Lowest-income households have lost as much as Php6,800 to high inflation

November 6, 2018

by IBON Foundation

The incomes of the country’s poorest households have eroded after ten months of accelerating inflation. Research group IBON estimates that the poorest 60 million Filipinos have suffered income losses of anywhere from Php2,500 to as much as Php6,800 because of worsening inflation since the start of 2018.

The inflation rate has increased from 3.4% in January 2018 to 6.7% in October. The October inflation rate of 6.7%, unchanged from September, is more than double the 3.1% rate in the same period a year ago and over five times the 1.3% inflation rate in June 2016 at the start of the Duterte administration. Inflation is at the highest in nearly 10 years or since the 7.2% rate February 2009.

The Department of Finance (DOF) has estimated the first to sixth income deciles in the country as having monthly household incomes of Php7,724 to Php21,119 in 2018. Assuming these to be constant, the erosion of household purchasing power can be estimated by deflating them according to the prevailing monthly inflation rate. Each decile covers 10% of the country’s approximately 23 million households arranged from poorest to richest.

IBON estimates that in the first ten months of the year so far, households in the poorest first decile with Php7,724 monthly income have cumulatively lost Php2,467 due to inflation, those in the second decile (Php10,711 monthly income) have lost Php3,422 and those in the third decile (Php12,835 monthly income) have lost Php4,100. Households in the fourth decile (Php15,132 monthly income) have lost Php4,834, those in the fifth decile (Php17,309 monthly income) lost Php5,529, and those in the sixth decile (Php21,119) lost Php6,746.

The peso’s depreciation, rising global oil prices and the Tax Reform for Acceleration and Inclusion (TRAIN) Law are among the most important proximate sources of inflationary pressure. Of these factors, TRAIN Package 1 is most directly within the Duterte administration’s control, said the group.

TRAIN’s mitigating measures have failed to support the incomes of the country’s poorest and most vulnerable, said IBON. Ten months into high inflation, only seven million out of the target 10 million families are reported to have received their supposed unconditional cash transfers. Three million families have not yet gotten anything.

Yet even those transfers have been extremely delayed and millions of families suffered months of high prices and reduced consumption without receiving any cash transfers, said the group. No one received cash transfers in January and February when prices already started to soar. Millions of families still did not get anything in succeeding months: 8.2 million by March, 6.2 million by June, 3.9 million in August, and three million as of October. ###