Metro Manila (CNN Philippines, June 29) — While Filipinos have felt not only the sting of the pandemic but also the blow from price spikes during the first year in office of President Ferdinand Marcos Jr., the current administration still saw the country gaining economic recovery momentum—thanks to consumers’ so-called revenge spending.
Immediately after securing the country's top post, Marcos ended imposing strict COVID-19 restrictions, which was contrary to the approach of his predecessor, former President Rodrigo Duterte, who resorted to hard lockdowns every time the number of cases was on the uptrend.
Marcos' decision provided the needed green light for businesses in every industry to reclaim their foothold and for the public to feel normalcy, subsequently pumping up their confidence.
As mobility increased after more than two years, businesses and monetary officials previously noted that Filipino consumers have been spending more—especially on travel, dining out, and clothes.
This behavior pushed the Philippine economy to its strongest economic growth yet since 1976, expanding by 7.6% in the full-year 2022.
READ: Strongest since 1976: PH records 7.6% economic growth in 2022
However, soaring prices–in almost all commodities–also haunted Filipinos, particularly those living paycheck to paycheck. There were even months at the latter part of 2022 when prices of red onions skyrocketed to as much as ₱720 per kilogram.
READ: Red onion prices soar to over ₱700 per kilo
The Philippine Statistics Authority (PSA) earlier reported that January's inflation rate stood at 8.7%, the hottest since November 2008.
While inflation figures have started cooling down, they remain elevated and far from the government's target range of 2% to 4%.
Is the Marcos administration to blame?
One of the economists interviewed by CNN Philippines attributed the surging prices to outside forces, such as the ongoing tension in Europe.
"Inflation similarly accelerated in many countries around the world at similar levels, with the peak in US inflation at a new 40-year high of 9.1% in June 2022, largely triggered by the Russia-Ukraine war since February 24, 2022," RCBC chief economist Michael Ricafort said.
Ricafort noted that the war triggered the sharp jump in global oil prices, which resulted in a knock-on effect on other commodities.
Pantheon Macroeconomics chief emerging Asia economist Miguel Chanco echoed this, saying Russia's invasion of Ukraine affected all countries.
But can Filipinos also pin the higher prices on the current administration's actions? "Yes," Chanco said.
"In another sense, yes, because the Philippines was hit more badly by inflation compared to other economies of a similar level of development in ASEAN. The administration certainly could have acted much faster to allow for the freer importation of food to curb domestic price pressures," Chanco said.
Although the PSA recorded a much slower inflation rate for the past few months, it remains higher than some neighboring countries, such as Thailand, Indonesia, and Vietnam.
Ricafort also said the government only supported "targeted or limited" importation of some agricultural products, even though local supplies were insufficient due to robust demand and massive damage in the sector caused by strong typhoons.
To keep the downtrend in inflation, the RCBC economist said the government must increase agriculture production and only import if needed, but should not coincide with the harvest season of local producers.
As the El Niño threat looms, which is expected to greatly hit the sector, Ricafort added that the government must immediately improve irrigation facilities.
For his part, Marcos–who also heads the Department of Agriculture–ordered the agency to pump up the sector's capacity to bring down prices of goods, as well as accelerate the adoption of machines to aid in beefing up production.
READ: From soaring prices to resignations: PH agriculture during Marcos' first year
Saying the improvement in inflation figures is "almost on auto pilot," Chanco warned that if the Philippines faces another "black swan event," it may "arrest" the slowdown in inflation.
"Then the authorities should be ready with relevant supply-side measures," he added.
Based on Pulse Asia's September 2022 survey, many Filipinos were disappointed with how the administration addressed inflation woes, with a -11 net approval rating for its performance on this front.
How are consumers holding up?
Labor lawyer Luke Espiritu, who also sought to secure a Senate seat during the May 2022 polls, said the Filipino masses "do not feel" the economic growth.
