It’s Your Choice

The exploding 6.7% inflation rate blasts the whole Philippines that cause a great jolt and
affliction to everyone. Yet, the worry of the Filipino that there would have been more increase by
October will be the creepiest situation in each Filipino family.

Inflation is a “prominent challenge” to the Philippines and elevated price spikes will remain “for
a couple of months,” debt-watcher Moody’s said Friday. Why is that the inflation rate continuously
growing in our falling economy? All we know is to be scared of inflation nevertheless, we did not make
a way to stop it.

Educating the mind about inflation can be a stepping stone to fight the trepidation of the
Filipino. Data shows that the 6.7 inflation rate in the Philippines prevails the history of being the highest
rate compared not only in 9 years in our country but merely in all ASEAN countries.

Meanwhile, it is confusing that inflation is only running into the Philippines and not in other
ASEAN countries so it only means that the Philippines build the block to aggregate the factors of
inflation. First block is the world’s oil prices and countries like Philippines with no substantial oil
production are forced to import oil.

One study showed that, back in 2016, we imported as much as 94% of our oil requirements. The
fact that global oil prices later this year could reach up to $90 per barrel answer the procurement of
inflation of oil that prompts inflation to the whole commodities. The expensive oil that is used for
transportation and cooking makes the cost of living inflated.

Indeed, TRAIN included tax hikes on several petroleum products, such as unleaded gasoline,
diesel, and kerosene. It also provides for two more rounds of automatic petroleum tax hikes in 2019 and
2020. The combination of the fact that we import expensive oil with the fact that our own government
makes it more expensive by imposing tax rubs the wound of Filipino by the salt of inflation.

Another factor that contributes to runaway inflation is the weakening peso. As of September 5
the peso closed at the astonishing P53.5 per US dollar, the lowest it’s been in 12.2 years. The peso is also
one of the weakened currencies in the ASEAN today. It is sad to think that our price value and the
identity of our economy is now priceless not because it is free but because its value was stepped down
to the lowest worth.

Furthermore, because we pay imports in foreign currencies, a weaker peso necessarily makes
imports costlier. As such imports are raw materials (like iron and steel) and capital goods meant for
Duterte’s infrastructure push called Build, Build, Build. Therefore we can blame it as the root cause for
the weakening of peso and infer that Build, Build, Build also Build the seed of the inflation.

This widening “trade gap” roughly means we are shelling out more dollars than we are earning
and the relative abundance of pesos in the local market robs it of its value. We only make other country
rich by digging our own poverty and ignoring our natural resources by importing other product that
steals the essence of our own product.

Consequently, the biggest and most neglected factor behind inflation is the people’s
expectations of inflation. A recent study by IMF researchers shows that at least half of inflation in
ASEAN-5 countries is attributable to how people anticipate future inflation and this factor overwhelms
all other factors such as oil and weakening peso.

Inflation expectation matters because they change how people behave. If people expect
inflation to rise in the coming months, not only will consumers hoard basic goods, but workers will also
lobby for higher wages, and firms will also revise their menus or pricelist to safeguard their profits. We
on ourselves create our own trap and our own fall down.

Now that the Christmas is near, it is expected that the shopping price will increase annually and
creates an early Christmas shopper. It is a natural phenomenon in the Philippines and all these effects
add up to further inflation. With this the original expectation becomes “self-fulfilling prophecies” said by
the PhD candidate at the UP School of Economics. The prophecy of inflation was set by the greedy mind
of every Filipino.

On the other hand, all this factors only points to something—poverty. The increasing price of
basic commodity and the shortage of rice which is the basic need of every Filipino were not sustained
because of the tight budget produced by the inflation. The dream of every family to feed the hungry
stomach of their children was now an illusion. Hence, the poor become poorer, the poorer become the
poorest and the poorest will die in the grave of hunger.

However, the government did their best just to solve the problem of inflation rate. In a separate
statement, the central bank said the implementation of non-monetary measures, particularly the
approval of rice tarrification along with the additional importation of rice and other food items, “could
lead to an earlier return of inflation to within the target range in 2019”.

Hence, this non-monetary policy and a tighter monetary policy came in a tad too late. It is in
government’s interest, therefore to manage people’s inflation expectation from time to time. The
personal satisfaction of the government manages the flow of inflation because now that the political
candidacy is near, the one who can surpass this problem will be a hero to Filipino and make a blind
loyalty.

Afterall, inflation rate is not a problem but rather it is a choice. Choice if we will import oil even
though we know that Philippines inhibit many resources. Choice if we will weaken our peso even though
we have the capability to strengthen the value of our economy. Choice if our government will continue
to manage the basic commodity into a standard price.

Choice if we will be carried away by our expectation and absurdity even though we already
know that our choice makes the real inflation. Don’t let inflation rate increase again and don’t let the
fear of every Filipino happens. Choose the right path and time to time we can choose to balance our
economy that can save each family from poverty and inflation.