In the Philippines, factors such as disruptions in agricultural food supplies and fluctuations in worldwide oil prices have contributed to inflation volatility. As a result, even while other CPI components show relatively minor rises, the headline inflation rate may reach double digits.
What causes the Philippines’ high inflation rate?
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In December 2021, the country’s headline inflation rate fell to 3.6 percent, down from 4.2 percent in November 2021. This is the lowest rate of inflation forecasted for 2021.
The national average inflation rate in 2021 was 4.5 percent, which was higher than the 2.6 percent average inflation rate in 2020. (See Tables A and B, as well as Figure 1)
The slower annual growth in food and non-alcoholic drinks, which was 3.1 percent in December 2021, compared to 3.9 percent in November 2021, was the main driver of the overall inflation downward trend in December 2021.
Lower inflation was also observed in the indices of the following commodity groupings, contributing to the month’s total inflation trend:
Furniture, domestic equipment, and basic house upkeep, 2.3 percent;
Inflation rates were higher in the housing, water, electricity, gas, and other fuels indices, at 5.0 percent, and in the communication indices, at 0.3 percent.
Inflation in the education index has been at 0.7 percent for three months in a row. (See Tables 3 and 4 for more information.)
Annual average inflation rates in 2021 were greater than annual average inflation rates in 2020 in the following key commodity groups:
Other commodity categories, on the other hand, had slower annual average inflation or a negative annual average rate this year, with the exception of communication, which maintained its 2020 annual average rate of 0.3 percent. (See Tables 3 and 4A for more information.)
Core inflation, which excludes some food and energy goods, fell to 3.0% in December 2021, down from 3.3 percent in November 2021. The core inflation rate was 3.3 percent in December 2020. (Answers to Tables A and 9)
The annual average core inflation rate in 2021 was 3.3 percent, slightly higher than the annual average rate of 3.2 percent in 2020. (Answers to Tables A and 9)
Food inflation in the United States continued to fall last month, falling to 3.2 percent from 4.1 percent in November 2021. In December 2020, food inflation was reported to reach 4.9 percent. (See Table 7)
In December 2021, the yearly growth rate of the veggies index declined by -10.0 percent by food group. Furthermore, annual gains in the rice, corn, and fish indices were slower at 0.9 percent, 14.4 percent, 7.0 percent, and 1.1 percent, respectively. During the month, the indices of other food groups had bigger annual increases. (See Table 5)
2. The National Capital Area (NCR)
Similarly, inflation in the NCR increased at a slower rate of 2.8 percent in December 2021, compared to 2.9 percent in November 2021. In December 2020, the region’s inflation rate was 3.2 percent. (A and B Tables)
The annual average inflation rate in the NCR was 3.5 percent in 2021, up from 2.2 percent in 2020. (See Tables 3 and 4A for more information.)
The decrease in NCR inflation was mostly due to a reduced annual rate of increase in the transport index, which was 5.6 percent in November 2021, down from 7.6 percent in November 2021. The annual increases in the indices of food and non-alcoholic beverages (1.5%), alcoholic beverages and tobacco (6.6%), and furnishing, domestic equipment, and routine house maintenance (1.0%) also moderated.
Meanwhile, the housing, water, electricity, gas, and other fuels indices increased by 4.4 percent, while the restaurant and other goods and services indices increased by 2.9 percent. During the month, the rest of the commodity groupings either maintained their previous month’s annual rates or had zero percent annual increase. (See Tables 3 and 4 for more information.)
3. Areas Outside of the National Capital Region (AONCR)
In December 2021, inflation in AONCR fell to 3.9 percent, down from 4.5 percent in November 2021. Inflation in the AONCR was 3.7 percent in December 2020. (A and B Tables)
Inflation in the AONCR increased to 4.7 percent in 2021, up from 2.7 percent in 2020. (See Tables 3 and 4A for more information.)
The decreased annual rate of increase in the food and non-alcoholic drinks index, which was 3.5 percent during the month, contributed to the downward trend in AONCR inflation. Similarly, annual increases in the indexes of the following commodity groupings slowed:
Furniture, domestic equipment, and basic house upkeep, 2.7 percent;
Inflation for housing, water, electricity, gas, and other fuels, on the other hand, was higher at 5.2 percent, while the indices for the rest of the commodity groupings maintained their annual growth rates from the previous month. (See Tables 3 and 4 for more information.)
