Admittedly it’s largely a seasonal effect and not one directly caused by what Herculean efforts the administration of Rodrigo R. Duterte is already busy doing to mitigate the debilitating effects of inflation. It is inflation caused both by uncontrollable external factors on one end and gross mismanagement of agricultural resources, particularly the incompetent management of our rice resources, on another.
Check out the concepts and the calculus.
Rice is a staple, and among the basket of goods that are metrics for the consumer price index (CPI) that tracks inflation, it is one of the most substantive. Among the factors that have contributed to the debilitating inflation we have now, we have petroleum prices over which we have little control, and then there’s domestic rice supply on which we have a relatively better handle.
On the former we are compelled to surrender to harsh geopolitical realities. On the latter, our ineptitude in fumbling the agricultural portfolio should not go unpunished or even unaddressed.
Throughout, we have an economy all too vulnerable.
Fortunately, there are uncontrollable forces that work in our favor. As we move towards the yuletide season in this last quarter of 2018, the dark clouds above will be parting and making way for a brighter, more luminous horizon.
In no particular order, allow us to view some of the increasingly brighter lights that definitely declare the economic negatives we are experiencing are temporary and do not deserve costlier permanent fixes that perpetuate, if not aggravate, structural imbalances.
One positive factor is the increase in consumer activity towards the end of the year as supply increases to accommodate demand. On both sides of that equation we see upsides.
Increased demand increases consumerism. Towards the yuletide, consumers buy more goods, more food, more clothes and even more of everything else that may or may not be among the traditional basket of goods that make up the CPI.
When we analyze the economic drivers in the expense method used to compute gross domestic productivity (GDP) growth, household consumption is certainly a significant factor. A seasonal increase in the expenditures is likely to give the yearly average GDP a much-needed kick.
Another positive factor at this time of the year is consumer empowerment from bonuses, 13th or even 14th to 15th month pays for employees. This fuels consumerism on the statistical and empirical side of the mathematics of the season. But more than that, where psychological outlook is concerned, the extra money in their pockets gives the public a positive sense of well-being and a realization that economic downsides are temporary.
Similarly, there are positive factors on the supply side. Manufacturing output revs up an extra notch in anticipation of seasonal demand. That signals not only higher employment hours for plantilla workers but for contractual employment as well, all throughout the value chain from manufacturing to retail sales.
On the financial side, there is an increased incidence of availments and drawdowns on stand-by letters of credit and pre-approved lines that augur well for financial intermediaries and banks. After all, funds inside vaults and those locked up as reserves awaiting employment do not earn the kind of interest a debtor can pay. Drawdowns put dormant money to good use and thus increase productivity.
Also on the financial side, the last quarter traditionally experiences a seasonal uptick in inward remittances from our overseas Filipino workers, as well as from Filipino businesses with offshore units. The former remits home excess earnings and the latter remits home equity income to shore up local balance sheets in time for year-end closures. The former fuels consumerism. The latter boosts domestic asset values.
As inward flows are denominated in dollars, the inflow relative to the current value of the peso should give the local currency a booster shot and thus perhaps increase purchasing.
Ceteris paribus, these augur well for us.