Millions of Filipinos are struggling with rapidly rising prices of food and other basic goods and services. The government’s main response to contain inflation is just the standard textbook response of increasing interest rates. Even if successful, this will take too long while worsening joblessness and the economic slowdown.
Substantial emergency cash subsidies or ayuda will be more immediate and effective to help Filipinos cope. These will spur aggregate demand and can usher in more rapid recovery especially if complementary supply-side measures are also taken.
Unfortunately, the Philippine government is scrimping on ayuda with the economic team insisting, more than once, that “ayuda is a waste of money”. It is cutting ayuda budgets in 2023, refuses to increase ayuda now, and has actually even reneged on ayuda that it earlier promised. This contrasts with relentless increases in spending on infrastructure, military modernization, dubious confidential and intelligence funds, and debt service.
The government’s spending priorities need to be fixed. Social protection needs to be expanded to help families and sectors in need. It is also never too early to start taking steps to develop the national economy and make Filipinos less vulnerable to external economic shocks.
Too many suffering
Ayuda is urgent to address falling household incomes and growing poverty.
The Philippine Statistics Authority (PSA) recently reported family incomes falling across all income levels. This resulted in the number of officially poor families increasing by 492,000 to 3.5 million in 2021, and the number of poor Filipinos increasing by 2.3 million to nearly 20 million.
These are however based on an unrealistically low official poverty threshold and underestimate the number of distressed Filipinos. IBON estimates on more recent Bangko Sentral ng Pilipinas (BSP) data for the third quarter of 2022 show that there are now 19.4 million families without any savings and vulnerable to any change in prices. This is 3.7 million more than at the end of 2019 before the excessive lockdowns started.
Family incomes are falling because real wages are falling. Minimum wage hikes have not even kept up with inflation. For instance, the nominal NCR minimum wage increased from Php537 in 2019 to Php570 to date but its real value has actually fallen from Php517 to Php500, measured in 2018 prices. Earlier PSA data also showed that average real monthly wages received by time-rate workers and in benchmark occupations fell in 2020.
This is for those in salaried work and the situation is likely worse for those in self-employment and other informal work which has been bloating since the pandemic lockdowns. IBON estimates as much as 20.6 million or 43.1% of jobs in self-employment or outright informal work as of August 2022.
Meanwhile, inflation is accelerating rapidly from 3% in January 2020 to 6.9% already in September 2022. Food and non-alcoholic beverages inflation leapt from 2.5% to 7.4%, in housing, water, electricity, gas and other fuels from 2.6% to 7.3%, and in transportation from 4.1% to 14.5 percent. These are however not the end of it and inflation is expected to keep rising into the new year.
Scrimping on ayuda
Millions of households, workers, small producers and businesses are finding it more difficult than ever to cope and recover. The government announced that it is fast-tracking cash assistance for vulnerable sectors to cushion the impact of inflation. The actual magnitude of assistance they are giving however falls far short of what is needed.
Using PSA, BSP data and self-rated poverty surveys, IBON estimates some 19-20 million poor and vulnerable families in urgent need of as much as Php30,000 in ayuda to make up for income losses since the pandemic lockdowns started and provide a buffer for further price increases to come.
The government is however only looking at 12.4 million households for targeted cash transfers (TCTs) of just Php3,000 (Php500 per month for six months). Even then, only 5.9 million households of mostly Pantawid Pamilyang Pilipino Program (4Ps) beneficiaries and pensioners have been given this as of July 2022. Disbursement is also very slow with April/May subsidies only distributed in June/July.
This is not the first time that ayuda was not given as promised. The Tax Reform for Acceleration and Inclusion (TRAIN) Law supposedly had a provision for unconditional cash transfers (UCTs) in 2018-2020 for the 10 million poorest families. The UCTS in 2018 were also delayed for many months. But, worse, most of the Php3,600 in UCTs for 2019 and 2020 have still not been distributed with an unspent balance of Php45.2 billion as of end-2021.
Transport groups meanwhile estimate some 600,000 jeepney drivers needing support since the pandemic and especially after the recent spate of fuel price hikes. IBON estimates some 1.9 million transport workers who should be allotted fuel subsidies.
The government however only targets to help 377,443 drivers of jeepneys, UV vans, mini-buses, shuttle services, taxis, trikes, and other ride-hailing services with Php6,500 worth of fuel subsidy each under the Pantawid Pasada program.
As of June 2022, only some 180,000 public utility vehicle (PUV) drivers and operators were reported to have received the subsidy. The Land and Transportation Franchise Regulatory Board (LTFRB) said that 90% of this year’s fuel subsidies has been distributed. Transport groups however claim that many have not received their subsidies due to payout glitches.
The Registry System for Basic Sectors in Agriculture (RSBSA) lists 10.9 million farmers. The government however only targets 1.5 million rice farmers eligible for Php5,000 in cash aid to boost productivity. This seems to be aside from 158,000 farmers and fisherfolk eligible for Php3,000 in fuel subsidies; only 101,743 corn farmers and fisherfolk have been reported as already receiving this. In any case, these are amounts far below the Php15,000 producers’ subsidy demanded by farmers groups and advocates.
The government’s stinginess in giving ayuda is glaring in how, amid worsening joblessness and inflation, some 850,000 households are going to be removed from the 4Ps. They are supposedly no longer poor and will be replaced with new beneficiaries.
The Marcos administration is also conspicuously removing vital emergency assistance allocations from the proposed 2023 national budget.
Beyond emergency assistance
Bold and urgent action is needed to address the worsening state of Filipinos. The Marcos administration needs to first of all admit this instead of repeating its narrative of strong economic fundamentals and being on the track of recovery.
The distress that millions of Filipino families are facing and their looming difficulties from even more price increases need to be addressed immediately. IBON’s proposed Php1.5-trillion expansionary fiscal policy proposal includes substantial amounts of ayuda to cover as many poor and vulnerable Filipinos as possible. A wage hike is also in order with wage subsidies to help micro and small enterprises comply.
Inflation can be moderated with tax cuts on consumer goods and services such as value-added tax (VAT) and on oil products. Steps should also already be taken to protect and strengthen domestic agricultural and industrial production.
The Marcos Jr administration has vast resources to intervene and help troubled Filipinos and their families if it wanted to.