Inflation slowing due to a sluggish economy — IBON

November 6, 2019

by IBON Media

Research group IBON said that despite reported slower inflation, daily expenses are still rising and too expensive for the majority of Filipinos who suffer low and stagnant incomes. The group also said that slowing inflation mainly reflects a slackening economy.

The Philippine Statistics Authority (PSA) reported lower nationwide inflation at 0.8% in October 2019 from 0.9% the previous month and 6.7% in October last year. Meanwhile, National Capital Region (NCR) inflation increased to 1.3% in October 2019 from 0.9% in September 2019. But was lower than the 6.1% inflation in October 2018. The uptick in NCR inflation was due to higher annual inflation in alcoholic beverages and tobacco, food and non-alcoholic beverages, and clothing and footwear.

IBON executive director Sonny Africa said that lower inflation is generally better for poor and low-income consumers as slower price increases will weigh less on low wages and incomes. He noted however that lower reported inflation is from a high base last year when prices dramatically rose. Yet some food items are still more expensive now than last year.

In Metro Manila, for example, the cost of pork, chicken, fish, eggs and many vegetables in the last week of October 2019 was much higher than in the same period last year. The price of pork increased by Php50; chicken by Php30; tilapia by Php20; sitao by Php20; and potato and native pechay by Php15. Rice is a notable exception in being slightly cheaper.

Africa said however that the majority of Filipinos’ incomes are still far below what is needed to live decently and still eroding further despite reportedly lower inflation. In NCR for instance, the real value of the minimum wage or taking inflation into account is actually lower today compared to November last year. Measured at 2012 prices, the real value of the Php537 NCR minimum wage has fallen to Php453 today from Php459 in November 2018.

It is also likely that inflation is slowing because the economy is slowing from faltering investments, stalling infrastructure spending, and the global economic slowdown, said Africa. So far under the Duterte administration, gross domestic product (GDP) growth has declined from 6.9% in 2016 to 6.7% in 2017 and 6.2% in 2018. The 5.5% growth in the second quarter of 2019 is the lowest in 17 quarters.

Foreign direct investments shrank by 39.8% from US$6.8 billion in January-July 2018 to US$4.1 billion in the same period in 2019. Meanwhile, infrastructure spending growth contracted from 45.9% in January-September 2018 to -4.3% in the same period this year.

Africa said that lower inflation alone is meaningless if Filipinos especially the poor continue to be burdened with high prices and little to no incomes. The government should not ignore this nor the signs of a slowing economy. Immediate steps for government should include supporting and developing domestic agriculture, as well as substantially increasing wages and salaries to give relief to Filipino households. ###

Photo from Coconuts Manila