INFLATION. A Department of Trade and Industry (DTI) staff checks the prices of canned goods in this undated photo. The 6.1 percent inflation should serve as an impetus for policymakers to search for ways to counter inflationary forces.(Photo courtesy of PIA Pangasinan)
MANILA – An economist in the academe said the country’s 6.1 percent inflation figure in September should not elicit overreaction but rather should serve as an impetus for policymakers to search for ways to counter inflationary forces.
In an interview, Carlos Manapat, chairman of the economics department at the University of Santo Tomas (UST), pointed out that price pressures last month did not seem to be fueled by any inherent weakness in the Philippine economy but rather mostly driven by external factors.
He explained that rising world crude prices have led to higher local pump prices, which inevitably led to higher transport costs and fares in the country.
Manapat said the more expensive fuel today is the fallout from the prolonged Russia-Ukraine conflict and the production cuts imposed by the Organization of Petroleum Exporting Countries (OPEC) to drive up prices.
The professor explained that the best way to mitigate the inflation uptick’s impact is to work on growing the Philippines’ Gross Domestic Product (GDP).
“The rise in inflation would not be so bad if we see that the GDP is also growing proportionately… it sort of cancels out the effects of inflation,” he noted.
It can be recalled that the country’s GDP grew by 4.3 percent in the second quarter, and 5.3 percent for the first half of 2023.
Meanwhile, the First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P) recently forecast a GDP growth of between 5.0 to 5.2 percent in the third quarter.
The Philippine government has targeted a 6.0 to 7.0 percent GDP growth in 2023, although Finance Secretary Benjamin Diokno was recently quoted as saying that the country is likely to hit the lower end of this target.
Also adding to price pressures, according to Manapat, is the fact the yearly import season in the Philippines begins sometime in the third quarter.
He explained that this is a cyclical occurrence that signals that businesses are stockpiling for the anticipated surge in demand during the Christmas season.
To further soften the impact of inflation, Manapat urged the government to work on increasing agricultural output.
He recounted that the abnormal inflationary surge late last year that lasted until early this year was triggered by a shortage in key agriculture products.
Furthermore, substantial increases in the retail prices of rice and sugar also accounted for price pressures last month.
Manapat suggested that the government invest heavily in agricultural infrastructure to ensure greater productivity by filling in the gaps that lead to shortages.
“Anything the private sector cannot handle the government must do. The necessary infrastructure must be put in place to stimulate food production,” he stressed.
Inflation in August was at 5.3 percent, and 4.7 percent in July. (PNA)