"We must remember that our workers receive starvation wages… mas masahol ngayon dahil sa inflation (it's even worse now because of inflation)," he said during the CNN Philippines special "Pangulong Marcos: Ang Unang Taon."
Citing data from think tank IBON Foundation, Espiritu said Filipino workers must be paid ₱1,161 a day to finance their cost of living.
But Espiritu pointed out that workers only get "less than half of that."
In the capital region, the minimum wage rates range from ₱533 to ₱570 only. Workers in provinces outside Metro Manila take home less.
Just on Thursday, the National Capital Region Wage Board approved a ₱40 wage hike for workers in private establishments. This raised the new daily minimum pay in Metro Manila to ₱610 (non-agricultural) and ₱570 (agriculture sector).
"So what happens is that the workers are living on wages that they still need to supplement beyond their 8-hour day work," Espiritu said.
"I think any economic policy na hindi nakasentro sa pagtataas ng kabuhayan ng mga nasa baba is doomed to fail. At tandaan natin, kapag may pang-gastos ang ordinaryang masang Pilipino, then that will support our businesses," he added.
[Translation: I think any economic policy that is not centered on raising the livelihood of those at the bottom is doomed to fail. And let's remember, when ordinary Filipinos have money to spend, then that will support our businesses.]
If many Filipinos are on job orders and only get meager wages, Espiritu expressed doubts that an economy would be stable "based on hunger and starvation."
Meanwhile, Jonathan Ravelas, managing director of eManagement for Business and Marketing Services, said the revenge spending recorded probably came from the middle to high-end class as ordinary employees' savings had been largely drained due to the pandemic.
But Ravelas thinks revenge spending has already ended due to high inflation.
Economist Winnie Monsod said the poor and ordinary workers could not afford to cough up more money.
"The [income] classes D and E are not spending… They barely have enough to eat," Monsod said.
To somehow cushion the impact of high prices, Finance Secretary Benjamin Diokno said in March that over nine million Filipino households would get ₱1,000.
Diokno said a total of ₱26.6 billion worth of subsidies were allotted for the vulnerable sector.
Meanwhile, some Philippine companies benefitted from Filipinos' revenge spending, but others felt consumers' budget crunch.
For instance, Globe President and CEO Ernest Cu earlier said the Ayala-led telco giant saw consumers, particularly those under the lower-income classes, optimizing their spending or even shelling out less.
He noted that Globe booked a 2% quarter-on-quarter drop in revenues in the third quarter of 2022. Globe’s core profit also plunged by 16% to ₱4.993 billion.
Players in the real estate market might have also experienced the pinch of the Bangko Sentral ng Pilipinas' (BSP) tightening cycle.
Central banks around the world have been hiking their interest rates to temper inflation. With more expensive borrowing costs, consumers and businesses are expected to spend less.
BSP Governor Felipe Medalla said in March that the reduction in demand amid higher interest rates was already seen in housing loans.
For the second time after waves of increases, the BSP kept interest rates unchanged at 6.25%.
READ: BSP leaves interest rates unchanged at 6.25%
Will consumers lose more purchasing power under Marcos’ leadership?
Since the current government is not keen on reviving tougher COVID-19 rules, Ricafort said improvements in the labor market would result in "higher incomes," subsequently offsetting high inflation witnessed in recent months.
For Chanco, while there would be no price shocks as strong as before, threats still linger.
"The peso, for now, no longer is as secure as it once was, due to a structural current account deficit. Any threat to peso stability would in turn make imports more expensive, thus dealing a blow to purchasing power," Chanco said.
"On the fiscal side, it's taking the government some time to curb the budget blowouts caused naturally by COVID. The authorities may, further down the line, introduce tax measures to see to this, and these steps could hit household finances, as well," he added.
Monetary officials expressed confidence that the inflation rate will further drop to the government's target band in the last quarter of 2023.
The country's finance chief even said inflation may reach below 2% by the first quarter of 2024.