What really caused the Philippine's 9-year high inflation?

Economic inflation is like an inflated balloon

Inflation seems like an unfamiliar word but it is not that hard to understand. Many Filipinos have been using this economic 'misery' to point out that the Philippines' economy is going at its worse because of the 9-year high inflation. But what really caused inflation?

The US Federal Reserves and depreciation of the Philippine peso

Due to the economic comeback of the United States under the Trump administration, the US Federal Reserves has increased the interest rate of the US dollar. Sad to say, the strength of a foreign currency, like the Philippine peso, depends on the US dollar. If the US dollar is stronger, the Philippine peso (PHP) will become weaker and vice-versa, this is what others call the 'SeeSaw effect'. The US dollar and Philippine peso cannot be both strong at the same rate. The depreciation of our currency plays a role in our country's rising inflation.

The rice supply dilemma

Suddenly, rice shortage in the Philippines has led to the increase in its price, this is because of the Law of Supply and Demand has taken place. This is the reason why the government is on a crackdown against rice hoarders, so far it has yielded good results with many hoarders caught and warehouse inspected and has slowly lower down the rice prices. An increase in the price of basic commodities also added to the inflation burden.

Duterte's Build Build Build program

The government's 'Build Build Build' program, which aims to prioritize spending on large infrastructures throughout the country is also an additional burden to the inflation rate. However, this move is not a bad idea since it will help and compensate with our country's economic growth. In Aquino's time, inflation was low because there was low infrastructure spending, but doesn't mean it's good. When is infrastructure bad for a country? Well, inflation could be the effect but once it has all been flattened out, the effects of massive infrastructure spending will bear fruit in the years to come.

External influences and surging oil price

Believe it or not, but external influences have added to the rise of inflation in the country. The recent US-China trade war will have an effect on the global economic growth since the two countries are amongst the strongest economic superpowers most countries, like the Philippines, also depend on. The recent rise in oil prices due to the sanction of the United States on Iran has led to the increase in basic commodities in the country since we use oil to transport goods within and outside the country.

Everyone is affected

It is not only the Philippines that is experiencing this global economic misery, but also the rest of the world. Currently, we are the highest in the Philippines when it comes to inflation rate due to our insufficient oil produce and rice shortage. Other Southeast Asian countries like Malaysia have risen up against oil price hike due to their abundant local oil supply (see Petronas). Even the superpowers have felt the impact of the global tensions, like how China cuts the reserve requirement ratio of its banks. The International Monetary Fund (IMF) has cut its global growth forecast due to the global tensions that are currently affecting global economic activity.

What can we do?

Even our own economic managers have forecast more inflation hikes this year so we are in for a rough ride. What Filipinos can do to compensate against the inflation hike is to increase its consumer spending like what the US did. Our government also needs to look at more stronger exports to reduce inflation. Sadly, our country is strongest in importing and is weak on exporting. Our massive infrastructure spending also resulted to a strong import due to our weak steel production. We need to import more to continue operating the projects. Once we realize that we need to tap more on our rich natural resources, we will be a strong export country and will help reduce inflation by a hard slap. But most of all, to survive inflation is to be smart and adaptive. High inflation happens every once in a while but our ancestors have survived them all and our country is still one of the countries with strong economic growth. It's time to grab opportunities!