If you are reading this by now, you know that warnings on stagflation have emerged for our economy, and other financial institutions are warning of slower growth and getting louder. We have breached the P60 to US dollar threshold for the first time in history, raising the cost of our imports such as crude oil. Indeed, we are facing a difficult economic situation- another slump from which the impacts and effects may be prolonged.

This may be a good time to learn from recent economic history and distill the lessons we can learn from it.

In my lifetime i have experienced four major economic slump and rise cycles. The early 1980s saw the peso-dollar exchange rate rise to unprecedented levels, inflation nearing 50%, and the economy actually contracting rather than growing. It was a period where many local manufacturing companies closed, and unemployment rose. In its wake, our economy grew slowly in this period.

As we entered the 90’s, the broad economic effects of the 1991 Gulf War, along with the effects of the Pinatubo eruption, caused inflation to spike again to about 20 percent due to the rapid rise in oil prices that more than doubled fuel prices to twenty pesos per liter.

A period of growth followed in the Ramos years, to slump again in the aftermath of the 1997 Asian Financial Crisis, which saw our peso dollar exchange rate fly from P26 to P30 to the US dollar in a matter of days. The pandemic years of 2020-2022 were economically difficult, but unlike the previous crisis years, inflation was low, and we were in rather good economic shape with high growth and manageable inflation before the pandemic hit.

All these points in history show that economic challenges can make or break the businesses and companies we own or work for. In all these crises, our economy survived and recovered, but with some adjustments to prepare for future crises. The first lesson is to have larger financial cash buffers from current operations to weather periods of low revenue and keep payrolls and suppliers paid.

Another lesson I learned is when I made my own adjustments and discovered an opportunity in the business I ran. By developing new operations that brought more cash in at regular intervals, the business became more financially nimble and invested in aspects that build resilience, such as certain financial instruments that can be called upon when more cash is needed.

With these lessons, I believe our businesses can recover from this current situation, and that this will be due to the major adjustments we will need to make to fortify the fundamentals of your business. However, for the local economy we are in, there are pillars that need to be strengthened.

I have already written last week in response to the inflation spike and how strengthening local food production and distribution systems through targeted subsidies and other means can lower the cost of producing and transporting food, and lower food costs for the majority.

Another major pillar of a strong local economy for us is to reduce our dependence on foreign fuel. This is because we use precious foreign exchange to buy these. When our peso devalues, fuel becomes more expensive. For this, indigenizing our energy will be essential. Electrifying our transport systems can reduce costs and keep money in local circulation, since the energy to run electric vehicles is locally generated.

Moving forward, I hope to see more local manufacturing of essential goods. This allows us to buy more local goods so that we can reduce imports and keep our current account deficit at manageable levels. This also secures and increases local jobs, further making our local economies strong for the future.