The value of P100 continued to shrink in the first quarter, with the poorest households shelling out more for basic goods and services, the March inflation data released by the Philippine Statistics Authority (PSA) on Tuesday indicated.
PSA data showed that in the first quarter, the poorest households shelled out P132 for goods and services worth P100 in 2012. For all households, the average increase in expenditure was at P28 for every P100.
Inflation in the first quarter averaged 4.5 percent, higher than last year’s 2.7 percent. The March inflation print reached 4.5 percent, slower than February’s 4.7 percent, but higher than last year’s 2.5 percent.
“[For all income households] yung P100 na nabibili mo nung 2012, P128 na ngayon ang halaga [goods and services you can buy for P100 in 2012 now cost P128]. So you need an additional P28,” PSA Price Statistics Division Chief Elena G. Varona said in a phone interview with the BusinessMirror on Tuesday.
Inflation for the poorest 30 percent of households averaged 5.5 percent in March, the same rate in February 2021 but higher than the 2.4 percent posted in March 2020.
In the first quarter, the average inflation experienced by the poorest Filipinos was at 5.3 percent, higher than the 2.3 percent posted in the January-to-March period last year.
Poverty
The increase in inflation and the decline in the value of the purchasing power of the peso will ultimately impact the poverty threshold for this year.
National Statistician Claire Dennis S. Mapa told the BusinessMirror that this will likely increase the poverty threshold. A higher threshold may mean more Filipinos could live below the poverty line.
The Family Income and Expenditure Survey (FIES) will be conducted this year. The FIES, used to compute poverty incidence, is conducted every three years.
The PSA defined the poverty threshold as “the minimum income/expenditure required for a family/individual to meet the basic food and non-food requirements.”
“It will have an impact on the poverty threshold [PT]. The PT will increase, because of relatively higher inflation—particularly on food items—just like what we saw in 2018,” Mapa said. “The other variable that will influence poverty incidence is the increase in household income.”
In an e-mail to the BusinessMirror, Ateneo de Manila University Department of Economics Associate Professor Geoffrey M. Ducanes said higher inflation, particularly food inflation, will raise the country’s poverty threshold.
The weight of food in the basket of goods used to compute inflation experienced by the poorest 30 percent, as previously explained by Mapa, is 70 percent against 39 percent for all the households.
Ducanes said this may explain why the Bottom 30 percent of households experienced a much higher inflation at 5.3 percent in the first quarter.
“From 2015 to 2018, the poverty threshold, on average, rose by 13.5 percent even as inflation during the 3-year period was only 9.6 percent. Perhaps something similar can be expected from 2018 to 2021,” Ducanes said.
Based on March inflation data, food inflation increased 6.2 percent in March, lower than the 7 percent posted in February but higher than the 2.9 percent posted in March last year.
On average, food inflation in the first quarter was at 6.6 percent in 2021, significantly higher than the 2.3 percent posted in January-March 2020.
“Food inflation for the first three quarters is already about 3 percentage points above ‘normal’ at 6 percent, so if this continues to hold, we estimate it to add about 0.9 percentage point to household poverty incidence or about 225,000 new poor households or about a million poor individuals,” Ducanes said.
Social protection
Given the decline in the purchasing power of the peso, Ducanes thinks government must step up by providing cash aid and, where possible, food.
Continuing the Department of Education’s feeding program for young students, by delivering food directly to the home of students or for pick up in schools, would help, he added.
This can also be done through the use of barangay centers, provided that strict protocols and social distancing is observed. The food assistance could be expanded to include medicines and vitamins for poor communities.
Wage hike?
Increasing wages during a pandemic, Ducanes said, would only make matters worse as this could result in layoffs. Many businesses are suffering due to the mobility restrictions in effect in Metro Manila and nearby provinces.
“Higher wages is difficult to implement at this time and maybe counterproductive as businesses are also suffering. It may just lead to more layoffs,” Ducanes said.
“At this time, the government should really take the lead and provide aid to those affected—those who have lost their means of earning income due to the pandemic and the lockdown, especially those who are in immediate danger of going hungry,” he added.
Priority: ‘Ayuda’
Unionbank Chief Economist Ruben Carlo O. Asuncion said the priority now should be to distribute the “ayuda” or assistance efficiently. While a wage increase may be considered, he agreed with Ducanes that it may do more harm than good.
Asuncion said if a wage increase is mandated, many micro, small, and medium enterprises (MSMEs) would again be placed in a “precarious position” as they are in varying stages of recovery or may be fighting for their survival.