Thirteen AONCR regions experienced reduced inflation in November 2021 when compared to their annual growth rates in November 2021. The Bangsamoro Autonomous Region in Muslim Mindanao (BARMM) had the lowest inflation rate of 2.1 percent, while Region IX (Zamboanga Peninsula) and Region XI (Davao Region) had the highest inflation rates of 6.1 percent each. (See Table 4)
All regions in the AONCR experienced higher annual average inflation rates in 2021 than they did in 2020. Region V (Bicol Region) had the highest annual average inflation rate of 6.6 percent during the year. Region VII (Central Visayas), on the other side, had the lowest yearly average inflation rate of 2.5 percent (Table 4A).
What are the five factors that contribute to inflation?
Inflation is a significant factor in the economy that affects everyone’s finances. Here’s an in-depth look at the five primary reasons of this economic phenomenon so you can comprehend it better.
Growing Economy
Unemployment falls and salaries normally rise in a developing or expanding economy. As a result, more people have more money in their pockets, which they are ready to spend on both luxuries and necessities. This increased demand allows suppliers to raise prices, which leads to more jobs, which leads to more money in circulation, and so on.
In this setting, inflation is viewed as beneficial. The Federal Reserve does, in fact, favor inflation since it is a sign of a healthy economy. The Fed, on the other hand, wants only a small amount of inflation, aiming for a core inflation rate of 2% annually. Many economists concur, estimating yearly inflation to be between 2% and 3%, as measured by the consumer price index. They consider this a good increase as long as it does not significantly surpass the economy’s growth as measured by GDP (GDP).
Demand-pull inflation is defined as a rise in consumer expenditure and demand as a result of an expanding economy.
Expansion of the Money Supply
Demand-pull inflation can also be fueled by a larger money supply. This occurs when the Fed issues money at a faster rate than the economy’s growth rate. Demand rises as more money circulates, and prices rise in response.
Another way to look at it is as follows: Consider a web-based auction. The bigger the number of bids (or the amount of money invested in an object), the higher the price. Remember that money is worth whatever we consider important enough to swap it for.
Government Regulation
The government has the power to enact new regulations or tariffs that make it more expensive for businesses to manufacture or import goods. They pass on the additional costs to customers in the form of higher prices. Cost-push inflation arises as a result of this.
Managing the National Debt
When the national debt becomes unmanageable, the government has two options. One option is to increase taxes in order to make debt payments. If corporation taxes are raised, companies will most likely pass the cost on to consumers in the form of increased pricing. This is a different type of cost-push inflation situation.
The government’s second alternative is to print more money, of course. As previously stated, this can lead to demand-pull inflation. As a result, if the government applies both techniques to address the national debt, demand-pull and cost-push inflation may be affected.
Exchange Rate Changes
When the US dollar’s value falls in relation to other currencies, it loses purchasing power. In other words, imported goods which account for the vast bulk of consumer goods purchased in the United States become more expensive to purchase. Their price rises. The resulting inflation is known as cost-push inflation.
What are the three primary reasons for inflation?
Demand-pull inflation, cost-push inflation, and built-in inflation are the three basic sources of inflation. Demand-pull inflation occurs when there are insufficient items or services to meet demand, leading prices to rise.
On the other side, cost-push inflation happens when the cost of producing goods and services rises, causing businesses to raise their prices.
Finally, workers want greater pay to keep up with increased living costs, which leads to built-in inflation, often known as a “wage-price spiral.” As a result, businesses raise their prices to cover rising wage expenses, resulting in a self-reinforcing cycle of wage and price increases.
What is the Philippines’ inflation rate?
Philippine CPI inflation came in at 3%, below market expectations of 3.2 percent and not yet reflecting recent geopolitical risks. Slower inflation for food products (1.2 percent vs. 1.7 percent previously) put downward pressure on the economy, owing partly to reduced rice prices. Meanwhile, greater inflation in utilities and transportation, reflecting the higher cost of imported oil, put upward pressure.
