Inflation at 8.7%; job losses seen


PERSISTENTLY high inflation and bloated wage increases could lead to job losses nationwide, local economists warned on Tuesday.

This, after the Philippine Statistics Authority (PSA) reported that inflation reached 8.7 percent in January 2023. This is the highest in 15 years or since November 2008 when inflation clocked in at 9.1 percent. (Full story here:

Unionbank Chief Economist Ruben Carlo O. Asuncion told the BusinessMirror that job losses cannot be discounted at this point given that high inflation could translate to higher production losses incurred by firms nationwide.

“We sense a resilient and upbeat consumer demand even as the holidays have come and gone, especially among the middle and higher classes. However, the probability of job losses due to higher production costs cannot be discounted easily. The question of whether this inflation surprise will stick [or is a one-off] may have yet to unfold, and the answer will definitely weigh on job generation or otherwise,” Asuncion said.

Rizal Commercial Banking Corporation (RCBC) Chief Economist Michael Ricafort also recognized the possibility of such a scenario. He said job losses would be possible if businesses/industries would require more funds to pay for higher prices/inflation on inputs, investments, and other spending.

“The resulting higher interest rates could increase borrowing costs and could slow down investments and other business/economic activities that create jobs,” he said.

University of the Philippines School of Economics head of research Renato E. Reside Jr. said the government should keep minimum wage from increasing too much to prevent inflation from leading to job cuts. “At best, wage increases must be accompanied by significant increases in labor productivity.”

Ateneo Center for Research and Development (ACERD) Associate Director Ser Percival K. Peña-Reyes told the BusinessMirror that should inflation continue to outpace the country’s GDP growth, this could lead to job losses among Filipinos.

In the fourth quarter, GDP grew 7.2 percent but in the October to December period in 2022, the average inflation was at 7.93 percent. The average inflation was at 7.7 percent in October; 8 percent in November; and 8.1 percent in December.

“If inflation continues to outpace GDP growth, it could dampen consumer spending and trigger a wage-price spiral,” Peña-Reyes told this newspaper. “Maaaring magbawas ng trabaho [Jobs may be shed] if wages [production costs] go up.”


Peña-Reyes said much of the country’s inflation woes are “self-inflicted.” He said external factors have little to do with the recent increase in commodity prices.

He said the country needs to improve the management of the supply of onions, sugar, and garlic to prevent the prices of these commodities from skyrocketing. “Mas malala pa inflation natin kaysa sa ibang bansa sa ASEAN,” he said.

Reside added that food prices also depend on trade measures being imposed by the Philippine government. He said prices of commodities are also affected by the extent to which imports are allowed.

He added that it also depends on “the efficacy of efforts to reduce market power along the supply chain and farm productivity.”

In a statement, the Bank of the Philippine Islands (BPI) agreed that food costs had a lot to do with the 8.7-percent inflation. BPI said food items with the largest increases were vegetables, sugar, oils/fats, corn, and dairy products.

As for Asuncion, he said, non-food items also have to be examined closely. He said a bigger question is whether the pressure from non-food items are “one-offs” such as raising rentals.

He said some rate increases in utilities such as electricity and water have to go through the government. However, there are “unsettled supply issues between Meralco and SMC [San Miguel Corp.] that would entail future electricity costs.”

Government efforts

For its part, the National Economic and Development Authority (Neda) said higher agricultural productivity, food supply augmentation, and energy security are top priorities of the government to temper upward price pressures.    

Neda Secretary Arsenio M. Balisacan said the agency has been working closely with agencies to ensure timely and efficient implementation of the strategies and programs laid out in the Philippine Development Plan (PDP) 2023-2028, particularly in modernizing the country’s agriculture and agribusiness and ensuring energy security.

“A robust and resilient agriculture is vital to ensuring that we have enough supply of food and to keeping food prices stable, especially as we continue to face global headwinds and are exposed to natural hazards. Importantly, it serves as the foundation for a strong economy, as agricultural products move up the value chain,” Balisacan said.

Among the strategies in Chapter 5 of the Philippine Development Plan 2023-2028 are the consolidation and clustering of farms; use of appropriate modern technologies; integration of climate and disaster risks in farmers’ planning and programming; development and mainstreaming of early warning systems/anticipatory mechanisms; the boosting of local production capabilities; and the enabling of market-friendly trade and investment policy for agriculture and food.

The economic managers expect inflation to moderate for 2023 to 2024, with a slower-than-expected global recovery and waning pent-up domestic demand. Moreover, the impact of Bangko Sentral ng Pilipinas policy rate hikes is anticipated to be felt this year.

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