The purchasing power of the Philippine peso declined further in October as inflation shot to an almost 14-year high and as the local currency weakened against the US dollar.
Philippine Statistics Authority (PSA) chief Dennis Mapa said the value of one peso in 2018 slipped to 85 centavos in October, down from 86 centavos in July.
The purchasing power of the Philippine peso is computed as 1 divided by the consumer price index (CPI), multiplied by 100.
Inflation, which refers to the rate at which prices change over a period of time, shot up to 7.7 percent in October.
Mapa said that year-to-date, the purchasing power of the peso stands at 87 centavos against its value of P1 in base year 2018.
Rizal Commercial Banking Corp. chief economist Michael Ricafort said the decrease in the purchasing power of the local currency “may largely reflect the 15 percent depreciation of the peso vs. the US dollar from a year ago and also since the start of 2022.”
Ricafort said the weaker peso led to higher import prices, which, inturn, led to higher overall inflation.
Meanwhile, the labor group Partido Manggagawa (PM) said inflation has wiped out at least P76 from the P570 minimum wage in Metro Manila.
“The P570 minimum wage in NCR is actually just worth P494 by October. P76 has been shaved off the real value of the minimum wage and workers are now poorer by that amount every day,” said Rene Magtubo, PM national chairman and a city councilor of Marikina. “Before the P33 minimum wage hike in June 2022, the minimum wage was P537. Meaning, not only has the P33 been effectively wiped out by inflation, workers’ wages have [been] pushed back even further.”
He called for a new round of wage hikes to recover the lost purchasing power of workers, not just in Metro Manila but in the whole country.
The labor group’s demand for a wage hike is based on an initial computation by the Labor Education and Research Network. The computation for wage erosion took account of the rise in prices since the effectiveness of the P570 minimum wage in Metro Manila on June 4.
Also on Friday, an industry group asked for government support to make Philippine products more competitive and affordable.
“You will find that Philippine products are at least 25-percent more expensive than its neighboring countries,” Philippine Export Service Providers and Consolidators Association Inc. president Tom Medina said at the monthly food forum “Usaping Pagkain” organized by the Philippine Chamber of Agriculture and Food Inc.
The export consolidators specifically asked the government to scrap the 12-percent value added tax on indirect exports, particularly on products of micro, small and medium enterprises.
PESPCA said prospects were bleak given the government’s lack of support to the industry and MSMEs on top of global challenges.
The group has a pending petition with the Board of Investments to include export consolidation as one of the preferred industries in the strategic investments priority plan of the Department of Trade and Industry to gain incentives in the form of VAT-exemption.
The group said while the Department of Finance admitted to an oversight on the imposition of VAT on indirect exports, correcting that specific mistake would need corrective legislation by Congress and may take another two years.
Medina said VAT on indirect exports creates a price level which the market would not be able to absorb, “and thus, in a matter of a few more months with the challenge of the inflation and recession abroad, we will see a lot more MSMEs closing shop.”
The group said that by eliminating the 12-percent VAT, Philippine products would become more competitive against similar products that lined up the shelves of supermarkets in other countries.
In other developments:
• Terry L. Ridon, convenor of Infrawatch PH, said the President should pause scheduled increases in regulated sectors such as water, power and transport until inflation has normalized to acceptable levels.
• Jay Layug, president of the Developers of Renewable Energy for AdvanceMent, Inc., said it is critical to manage the cost of electricity that is factored into the prices of basic consumer goods.
• Danilo Fausto, agriculture economist and president of the PCAFI, said the high inflation rate will have the highest toll on the low income families who spent almost 60 percent of their income on household needs. This will also include those who went in refuge to the farm sector and the under employed, because of the pandemic, after losing their jobs from tourism, transportation and service sectors, and reduced working days from industries.
• Angelo Palmones of the Alyansa ng mga Grupong Haligi ng Agham at Teknolohiya para sa Mamamayan (AGHAM), said the worst is yet to come, saying the administration must come up with drastic, scientific medium-term strategies to increase food production and exports.