Ultimately, he said inflation is market-driven and would be difficult to control. However, the government should continue working to achieve food security and stability.
“Enforcement of existing laws pertaining to provision of goods and services should be effective and reliable. Institutions that are in charge of cushioning from higher prices should be correspondingly strengthened and capable,” Asuncion told this newspaper.
Neda: Help on way
For his part, Acting Socioeconomic Planning Secretary Karl Kendrick T. Chua told the BusinessMirror that help is on the way for Filipinos.
Chua said the government is providing a P22.9-billion subsidy, and the national budget also provides over P280 billion of subsidies.
Besides, Chua said, inflation will likely fall in the coming months to within the 2-4 percent target range of the Central Bank, as a result of the decline in tariffs on meat, which officials think would increase supply and depress prices. Based on the PSA data, meat inflation reached 20.9 percent in March.
Mapa said the price of pork in the National Capital Region (NCR) averaged P329 per kilo in March, a 59-percent increase from the P207 per kilo recorded in March last year.
Compared to February, when the price of pork averaged P323 per kilo, the increase was slower at 1.8 percent.
In Areas Outside NCR (AONCR), pork prices averaged P312 per kilo in March, a 50-percent increase from the P208 per kilo in the same period last year.
However, compared to February, there was a 1.6-percent decline in pork prices. The average price of a kilo of pork in these areas was pegged at P317.
“We will see inflation fall within the 2 to 4 percent target as we lower the tariff on meat to increase supply. We will also ensure unhampered flow of food products,” Chua said.
Despite being outside the Central Bank’s target range of 2.0 to 4.0 percent, the Neda said the lower inflation rate recorded for March is a good indicator of price stabilization and the government expects the succeeding inflation rates to align with targets soon as a result of proactive interventions.
Chua reiterated the government’s commitment to support farmers and producers by providing the necessary assistance and promoting innovative production technologies.
“The President has already proposed to Congress the increase in the minimum access volume of pork. A temporary decrease in pork tariffs is also being considered. These will help lower our inflation rate further and keep it within the government’s targets,” he added.
Chua renewed his call for the public and private sector to take advantage of the digital economy and e-commerce, especially for agricultural products and other basic commodities.
Digital platforms, he stressed, provide benefits to both producers (they can market their goods to more buyers), and consumers (they get more options).
“In managing inflation throughout this crisis, we must innovate and adapt quickly. The government will continue to adopt evidence-based policy actions and seize opportunities to guarantee the Filipino people’s access to affordable, nutritious food and high-quality goods and services,” Chua said.
Inflation nationwide
PSA’S Mapa said the major contributors to inflation in March were higher food and non-alcoholic beverages; transport; and restaurant and miscellaneous goods and services.
Inflation for the food and non-alcoholic beverages index averaged 5.8 percent and accounted for 50.9 percent of the March inflation.
It was driven by meat inflation which averaged 20.9 percent; fish at 4.9 percent; and vegetables at 8.3 percent.
In a statement, Chua said the slower inflation in March 2021 was mainly driven by the decrease in the price indices for major food items.
Inflation eased for vegetables (8.3 percent from 16.7 percent), fruits (3.9 percent from 7.4 percent), and fish (4.9 percent from 5.1 percent).
The supply of vegetables and fruits has risen with better weather conditions and the onset of the harvest season for selected agricultural products.
However, he said the continued supply deficiency in meat, particularly pork, makes it the leading driver of inflation at 20.9 percent from 20.7 percent in the previous month.
For transport, Mapa said inflation averaged 13.8 percent in March which accounted for 25.5 percent of inflation during the month.
This was driven by higher tricycle fares which rose 47.5 percent; petroleum and fuels, 11.9 percent; and jeepney fares, 6.3 percent.
In terms of restaurant and miscellaneous goods and services, inflation reached 3.1 percent and accounted for 8.9 percent of March inflation.
This was driven by meals eaten outside the home which saw an inflation of 3.3 percent; articles for personal hygiene, 2.9 percent; and barbershop services, 10.4 percent.
Meanwhile, data showed that inflation in NCR averaged 3.7 percent in March 2021. This is slower than the 4.1 percent in February 2021 but faster than the 1.7 percent in March last year.
Inflation in AONCR averaged 4.7 percent in March 2021—slower than the 4.8 percent in February but higher than the 2.7 percent in March 2020.
The lowest inflation among AONCR regions in March 2021 remained in Region 7 (Central Visayas) at 1.5 percent, while the highest was in Region 5 (Bicol region) at 8.0 percent.
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