Bracing against stagflation

By Herbert Vego

WHILE we may find the word strange, “stagflation” is in the dictionary, defined as “persistent high inflation combined with high unemployment and stagnant demand in a country’s economy.”

Simply put, it is a condition where the poor no longer make enough money to cope with the rising prices of basic needs.

In the opinion of former National Economic and Development Authority (NEDA) Director-General Cielito F. Habito, our economy could be at risk of stagflation.

The purchasing power of the Philippine peso has slid to a record low, with PHP 1 in 2018 now worth only PHP 0.75 as of March this year.

This means that what we could buy for PHP 750 in 2018 is now costlier at PHP 1,000.

There has been a downward trend of our peso sliding to PHP 61.80 this week against one U.S. dollar.

Certified technical analyst Jonathan Ravelas of PH Resorts Group fears it could hit the PHP 65 level against the U.S. dollar in one to three years.

Whatever money we have in the bank loses its value correspondingly.

Now we are coming to terms with what used to be an unfamiliar economic condition characterized by the simultaneous occurrence of slow economic growth, high unemployment, and rapidly rising prices.

The Middle East oil price shocks and peso depreciation are blamed as the primary triggers.

The crisis originated from disruptions around the Strait of Hormuz — between the southern coast of Iran and the northern tip of the Arabian Peninsula — through which nearly one-fifth of global oil supply moves.

Our economists agree, however, that the country is not yet in a technical recession or full-blown stagflation, but they warn that we are at a “danger zone” with inflation hovering around 7.2%.

This is worrisome for low-income wage earners who can no longer make ends meet.

Take it from Philippine National Bank (PNB) chief economist Alvin Arogo: The combination of rising prices and weak growth shows that stagflation risks are present.

No less than President Ferdinand Marcos Jr. has acknowledged that potential stagflation is an active concern for the administration, though his economic managers maintain that targeted structural reforms will help the country pull itself up.

The Philippine Institute for Development Studies (PIDS) recently warned that even middle-income Filipinos who earn more or less PHP 40,000 per month need to tighten their belts further to support their dependents.

We know of neighbors who are just one hospitalization away from falling into poverty, yet they remain invisible in subsidy programs.

We dread imagining the peso weakening further to PHP 100 against the dollar within the next 10 years.

By then, we might no longer buy anything below PHP 1; hence, there would be no more coins stamped with a lesser amount.

It would be crying time over food, shelter, leisure, and transportation costs, among others.

The only immediate beneficiaries may be exporters of local products, as dollar revenues translate into higher peso income.

Today’s youth are not aware of how much our currency has depreciated.

But as a grade schooler in the 1950s, I remember that the U.S. dollar was worth two pesos.

Back then, a piece of candy cost only one centavo.

-oOo-

First five years of MORE Power

IT’S a dream come true for MORE Electric and Power Corporation (MORE Power) President Roel Z. Castro.

I refer to the firm’s coffee-table book, “Illuminating Iloilo: MORE Power’s Grounding Milestones,” which was launched in a hotel last Tuesday.

I remember that day in 2024 when Sir Roel confided to us his idea of coming up with that book to chronicle the first five years of service of MORE Power as Iloilo City’s distribution utility.

The book chronicles the utility firm’s transformation of power distribution services in Iloilo City since it took over operations in 2020.

I eventually turned up as one of the authors tapped to write the book.

More on this later.