V  –  Bicol Region9.9
  VI  –  Western Visayas7.7
  VII  –  Central Visayas6.6
  VIII  –  Eastern Visayas6.9
  IX  –  Zamboanga Peninsula7.6
  X  –  Northern Mindanao7.6
  XI  –  Davao Region7.8
  XII  –  SOCCSKSARGEN7.9
  XIII  –  Caraga6.2
 ARMM – Autonomous Region in Muslim Mindanao8.3

Moreover, Table 2 shows that the highest increase in prices in October 2018 occurred among alcoholic beverages and tobacco products. Basic commodities such as food and non-alcoholic beverages, transport, housing and utilities, and health followed. Deflation was observed among educational commodities.

Table 2. Inflation Rates, by commodity (PSA, 2018).

CommodityInflation Rate (October 2018)
Alcoholic Beverages and Tobacco21.6%
Food and Non-Alcoholic Beverages9.4%
Transport8.8%
Housing, Water, Electricity, Gas, and Other Fuels4.8%
Health4.3%
Restaurant and Miscellaneous Goods and Services4.2%
Furnishing, Household Equipment and Routine Maintenance of the House3.7%
Recreation and Culture3.1%
Clothing and Footwear2.5%
Communication0.5%
Education-3.8%

Understanding Inflation 

Inflation may be caused by two conditions. First, inflation occurs if there is a higher demand for certain commodities, such as oil, and second, if supply becomes limited while the demand remains. Generally, a certain degree of inflation should be expected, and may in fact indicate economic growth, as when consumers are able to spend for goods and services to a degree that demand outweighs existing supply. Forces such as prices of inputs including petroleum products, labor, and land rent, changes in the value of currency, turmoil in the financial market, technological breakthroughs, structural reforms, and natural disasters can have compounding effects on the increase of commodity prices.

The Philippine economy is not immune to internal and external shocks that can induce inflation. Its neoliberal nature renders itself malleable to changes in the prices of its imports while its heavily privatized and deregulated raw materials industry constrains interference by the State. Additionally, the government has imposed additional taxes through its Tax Reform for Acceleration and Inclusion Act, or the TRAIN Law. As a consequence, the country has seen one of the highest inflation rates in the ASEAN region.

JC Punongbayan, in his analysis published by Rappler, noted that higher world oil prices accentuated by additional taxes imposed by TRAIN Law, weak peso due to a trade gap (increased imports compared to how much we export), people’s expectations of impending high prices, and the “tighter” supply of agricultural products have all contributed to high prices in the local market.

Continuous rising prices could have drastic implications for the economy as a whole. Zimbabwe, for example, gave up its national currency in 2008 due to hyperinflation. Venezuela’s hyperinflation has prompted its citizens to migrate to neighboring countries due to astronomical prices of commodities and the scarcity of basic goods. While the Philippines won’t likely see such  drastic scenarios anytime soon, the impact of rising inflation to the economy as a whole is a major cause of concern. National Economic Development Authority (NEDA) Director Ernesto Pernia has admitted  that persistent inflation could pull down the real gross domestic product of the country.

Poor Filipinos are the most exposed and vulnerable to the impacts of high inflation.

Poor Filipinos are the Worst Hit

Rising inflation, for the ordinary Filipino, means their purchasing power is reduced, their cost of living rises, and if widespread price increases are sustained, their standard of living also deteriorates.  

Given the already low wages of many Filipino workers, along with persistent joblessness and underemployment, poor Filipinos are the most exposed and vulnerable to the impacts of high inflation.

Indeed, IBON Foundation has estimated that the poorest 60 million Filipinos have lost between Php 2,500 to Php 6,800 in income in 2018 because of rising prices.  The research group has also noted that despite government interventions such as unconditional cash transfers for targeted ten million of the most vulnerable families, three million of them have yet to receive anything. And even those that did eventually receive government assistance had to wait for months before funds became available.

Rising Inflation is a Human Rights Issue

The State, being duty-bearers, has an obligation to ensure that its citizens are fully able to enjoy their economic, social, and cultural rights and live their lives with dignity. Given the many harmful effects of rising inflation on the quality of lives of Filipinos, especially the poor and the marginalized, the government is duty-bound to address rising inflation promptly and decisively.

Along these lines, it is important for the government to consider halting the implementation of the TRAIN Law. As a tax reform measure, it is at best mis-timed and ought to be thoroughly reevaluated. Second, it is also time to raise minimum wages to livable standards. Looking ahead, the country’s dependence on imported oil should also be addressed by fast-tracking the development of alternative energy sources in the country, along with supporting the strengthening of local agriculture and industries.

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