The 7.7% inflation rate in October was the highest recorded since December 2008 (the year of the global financial crisis, dubbed the most serious one since the Great Depression).
The Philippine Statistics Authority (PSA) announced the October inflation rate on November 4. It was the second month in a row that inflation broke 13 or 14-year records. The numbers illuminated the real-world implication of this and were telling of how much Filipinos are hurting from the rising prices of petroleum products, food and other basic goods and services.
But the poor in the economic, political and cultural center of the country endured the hardest.
Inflation for food and non-alcoholic beverages and transport for the urban poor in the National Capital Region (NCR) is higher than NCR or the Philippines in general and also the highest in the country.
While inflation for most commodities is higher in NCR than the country as a whole, the specific items that ordinary people and the urban poor consume the most are among those which saw the highest inflation rates. (See table below.)
Fish and seafood, vegetables, oils and sugar were among the food items that saw the highest increases among the goods the poor usually consume and the highest margins of inflation in the country.
Transport services, particularly operation of personal transport equipment (possibly workers with their own motorcycles or jeepney drivers) and passenger transport by road is higher by 30 to 50% among the urban poor in NCR than the whole of the country.
Inflation for liquid fuels (diesel, gasoline, kerosene and LPG) was second to sugar with the highest inflation for commodities in the whole consumer price index for the poorest in the region.
Inflation has been known to hurt the poor disproportionately. Rise in prices of food and fuel products impacts ordinary people the most. This also means an increase in the cost of living for common people, if not hunger for the poor.
National statistician Dennis Mapa said the October inflation was mainly driven by higher food costs caused by the damage of Super Typhoon Karding (International name: Noru) in late September. Mapa said prices would further increase in the coming months in the wake of tropical storm Paeng (International name: Nalgae) in late October.
Helping the people by tempering inflation
Research group IBON said that the Marcos administration can address high inflation and help millions of Filipinos cope with rising prices if it wanted to.
Here are the specific steps they suggested:
- On the supply side, IBON said that prices can be immediately lowered by suspending or removing consumption taxes such as value-added tax (VAT) and oil excise taxes. Revenue losses from this may partially be made up for by any increased economic activity. The group added that revenue losses from scrapping consumption taxes can even be more directly addressed with higher taxes on high-income families, large corporations and billionaire wealth.
- Additionally, considering that a large part of inflation is from food, IBON said that the government can also help lower prices with increased production, marketing and logistics support for rural producers.
- On the demand side, wage hikes can be a start to support the purchasing power of families which has eroded so much after the excessive pandemic lockdowns and incessant oil and other price hikes.
- Substantial emergency cash or ayuda for the poorest 19-20 million families will also improve household welfare, spur economic activity and help give the supply-side measures more traction.
What is inflation?
The Office of the Press Secretary posted this explainer on the day the PSA announced the October inflation rate:
- Inflation is the increase in the price of services and products in the market that can be brought about by a high demand for a product with insufficient supply (demand-pull) or by an increase in production costs (cost-push).
- Inflation is a rise in the general level of prices of goods and services in an economy over a period of time.
- Global headwinds that contributed to inflation worldwide identified were: the emergence of countries from COVID-19 lockdowns causing demand-driven inflation, the Russia-Ukraine war continuing to disrupt the supply chain, the dollar strengthened significantly affecting most international trades and the recent Avian influenza flu outbreak affected prices of poultry products. In financial terms, the word “headwind” refers to conditions or events that cause delays in the development of the economy and industries.
- Commodity prices also increase when disaster damage to property, agriculture, infrastructure, and livestock causes shortages in the supply of goods and services.
Inflation occurs when prices rise across the economy, leading to a corresponding decrease in purchasing power of a given currency. In other words, a unit of money does not go as far as it used to or it buys less than it did before. For example, P200 can buy a kilo of rice and a kilo of chicken before, but now it can only buy a kilo of rice and half a kilo of chicken.
How is inflation measured?
According to Investopedia, inflation is often measured by the consumer price index (CPI). The CPI is calculated by measuring the price in one period for a fixed basket of consumer goods and services compared to their prices in previous periods. Changes in CPI approximately reflect changes in the cost of living.
The PSA’s CPI has over 90 items. But looking into specific items in the consumer basket of goods, it could be seen that the most essential—or what little the poor would need to buy with what money they have left—had the highest increases from last month or from the same period last year.