Economic slowdown seen due to inflation

A local economist projected an economic growth slowdown due to the rising inflation in the country.

Cebuano economist Fernando Fajardo described it as “contagious” because it has dampened the purchasing power of consumers.

The Philippine Statistics Authority reported that the inflation rate in September accelerated further to a nine-year high of 6.7 percent.

“I believe inflation will be higher in next three months of the year. Growth will slow down because of higher interest rates that the BSP (Bangko Sentral ng Pilipinas) is imposing to combat inflation which also aggravated the contractionary effect of higher excise taxes,” Fajardo said.

The economics professor noted that the soaring consumer prices significantly depleted the buying power of ordinary workers.

“Rice is expensive because of the failure of NFA (National Food Authority) and DA (Department of Agriculture) to maintain stable supply. We can't blame the typhoons. We know they always come every year and we should be prepared for them. Contagious because the fishermen also increase the price of their catch because of expensive fuel for their boat and the expensive rice they buy,” Fajardo explained.

He said many have been affected by the rising prices, including small vendors, students, minimum wage earners and public utility drivers, among others.

“Kay kinsa ra may dili mopamahal sa ilang produkto o serbisyo kon mahal sab ang ilang gipamalit?” the economist said.

In a joint statement yesterday, the government's economic managers, however, said inflation may have eased already.

"These clear signs of easing boost our confidence that inflation will taper off by year-end and go back to our target range by early next year," officials said.

"But we must couple this optimism with quick and focused actions in order to sustain gains made so far in keeping inflation in check," the statement added.

The economic team also calls on the public to stay on guard against profiteers and report those who unscrupulously take advantage of the current situation.

The September inflation was up from the 6.4% in August, the fastest pace in more than nine years, but was below the 6.8% market forecast and within the central bank's 6.3-7.1% target.

Prices have started soaring at the beginning of the year following tax increases on fuel, sweetened drinks and cigarettes as part of the government's tax reform program. But these increases quickly moved to transport, rice and other basic food items.

Also adding to inflationary pressures is the more than 8% fall in the peso this year, which makes imported goods more expensive. The BSP has so far delivered 150 basis points of interest rate increases since May to fight inflation.

The goal of these rate hikes is to fight inflation by reducing the amount of cash in the system, which should lower demand and cut prices. The central bank has forecast annual inflation will exceed a target of 2-4% until next year.

The peso was little changed at P54.295 per dollar as of Friday morning. The benchmark Philippine Stock Exchange index fell 0.06% to 7,088.97 during noon trading recess yesterday. —