^

Opinion

Inflation-bound

FIRST PERSON - Alex Magno - The Philippine Star

Through all of 2025, we will be battling inflation. It will be an uphill battle – considering we have a government seemingly bent on stoking inflation than quelling it.

This year has an unhappy start. President Marcos signed a budget where he vetoed items in his own National Expenditure Plan while leaving intact all the billions in pork barrel funds inserted by our legislators. This is very strange.

As a general feature, the 2025 budget pumps up consumer demand through dole-outs while cutting away economic investments that would improve national productivity. This is the textbook formula for boosting inflation.

In a vain effort to evade constitutionality questions, the line-item veto was used to bring down total public works allocations. Coupled with that, the accounting for “education” spending included outlays for police and military academies and institutions under the supervision of the DOST. The hope here is to delude the public, making it appear that the constitutional command for investments in education to take precedence is satisfied.

Our own government is taking us for fools.

The real scandal here is not the bad arithmetic. The real scandal is that we have flushed our children’s future down the drain. We have disinvested in building our human capital precisely at a time when credible studies put young Filipinos dead last in international rankings for literacy and numeracy.

While all our regional neighbors are building up their educational systems to exceed global standards, we are allowing ours to simply rot away. We do not have enough classrooms to educate the “demographic sweet spot” now coming into our schools. We have pinned our hopes on the population surge to lift us from underdevelopment. The 2025 budget abandons the young.

Nothing could be more treasonous.

To add to the aggravation, the 2025 budget reduces the allocation for the conditional cash transfer program that, at least, encouraged beneficiaries to keep their children schooled. Instead, funds were diverted to an inexplicable unconditional cash transfer program that is noting more than barefaced vote-buying.

We are systematically making idiots of our young.

Studies show that only 31 percent of young Filipinos are competently literate and numerate. That small number will likely become even smaller.

While neighboring countries are investing as much as they can in research and development, with China leading the world, we are defunding the same. We are undermining our own human capital and compromising our nation’s future.

Our economic planners forecast a 2025 inflation rate within the target range of two to four percent. We cannot be too certain of that.

Our monetary authorities are under pressure to continue bringing down interest rates.

We know the upsides to doing this. Lower interest rate will encourage investments and boost economic growth. The banks are hopeful a lower policy rate will significantly lower non-performing loan ratios. A lower interest rate environment might even encourage buying interest in condominiums where we currently have a 29-month oversupply. All these, however, add to inflationary pressures.

We must look at the downsides, too. If we reduce domestic interest rates, this will likely hasten depreciation of the peso. Over the last few months, the peso depreciated less against the dollar than other major currencies. The only reason for this is high interest rates. Should the peso depreciate sharply, this will kick up the inflation rate, considering we are nearly totally dependent on imports.

Towards the end of 2024, everyone expected oil prices to soften due to, among other things, the sluggishness of China’s economy. The last few weeks, however, saw firmer fuel prices. The main culprit here is lower US strategic reserves which the country needs to fill up somehow.

Through 2025, oil prices are now expected to hold firm, given geopolitical uncertainties and systematic throttling of supply by major oil exporters. This will prevent domestic inflation rates from dropping.

Over the past two years, domestic inflation was driven mainly by high food prices. This hurts the poor most.

The high food price regime is not about to abate. The Marcos II administration is not inclined to do the hard reforms needed for our agriculture to match the productivity of neighboring economies. Principal among the reforms needed is the consolidation of our farm production to make it more receptive to capital inputs and the economies of scale.

What we have done so far is to crack down on the cartels jacking up agricultural prices and dissuading smuggling by way of more severe penalties. None of these measures addresses the root problem: our agriculture is among the least efficient in the world.

We seem content to cover shortfalls by importing. We have emerged the biggest rice importer in the world. Reliance on imported food makes us import inflation as well. In addition, the global supply of the agricultural produce we need are not limitless.

Our balance of trade will continue to be unfavorable. The list of the things we need to import grows longer and the stuff we can export is shortening. This is the effect of having a consumption-driven growth. The trade deficit weakens the peso even more.

We will be even more reliant on remittances from our exported labor. Recently, we found out that we have begun exporting wombs as well.

To top everything off, 2025 is an election year. This means money will flow until it becomes useless.

Even the cost of buying votes has become inflated.

INFLATION

Philstar
  • Latest
  • Trending
Latest
Latest
abtest
Are you sure you want to log out?
X
Login

Philstar.com is one of the most vibrant, opinionated, discerning communities of readers on cyberspace. With your meaningful insights, help shape the stories that can shape the country. Sign up now!

Get Updated:

Signup for the News Round now

FORGOT PASSWORD?
SIGN IN
or sign in with