Inflation crisis starting to brew in the Philippines
Filipinos queuing for hours to buy cheap rice from the government. Families eating fewer meals a day to save money. Locals venting their anger against President Rodrigo Duterte on social media.
These are the images and stories that have dominated media coverage in the Philippines after inflation soared to more than 6 percent in August, far higher than the rest of Asia.
Pressure started at the beginning of the year with higher oil prices and tax increases on fuel, sugary drinks and cigarettes, and quickly moved to rice, the nation’s staple food, because of supply shortages. Now, everything from electronic gadgets to haircuts to T-shirts costs at least 10 percent more than a year ago, according to anecdotal evidence in Manila.
Alongside a more than 7 percent slump in the currency this year, consumers are hurting. A sentiment index contracted for the first time in more than two years, a worrying signal in a country where private consumption makes up about 70 percent of gross domestic product.
Consumers like Nica Aguilar, 30, are either switching to cheaper brands or changing daily routines to adapt. The energy compliance officer, who works in the Ortigas business district in Manila, said she now uses part of her lunch break to cut down on her parking bill after hourly fees rose by 25 percent. She leaves her office to re-park her car, taking advantage of a cheaper rate for the first four hours.
Duterte’s government is now scrambling to get on top of the problem as midterm elections loom next year. Import rules on rice and sugar will be eased, while the police have been roped in to check for overpricing. The central bank, which initially faced criticism for being too slow to act, has delivered 100 basis-points of interest-rate increases since May and pledged further strong action.
“Inflation is the most political of all economic risks because it can be felt immediately,” said Gene Pilapil, a political science professor at the University of the Philippines in Quezon City. The Duterte administration is facing its first major economic test and could lose public support should prices go out of control, he said.
Two years into his six-year term, Duterte’s popularity has so far been supported by a strong economy, rising wealth and a tough anti-drug and anti-crime stance. The most recent opinion poll showed his popularity may be waning.
“The 2019 elections were supposed to be a clear victory for the administration, but with inflation rising, it could become interesting,” said Pilapil.
Inflation accelerated to 6.4 percent in August, the fastest pace in nine years, with more pain in store as a super typhoon threatens farmlands in the Philippines just before the rice and corn harvest. Economic growth weakened to a three-year low of 6 percent last quarter, while the peso slumped to the lowest level since 2005 on Wednesday.