Last week brought good news on the economy, as the Philippine Statistics Authority reported that our gross domestic product (GDP) in the third quarter increased by 7.6% compared to the same quarter last year. . Many argue that growth is not necessarily the best yardstick to gauge the health of the economy, and rightly so. Yet faster GDP growth is generally good news because it means a faster increase in overall incomes, which is normally accompanied by an expansion of jobs. But we can get a fuller picture with my usual “PiTiK” test, looking at presyo, trabaho and kita (prices, jobs and income) based on the latest data.
Presyo continues to be bad news, with October’s inflation rate rising further to 7.7%, our highest level since 2008, when the year-end inflation rate was 7.8% and the full-year average of 8.2%. Where do the price increases mainly come from? Food has been the main culprit over the past year, with prices in October rising 9.4% year-on-year, a significant acceleration from 7.4% in September. Rising costs for housing, water, electricity, gas and other fuels (i.e. energy costs) also continued to accelerate, now at a rate of 7 .4% against only 4.5% at the start of the year. These costs are largely beyond our control because the fuels that run our power plants, machinery and vehicles are almost entirely imported, and the supply disruptions caused by the Russian-Ukrainian war have led to sharp price increases at home. global scale.
On the other hand, we could have some control over domestic food price movements through a combination of increased production and reduced imports. While the latter is the easiest to do, the preferred and most sustainable long-term way is to boost domestic production by helping agricultural producers increase their productivity to match the production costs of their foreign counterparts. But blocking the latter’s products through import controls or high import tariffs, which artificially drive up prices, makes no sense at a time when the urgency is to keep prices low for every Filipino. , especially the hungry poor. The Bangko Sentral ng Pilipinas (BSP) has expressed frustration that our agricultural authorities continue to fail in their mission, forcing it to use monetary tools that address the demand side of a problem where the supply side is the real culprit.
Meanwhile, the latest trabaho data looks good on the face of it, with the unemployment rate now down to its pre-pandemic level of 5%. But the quality of jobs is now the issue, after millions of people forced by COVID-19 out of quality jobs in industry, transport and tourism took refuge in informal jobs in agriculture and trade. The higher underemployment rate of 15.4% (compared to 13% at the end of 2019 before the pandemic) means that more workers feel the need for even more work even though they actually have work. Worryingly, college-educated workers now make up nearly half (45.4%) of unemployed Filipinos, up from 37.8% in October 2019. Workers under 35 now make up 69% of the unemployed, up from 75.7% in October 2019, telling us that older workers have been the biggest victims of the pandemic recession.
Finally, kita was the best news of the three indicators, as our GDP growth numbers appear to defy common trends elsewhere. The International Monetary Fund predicts growth of 4.5% in emerging and developing Asia to which we belong (against only 3.2% for the whole world), already reduced from its initial figure of 5.9% in January. But analysts are revising growth projections for the Philippines in the opposite direction, as we appear to be on track to achieve full-year GDP growth of at least 7%, thanks to the revival of the tourism sector and the “revenge” of consumer spending.
Can we continue? The biggest threat is inflation itself, both here and abroad, as rapidly rising prices dampen demand for goods and services. The world is already expecting an economic slowdown next year due to historically high inflation. This is why BSP is right to keep a close eye on presyo and to call on the government to do its part in this regard.
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