Philippine inflation could rise to 7%, only lagging Myanmar’s in ASEAN

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Filipinos are increasingly forced to tighten their belts in the wake of a continued high inflation rate which reached 6.4 per cent in August and could exceed seven per cent in September, according to analysts’ estimates.

The rate is the highest for the Philippines since 2009 under the Macapagal-Arroyo government and far above the record-low of 1.4 per cent in 2015 under the last full year of Benigno Aquino ‘s term as president. It is also completely detached from the central bank’s inflation target range of between two to four per cent from 2018 to 2020.

For example, prices of alcoholic drinks and tobacco climbed 21.6 per cent in August 2018 from a year ago, while non-alcoholic drinks rose 8.5 per cent. The average retail price of regular milled rice was 45.27 pesos per kilogramme in the first week of September, an increase of 19 per cent from a year ago. More than half a million metric tonnes of paddy rice were wiped out by the latest super typhoon Mangkhut, adding more pressure to rice prices which are already at a record.

Food costs in general rose 8.5 per cent over last year, and transportation was up 7.8 per cent. The rising prices of regular gasoline, which reached as much as 57 pesos per liter on September 23, is also doing no good to stabilise prices. In addition, the peso slumped to a 13-year low to the US dollar in September, bumping up the cost of imported goods once more.

Inflation in the Philippines is now the second-highest in the Association of Southeast Asian Nations, or ASEAN, only lagging behind Myanmar’s current 7.56 per cent. According to the latest figures, inflation is 4.5 per cent in Vietnam, 3.2 per cent in Indonesia, 2.9 per cent in Cambodia, 1.9 per cent in Laos, 1.5 per cent in Thailand, 0.9 per cent in Malaysia, 0.6 per cent in Singapore and 0.2 per cent in Brunei.

Philippine President Rodrigo Duterte, whose economic policies and political irritations are partly being made responsible for the development, on his part blamed US President Donald Trump and the trade war with China for the inflation that has hit the Philippines. In another speech, he said high crude oil prices and interest rate hikes in the US were the culprits for rising Philippine inflation.

He also accused his political opponents of using inflation to turn the public against him. He said the Communist Party of the Philippines and Senator Antonio Trillanes, leader of the welfare-focused and reformist Magdalo Party-List and a vocal critic of the president, were plotting to overthrow him.

But his views differ from the central bank, which said inflation was partly the result of higher excise taxes imposed by the government that have driven up food, alcohol and tobacco prices.

While Duterte is regarded as star-like figure by many Filipinos abroad, at home his huge popularity is beginning to be tested amid discontent over the rapid price rises, particularly the record cost of rice, a staple for Filipinos.

But the value of remittances from expat Filipinos in hard currency is now also becoming under threat since the lower peso is only partially offsetting consumer price inflation at home, which means that even overseas Filipinos could lose their confidence in Duterte’s economic capabilities over time.

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Reading Time: 2 minutes

Filipinos are increasingly forced to tighten their belts in the wake of a continued high inflation rate which reached 6.4 per cent in August and could exceed seven per cent in September, according to analysts’ estimates.

Reading Time: 2 minutes

Filipinos are increasingly forced to tighten their belts in the wake of a continued high inflation rate which reached 6.4 per cent in August and could exceed seven per cent in September, according to analysts’ estimates.

The rate is the highest for the Philippines since 2009 under the Macapagal-Arroyo government and far above the record-low of 1.4 per cent in 2015 under the last full year of Benigno Aquino ‘s term as president. It is also completely detached from the central bank’s inflation target range of between two to four per cent from 2018 to 2020.

For example, prices of alcoholic drinks and tobacco climbed 21.6 per cent in August 2018 from a year ago, while non-alcoholic drinks rose 8.5 per cent. The average retail price of regular milled rice was 45.27 pesos per kilogramme in the first week of September, an increase of 19 per cent from a year ago. More than half a million metric tonnes of paddy rice were wiped out by the latest super typhoon Mangkhut, adding more pressure to rice prices which are already at a record.

Food costs in general rose 8.5 per cent over last year, and transportation was up 7.8 per cent. The rising prices of regular gasoline, which reached as much as 57 pesos per liter on September 23, is also doing no good to stabilise prices. In addition, the peso slumped to a 13-year low to the US dollar in September, bumping up the cost of imported goods once more.

Inflation in the Philippines is now the second-highest in the Association of Southeast Asian Nations, or ASEAN, only lagging behind Myanmar’s current 7.56 per cent. According to the latest figures, inflation is 4.5 per cent in Vietnam, 3.2 per cent in Indonesia, 2.9 per cent in Cambodia, 1.9 per cent in Laos, 1.5 per cent in Thailand, 0.9 per cent in Malaysia, 0.6 per cent in Singapore and 0.2 per cent in Brunei.

Philippine President Rodrigo Duterte, whose economic policies and political irritations are partly being made responsible for the development, on his part blamed US President Donald Trump and the trade war with China for the inflation that has hit the Philippines. In another speech, he said high crude oil prices and interest rate hikes in the US were the culprits for rising Philippine inflation.

He also accused his political opponents of using inflation to turn the public against him. He said the Communist Party of the Philippines and Senator Antonio Trillanes, leader of the welfare-focused and reformist Magdalo Party-List and a vocal critic of the president, were plotting to overthrow him.

But his views differ from the central bank, which said inflation was partly the result of higher excise taxes imposed by the government that have driven up food, alcohol and tobacco prices.

While Duterte is regarded as star-like figure by many Filipinos abroad, at home his huge popularity is beginning to be tested amid discontent over the rapid price rises, particularly the record cost of rice, a staple for Filipinos.

But the value of remittances from expat Filipinos in hard currency is now also becoming under threat since the lower peso is only partially offsetting consumer price inflation at home, which means that even overseas Filipinos could lose their confidence in Duterte’s economic capabilities over time.

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