Were it not for the threat of a prolonged agony caused by food inflation and high fuel prices, the first day of the “ber” months should bring good tidings for Filipinos, as such signals preparations in observance of the coming Christmas celebration.
The new reality, however, is that the country will have to weather out the remainder of the year where majority of the population may have to further tighten their belts and simply be thankful for having something to eat every day, even if it’s just a few spoonful of rice.
Much as our central bank professes to be on guard and always ready to respond “full force” to new aggravations that may accelerate inflation or cause the peso to depreciate further, it no longer has the luxury of an effective arsenal to keep a tight rein on the economy.
The country is facing headwinds that are largely not within its control, and neither does it still have the wherewithal to cast an ironclad protective shield to insulate itself.
Faced with a possible 100-basis points interest rate hike by the US Federal Reserves within the next four months, the Bangko Sentral ng Pilipinas (BSP) will likely respond with a timid 25 or 50 basis points increase just so to minimize any possible debilitating damages.
The last administration had unsheathed all of its big guns in fighting the pandemic, with hopes that things would get back to normal this year. No one expected Russia to invade Ukraine, causing a global food chain crisis and disruptions to crude oil supply and pricing.
Reacting to Fed hikes
The US Fed’s aggressive stance raising key interest rates from zero at the start of the year by incremental points to reach 2.5 in August had left many central banks – both in developing and developed economies – trying to catch and match up, often at the expense of economic growth.
For countries like the Philippines, the US Fed’s higher interest rates means paying more for loans and other commodities that need to be imported. Our benchmark interest rate is now at 3.75 percent, a steep hike from only two percent in April. This could well end up at over four percent by the end of the year to match the expected 100 basis points raise by the US Fed. In Southeast Asia, the Philippines together with Indonesia now have the second highest interest rates, second to Vietnam’s four percent.
Despite continued forecasts of strong economic growth, persistent high inflation rates are also instrumental in bringing interest rates at higher levels. Malaysia and Thailand have both responded recently by raising their interest rates to 2.25 and 0.75, respectively, from 1.75 and 0.5 at the start of the year.
Other developing countries that are experiencing much worse inflation rates have had their central banks responding much more aggressively. Pakistan, which is in the midst of multiple economic and environmental crises, has its interest rates at 15 percent.
Bracing for tougher times
Riding out this storm and hoping for the least damage is what’s left for our economic policy makers to do. This should mean preparing Filipinos to brace for tougher times in the next few months (or even quarters) as the world’s leading economies fight their own problems.
The Marcos economic team, headed by Finance Secretary Benjamin Diokno, is now more focused on paring down the country’s debts to a more manageable level, it being one of the chief measures eyed in restoring economic growth in the coming years.
Any more ayuda for Filipinos to ride out this storm despite continued rising inflation, which some economists now foresee could reach seven percent anytime soon, will likely no longer be on top of the agenda.
While overseas remittances by working Filipinos in other parts of the world continue to be a lifesaving jacket for many families here, higher food prices and living expenses because of more expensive fuel and electricity will eat up a large portion, leaving less money for other spending.
Managing costs
Given the dire situation up ahead, and with government not likely to extend additional financial aid to affected sectors, the high mobility expenses of Filipinos will be a major problem as crude oil prices continue to keep the cost of fuels at more than double their pre-pandemic days.
It’s time to bring out those gas-saving tips, as well as car pooling and other advices, to keep these from eating a bigger chunk of the household budget. More must be done to mitigate the traffic buildup on major thoroughfares; traffic congestion only wastes expensive fuel.
High food costs are also bringing food expenses beyond what normally has been allocated. Let’s get back to sensible eating where foods that are less susceptible to inflation, but still nutritious are substituted.
Too many of our families who belong to lower income brackets have switched to junk foods like ramen, sweets, and biscuits over the more healthy vegetable diets, and it is the growing up children who ultimately suffer from this poor choice of meals.
Thankfully, the price of rice continues to be relatively stable, but the current government can do more to ensure that basic food supplies, either local produce or imports, will reach households at stable prices. It would be better, of course, if our food sourcing were not dependent on imports.
Readers are enjoined to send in their suggestions. Let’s strive to make these next few months count so that we are able to set aside enough funds to add a little more pomp to our Christmas and New Year celebrations this year.
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