Because of the prolonged turmoil in Eastern Europe, higher global wheat and energy prices are expected to trickle down to domestic prices, pushing inflation above the BSP target as early as 2Q.
Food and transportation are the two major components of the Philippine CPI basket, and any significant price changes in these sectors by May should be enough to push inflation above 4%.
How does inflation impact the Philippines?
Although business owners stated in the Total Remuneration Survey (TRS) 2020 that they want to raise pay by an average of 5.6 percent in 2021, more over half of the companies stated that they will postpone salary increases or reduce compensation increment levels to keep expenses down.
So, how does the rate of inflation influence Filipinos’ lives? Here’s what you’ll need to know.
The effects of the rising inflation in the Philippines
An increase in the rate of inflation means you’ll have to pay more for the same items you used to get for less money. For others, this may imply a lesser level of living and the sacrifice of luxury in order to obtain basic necessities.
As the cost of living rises, an ordinary earner may be forced to downsize his or her lifestyle. A high rate of inflation means you’ll have less disposable income and hence less money to spend than you’d want.
The effects of inflation on people with fixed incomes, such as pensioners who rely on pension benefits, will be felt. Given the rise in the cost of basic commodities, prescriptions, and utilities, their regular pension may no longer be sufficient to support their current lifestyle.
Even if health-care costs are expected to climb more slowly this year, there’s still a potential that, in order to satisfy everyday demands, health will be prioritized less for average income earners. You may no longer be able to acquire nutritional supplements or receive prescribed treatments, and your regular examinations may be curtailed.
Due to a lack of financial resources and a high rate of inflation, you may find yourself with insufficient funds to allocate for your savings, your child’s education, health emergencies, business, and retirement, all of which may have an impact on your future goals.
What is creating 2021 inflation?
As fractured supply chains combined with increased consumer demand for secondhand vehicles and construction materials, 2021 saw the fastest annual price rise since the early 1980s.
What are the two primary reasons for inflation?
Cost-push inflation is characterized by an increase in the cost of commodities as a result of supply-side factors. For example, if raw material costs rise dramatically and enterprises are unable to keep up with output of produced items, the price of manufactured goods on the market rises. Natural disasters, pandemics, and rising oil costs, for example, could all lead to cost-push inflation. Cost-push inflation can be caused by a variety of factors, and it’s something policymakers should be concerned about because it’s tough to control.
Who is to blame for inflation?
They claim supply chain challenges, growing demand, production costs, and large swathes of relief funding all have a part, although politicians tends to blame the supply chain or the $1.9 trillion American Rescue Plan Act of 2021 as the main reasons.
A more apolitical perspective would say that everyone has a role to play in reducing the amount of distance a dollar can travel.
“There’s a convergence of elements it’s both,” said David Wessel, head of the Brookings Institution’s Hutchins Center on Fiscal and Monetary Policy. “There are several factors that have driven up demand and prevented supply from responding appropriately, resulting in inflation.”
In emerging countries, what are the main sources of inflation?
Government spending, money supply growth, world oil prices, and the nominal effective exchange rate are all seen to be sources of inflation in emerging countries. Table 3 shows that when there is a high level of government spending and high oil prices, inflation accelerates.
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Inflation is defined as a rise in the price of goods and services in an economy over time. When there is too much money chasing too few products, inflation occurs. After the dot-com bubble burst in the early 2000s, the Federal Reserve kept interest rates low to try to boost the economy. More people borrowed money and spent it on products and services as a result of this. Prices will rise when there is a greater demand for goods and services than what is available, as businesses try to earn a profit. Increases in the cost of manufacturing, such as rising fuel prices or labor, can also produce inflation.
There are various reasons why inflation may occur in 2022. The first reason is that since Russia’s invasion of Ukraine, oil prices have risen dramatically. As a result, petrol and other transportation costs have increased. Furthermore, in order to stimulate the economy, the Fed has kept interest rates low. As a result, more people are borrowing and spending money, contributing to inflation. Finally, wages have been increasing in recent years, putting upward pressure on pricing.