The high inflation rate is boring a hole in our pockets. It is hurting our purchasing power. Belt-tightening is now the order of the day. This comes to fore as the upward adjustments in the prices of basic goods and commodities continue.
The spiraling prices of basic goods dominated the shout-outs and rants in social media complete with pictures. One graphically illustrated an individual eating rice using his bare hand with fish as pièce de résistance hanging in front of him just for smell or look at and not to be eaten. The photo caption in Filipino is more captivating: “Isang tingin, isang subo ng kain.” Just like in the movies, it gave us momentary laughter. Seriously, though, this just goes to show that rice, the tag price of which has significantly accelerated, remains our staple food no matter how expensive per kilo it has risen.
In spite of and despite the assurances from the economic managers that the Duterte administration is doing its best to address the situation, the ugly head of inflation has already emerged. It has steadily gone up from year to date. In December, 2017, average inflation was at 2.9 percent jumping to 3.8 percent in January, to 4.3 percent in February, inching to 4.5 in March, and surpassing the 5 percent mark in May. Maintaining its momentum, July recorded an average inflation of 5.7 percent, then leapfrogged to 6.4 percent in August, the highest in close to a decade.
Fine, the Bangko Sentral ng Pilipinas (BSP) has taken steps to tame inflation, increasing its policy interest rates by 50 basis points in August. One of the cause-push is the shortage in rice supply. Rice eats up roughly 20 percent of the food and non-alcoholic beverages in the basket of goods. It’s the biggest contributory to the uptick as it accounts for 38.34 percent in the overall index.
It’s inflation rice. One smart-aleck recommendation coming from no less than Agriculture Secretary Manny Piñol is to remove rice from the basket of goods.
While government has already sourced rice from abroad to address the deficiency, “Ompong” was another curve ball in the supply bottleneck. The typhoon wrought havoc in the rice granary of the country and other agricultural products to the tune of close to P15 billion and still counting. The difficulty in transporting goods from farm to market could push inflation even further. My random survey among bank analysts and economists indicated that for this month, inflation forecast ranges from a very optimistic 6.5 percent to a median of 6.8 percent to a high of 7.1 percent.
For market players/movers, an elevated inflation merits another round of interest rate increase by 50 basis points. No less. All eyes will be on the BSP as it is scheduled to discuss the policy rate next week.
Already as it is, the high inflation is weighing down on other macroeconomic indicators, particularly the foreign exchange rate, breaching the P54 mark.
Stability in the country’s macroeconomic fundamentals is essential in attracting potential investors as well as keeping investments of institutional and fund managers in the country. This was voiced out by European-based fund managers, in a series of meetings held by Metro Pacific Investment Corporation (MPIC) President and Chief Executive Officer Jose Ma. “Joey” Lim. The swings in the foreign exchange rate is a primary concern, admits Mr. Joey. MPIC’s plate is full of infrastructure project proposals, both here in the metropolis and in sprawling Cebu, the city of the South. There’s the unsolicited proposal for a desalination plant in Cebu and offer for the rehabilitation and upgrade of Metro Transit Line 3. Thus, stability of the macroeconomic indicators is imperative.
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