Glimpse of our Economic State
This phenomenon of the peso being able to buy fewer goods is called inflation. Price increases reduce purchasing power. Inflation happens in all countries; what differs is the inflation rate. In the Philippines, it has been relatively low, about four percent the past year. Problem: Inflation cannot stop. Solution: Income and savings should be growing at a faster rate than inflation. Otherwise, you will feel it more painfully.
It is actually of the US dollar’s weakness that the peso is appreciating. While it is true that the peso improved by about 16% against the dollar last year, the dollar prices of some imported commodities have increased at a much higher rate. For certain agricultural and other locally produced goods, the cost of production and distribution have also gone up higher than the appreciation with peso. Higher gasoline and diesel price, bad weather, and poor logistical infrastructure have caused the increase in product cost. On the other hand, prices of imported goods, particularly manufactured and agricultural commodities from other countries like China, have remained low, or even decreased.
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Posted by Denz
on Jul 4 2008. Filed under blog stuff.
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