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Price check A shopper checks the prices of canned goods at a supermarket in Manila on Monday, Dec. 5, 2022. PHOTO MIKE ALQUINTO
By Eireene Jairee Gomez, Manila Times
January 2, 2023
THE one thing the Filipino consumer will probably remember about 2022 is that it was a year of skyrocketing prices. On basically all fronts, households had to contend with stretching already extended budgets while wondering how much more expensive things could get.
It wasn't how people expected 2022 to turn out. Hopes were high that, after two years of pandemic-spurred lockdowns, the world was on track toward soon reopening. However, a one-two first-quarter combo — a new Covid-19 surge and Russia's invasion of Ukraine — quickly clouded the outlook for economies worldwide.
Food and energy prices quickly soared in the aftermath of the war in Ukraine, which Filipinos immediately felt via a series of pump price increases that continued all through 2022. Rising demand, meanwhile, stressed supply chains and spurred price hikes elsewhere.
Domestic inflation, which started the year at a within-target 3.0 percent, skyrocketed to a 14-year high of 8.0 by November. The full-year picture still isn't complete — December data is scheduled to be released this Thursday — but the 11-month average of 5.6 percent is well over the Bangko Sentral ng Pilipinas' (BSP) 2.0- to 4.0-target.
The December result could end up being higher as the interagency Development Budget Coordination Committee last month raised its full-year inflation forecast to 5.8 percent from 4.5 to 5.5 percent. Last Thursday, the central bank said consumer price growth could have hit 7.8 to 8.6 percent last month.
The BSP's policymaking Monetary Board (MB) ended up raising key interest rates by a total of 350 basis points (bps) last year in a bid to rein in inflation, the last being a 50-bps hike in December that hiked the benchmark interest rate to 5.50 percent, the overnight deposit rate to 5.0 percent and the overnight lending rate to 6.0 percent.
Further adjustments haven't been ruled out for 2023 — the BSP expects its 2.0- to 4.0-goal to again be breached this year — and monetary authorities have stressed that they remain ready to take all actions needed to bring inflation within target "as soon as possible."
Last month, BSP Governor Felipe Medalla declined to rule out further tightening during the first two MB meetings this year, saying "one can never say never." The terminal policy rate for 2023, he added, could hit 6.0 percent.
Non-monetary measures
The National Economic and Development Authority (NEDA), meanwhile, has said that the government remained committed to providing timely assistance to those hardest hit by inflation and implementing agricultural productivity measures to ensure the country's food security.
"The government is continuously implementing targeted subsidies and discounts to allay the impact of the higher prices of essential goods, especially for the vulnerable sectors and low-income earners of our society," Socioeconomic Planning Secretary Arsenio Balisacan said last year.
In anticipation of higher inflation in December, the Department of Budget and Management released P5.2 billion to cover the third tranche of the Targeted Cash Transfer (TCT) program of the Department of Social Welfare and Development. This covers a total of 9.8 million identified beneficiaries who are most affected by the continuous rise in commodity prices.
The TCT program grants unconditional cash transfers of P500 per month to the most affected households for six months to mitigate the effects of the increase in the prices of fuel and other non-fuel commodities.
"To ease price pressures, we continue to implement measures to boost food production and reduce the cost of bringing farm produce to the market," Balisacan said.
The Department of Agriculture, meanwhile, expanded the Kadiwa Program that aims to connect producers to consumers, allowing for higher profits for local farmers and more affordable prices for consumers.
The government is also supporting the agriculture sector by implementing programs to lower input costs, provide financial assistance in the form of fuel discounts to farmers and fisherfolk, develop innovations and strengthen the agricultural value chain.
On the provision of social assistance, Balisacan highlighted the importance of accelerating the government's digital transformation for a more efficient and faster delivery of services.
"We need to provide assistance, particularly to vulnerable groups, especially in times of high inflation. However, we need to improve our delivery mechanisms, particularly on the provision of ayuda (aid) to ensure that the aid reaches the right people in a timely manner," the NEDA chief said.
The medium-term plan
Meanwhile, the government's recently approved Philippine Development Plan for 2023-2028 provides other measures to address elevated inflation and the impact of the Covid-19 pandemic.
President Ferdinand "Bongbong" Marcos Jr. last December 16 approved the plan, which sets out the economic and social transformation roadmap for his six-year term. It seeks to promote job creation and intensify poverty reduction by steering the economy back to a high-growth path.
The strategies include building information and communications technology, creatives, tourism and logistics ecosystems around manufacturing clusters; building a dynamic innovation ecosystem; harnessing the private sector's resources, technologies and potential for scale economies through public-private partnerships; and ensuring the effective devolution of critical social services to local governments.
The PDP 2023-2028 is anchored on the AmBisyon Natin 2040, a long-term vision where Filipinos will be enjoying strongly rooted, comfortable and secure lives by 2040.
"Given the uncertainties and headwinds that we face, the plan is our roadmap that will show us the way forward, guiding our efforts and initiatives as we sustain our robust economic recovery and aspire for no less than the economic and social transformation of our country toward a matatag, maginhawa at panatag na buhay (stable, comfortable and tranquil lives) for all Filipinos," Balisacan said.
A positive note
Meanwhile, amid the continuing economic challenges, the Philippines is expected to become the 27th-largest economy in the world by 2037 according to the Centre for Economics and Business Research's (CEBR) World Economic League Table 2023 report.
Gross domestic product growth is expected to average 5.3 percent over the next five years and 5.0 percent over the next 15 years. These will advance the Philippines to 27th in 2037 from 38th spot this year. In Southeast Asia, the Philippines will be the fourth-biggest economy by 2037 behind Indonesia (11th), Thailand (25th) and Vietnam (26th) but ahead of Malaysia (35th).
The Philippine economy shrank by 9.6 percent in 2020 as strict Covid-19 quarantine and lockdown protocols stalled business activities. However, it bounced back with a 5.7-percent expansion in 2021. For 2022, growth will likely reach 6.5 percent, according to CEBR, within the government's 6.5- to 7.5- percent target.
Balisacan is optimistic that the 2002 goal would be exceeded given expectations of a "robust" fourth quarter. "It's [been] quite exceeded already," he said last month. "I think given the indication that we're seeing in the fourth quarter, it's likely going to exceed even... the upper limit of that range."
The NEDA chief, however, noted that the government needed to expand and diversify the country's sources of growth if it was to keep the economy growing.
"Instead of just looking at consumption, we need to be seeing more investments... trade sources of growth. In the supply side, instead of just seeing services, we need to be seeing more manufacturing, more construction, more utilities, even mining, which we hope could contribute strongly in the medium-term growth," he said.
"Agriculture could also be a driver to the extent that we can increase productivity there and temper any pressures extended on food prices," Balisacan continued.
