Perspective Shift: Decreasing Financial Resources Among Filipinos
Struggling pockets and soaring prices, that's the reality for a majority of folks in the Philippines. But fret not, 433 lucky bettors, who won the P239-million grand lotto jackpot on October 1st, cop a boost in their purchasing power for a while.
Former senator Kiko Pangilinan couldn't help but notice the stark difference in the cost of kitchen essentials like garlic and onions between Manila and Bangkok's public markets. A kilo of garlic in Thailand costs 50 baht or P85, while Manila consumers have to fork out a whopping P400. A kilo of inexpensive onions in Bangkok for 35 baht or P60 just melts into P300 here.
In his Facebook post, Pangilinan expressed frustration over the apparent mishandling of inflationary effects of the foreign exchange crisis, even with lower agricultural budgets in Thailand and Vietnam compared to the Philippine agriculture budget of P102.5 billion. Certainly, this higher budget isn't doing much to ease the pressure on locals.
If you're wondering why the average Juan is having sleepless nights, it's because nearly 7 out of 10 Filipinos are facing stress over the rising costs of basic goods and commodities, according to the latest Pulse Asia survey.
For now, inflation seems to be President Ferdinand Marcos Jr.'s Achilles' heel. A majority of Pulse Asia respondents graded him poorly on his handling of the issue. Controlling inflation was the top urgent national concern for 60% of respondents, while 42% disapproved of the administration's performance, compared to only 31% in favor.
Inflation, a fancy term referring to upturns in food, clothing, housing, electricity, and other critical commodity prices, skyrocketed to 6.9% in September – the worst in four years, according to the Philippine Statistics Authority (PSA). Unemployment rates also took a turn for the worse, with the latest PSA report showing a joblessness rate higher than the 5.2% posted in July, but lower than the 8.1% posted a year ago. This translates to a total of 2.68 million Filipinos being without jobs in August, a rise from 2.6 million recorded in July 2022, but a decrease from the 3.88 million in August 2021.
Furthermore, it's not just the everyday commuter feeling the pinch. Jeepney drivers are dealing with additional fuel costs of P8,000 to P20,000 per month, farmers, over P8,000 for land preparation and irrigation, and fisherfolk, P3,800 for their 16-fishing day month.
It's true what they say – the strong US dollar is the culprit behind the current global economic chaos, according to foreign and local analysts. The stronger US dollar, being at its strongest in two decades, has had far-reaching impacts on the global economy and international finance. When the US central bank raises interest rates, as it has been doing since March, the dollar becomes more appealing to investors worldwide. In this tumultuous climate, investors have been offered even more incentive to purchase dollars, usually in the form of US government bonds. While a strong dollar is appealing to American tourists, it's causing headaches for the rest of the world.
To make matters worse, the peso is astronomically stronger than the currencies of China, Japan, Korea, and other trading partners, according to Ruben Zamora, head of Institutional Coverage Division of Metrobank. Zamora spoke with our website and explained that the peso is resilient because of the real effective exchange rate – a measure that compares the peso's strength not only against the US dollar but also against other major currencies.
Zamora believes that the Philippine economy is fundamentally sound, and the current crisis is not a reflection of a weak local economy. BPO services and remittances have proven to be resilient and sources of strength, even in challenging times.
US-based hedge fund manager Eric Jurado agrees with Zamora's optimism, stating that a strong dollar is generally good overall. He thinks BPO services will become more appealing, leading to increased volumes. Value-chain electronics exports will be cheaper and volumes will increase. Additionally, OFW remittances will result in more sales in the greater economy.
While the end of the global currency bloodbath may be in sight, according to market veteran Ed Yardani, it's important to keep an eye on the Fed's actions. The Fed is expected to raise interest rates one more time in November before stopping altogether. This forecast, however, doesn't align with what the market sees: a 75 basis-point hike in November, then 50 in December. Some experts even expect the Fed to raise rates by another 25 basis points in early 2023 before eventually pausing, with the Fed funds rate sitting around 4.5%. Many fear that the global economy may be heading to a recession.
It's been a tough road for sure, with economic hardships not unknown to us Filipinos. But as history has shown, the Philippines has always bounced back stronger from adversity, much like a typhoon-ravaged city rebuilding from the rubble. Whether it's the financial crisis of the dying days of the dictatorship under Marcos Sr.’s regime or the current challenges posed by the strong US dollar, the resilient Philippines will prevail.
In light of the economic hardships faced by Filipinos, with inflation soaring to 6.9% in September and unemployment rates increasing, Senator Kiko Pangilinan has criticized the government's handling of the foreign exchange crisis, particularly in contrast to countries like Thailand and Vietnam with lower agricultural budgets. As the Philippines continues to struggle with rising costs of basic goods, politicians and analysts are closely watching the actions of the Federal Reserve, which may raise interest rates one more time in November, potentially impacting the global economy. Despite these challenges, there is optimism that the Philippine economy, renowned for its resilience, will bounce back as it has done in the past.
