Friday August 17, 2018

Villanueva: Up, up and away!

ALMOST, if not all, prices of goods & services in the country have increased. The inflation rate last April is already at 4.5 percent. It was 4.3 percent the previous month and 3.2 percent same month last year.

This means that the prices of goods and services in the economy have increased by that much. That percentage is beyond what was earlier projected by the Bangko Sentral ng Pilipinas (BSP).

Ideally, a stable inflation rate is within two to five percent. So, the Philippines’ inflation rate is within the ideal range, however, it is still alarming because it is nearing the five percent threshold, and BSP’s new projection is that inflation will reach six percent until the end of the year, and the disparity from the previous year’s rate is more than one percentage point.

Fingers are all pointing at the Train Law for these price increases for imposing new taxes and increasing some existing taxes. However, government economists are quick to defend that these price increases are just transitory (or simply temporary) and prices will later on stabilize.

There is a smorgasbord of products where their prices have increased. I do not want to enumerate each one of them, but in order for us to have context and/or clearer understanding of what is happening to our economy, I am listing a few things whose prices have increased, are increasing, or will increase.

About one and a half month ago, the increase in the taxi fare rates was implemented in the City of Baguio affecting thousands of commuters who regularly ride taxi cabs. This adjustment was justified citing the increasing fuel costs. As a result, there were many who decreased their taxi cab rides and decided to take public utility jeepneys (PUJs) instead, in order to cut down on their expenses.

Just when commuters resorted to PUJs as a cheaper alternative to taxi cabs, representatives of various jeepney operators & drivers association in the region have submitted a petition to increase the minimum jeepney fare to P14 from the current P8.50. The LTFRB was scheduled to conduct a hearing regarding this petition the other day, but was extended to give more time for petitioners and those opposing the petition to submit additional documents to support their arguments.

One of the reasons for these fare increases is the higher cost of fuel.

Prices of gasoline, diesel and other petrol (fuel) products have been observed to have an increasing trend. As a matter of fact, the price of gasoline here in Baguio is already within P60-65 per liter, while diesel costs a little less.

The increasing prices are due to the higher world price responding to the higher demand for petrol worldwide. On the other hand, progressive groups have identified the excise tax imposed on petrol products due to the Train Law exacerbated the spike on fuel prices. Despite several price rollbacks implemented by the petrol firms, the almost weekly increases are much higher so that the net increases are still substantial, and the decreases are almost negligible.

The Peso-US Dollar exchange rate has breached the P52.50 level during trading. Yesterday’s close was at P52.40:US$1. A year ago, just for comparison, the exchange rate was around P49.70 to the US Dollar. The exchange rate at present is higher than the rates last year.

Unfortunately, for the exchange rate, higher does not necessarily mean better. This only means that the local currency has depreciated (the decrease in the value of the currency), however, Digong’s economic managers are not yet calling this phenomenon as such.

In most cases, the higher exchange rate is detrimental to our economy.

This would mean that we would spending more pesos to pay for imported goods we bought. Most of the raw materials used by our manufacturing sector are imported. Petrol are also imported. It is already bad that world prices of petrol are increasing, and the depreciating peso made it much worse, resulting to relatively higher prices of petrol in the country.

Since raw materials are more expensive and petrol for transporting goods are more costly, the cost for producing and selling goods have increased. As a result, the selling price of goods will also increase as the producers also need to defray the cost they have incurred, otherwise, they will lose and eventually close shop.

The higher exchange rates may be advantageous for the OFWs and their families. Remittances the families are receiving from abroad may seem to be more, however, if prices of goods in the market are more expensive, their real income will be much lesser. They will be able to buy less number of goods with the remittance they receive.

It seems that prices of most goods and services in our economy are increasing, but the salaries/wages of people remain the same. The Train Law has not really helped with the lowering of income taxes, since the most affected by the increasing prices are the ones whose income did not adjust because they are exempted from paying tax in the first place. Their take home pay is still the same.

What now will happen to them when everything is going up, up and away, but their lives are going down, down the drain?

While this government with the best and brightest bureaucrats are still stuck with their war vs. drugs, are busy tricking the citizenry gaining riches for their own family from government advertisements, are travelling around the world giving 2-minute keynote addresses, and are taking videos of their stupidity in handling diplomatic affairs.

While our President is selling his soul and our country’s natural resources to China for more money that his cohorts will pocket, leaving the poor Juan to die a slow, painful death as he tightens tighter and tighter his belt as everything goes up, up and away!