Despite the challenging external environment, the Philippine economy remained resilient. However, in the first three quarters of 2022, the economy has inflated due to strong domestic demand.
The conflict between Ukraine and Russia highly affected the world market including the Philippines.
In this article, DZRH News Online provides an overview of significant economic issues that the country faced in 2022.
Ukraine and Russia feud
With the ongoing war between Russia and Ukraine, the inflation rate had increased the way lawmakers expected it due to the continuous oil price hikes.
Last March, former senator Panfilo Lacson stressed that the inflation rate in the Philippines has yet to drop to acceptable levels.
Lacson told DZRH that the inflation rate was at 3.7 percent, which became a huge concern since the acceptable inflation rate was supposedly at two percent.
Lacson feared that inflation will further rise if the government approves a minimum fare hike to prevent the impact of the increasing oil prices on the transportation sector.
Inflation
Highest inflation record
The Philippine Statistics Authority (PSA) recorded the highest inflation rate in the Philippines since 2008, soaring to 7.7 percent in October 2022.
It surpassed the recorded inflation rate of 6.4 percent in September 2022, further accelerating in the National Capital Region (NCR).
The primary commodity group to contribute to the uptrend of the national inflation were food and non-alcoholic beverages at 9.4 percent from 7.4 percent in September.
In November 2022, the inflation rate climbed up to 8.0% PSA Deputy National Statistician officer-in-charge Divina Gracia Prado said that the inflation rate was the highest since November 2008.
Inflation remained to elevate throughout the year
According to the Department of Finance (DOF), the inflation rate in the Philippines would remain elevated until the end of 2022.
The DOF stated that the high inflation may remain throughout the year due to the impact of typhoon Karding, transportation fare increase, the effect of peso depreciation, and higher demands during the -ber months.
Inflation as measured by the headline rate in October exceeded the September 2022 average of 6.4 percent.
According to PSA data, the average inflation rate from January to October 2022 was 5.4 percent, up from October 2021's inflation rate of 4.0 percent.
Food and non-alcoholic drinks, which increased from 7.4% in September to 9.4% in October, are the main commodity group that has contributed to the upward trend in national inflation.
Following this were restaurants and lodging services at 5.7 percent, followed by housing, water, electricity, gas, and other fuels at 7.4 percent.
President Marcos: Inflation is rampant and uncontrollable
The skyrocketing inflation in the Philippines is rampant and "out of control," according to President Ferdinand Marcos Jr.
Despite the soaring number of inflation, the president was still confident to say that the country's economy is still on track, maintaining its strong economic performance.
The president assured that his administration is united to ensure that the country will become a viable and sustainable destination for domestic and foreign investors.
Oil price surge
Oil price rollbacks/hikes
Rollback
The Department of Energy (DOE) - Oil Management Bureau looked forward that the prices of petroleum products will continuously drop due to oversupply.
As explained, the United States and European countries controlled the demand for duel products through interest rate adjustments.
According to DOE Director Rino Abas, the enforced lockdowns in China to curb the widespread of COVID-19 made an impact on the demand for oil products, however, he also warned that there could be a change of direction of oil price adjustments in the upcoming ministerial meeting of the Organization of the Petroleum Exporting Countries (OPEC).
Price hike
After a series of oil price rollbacks, petroleum products were expected to increase in the following weeks. The price hike was an effect of the petroleum product price increase in the world market.
Meanwhile, Independent Philippine Petroleum Companies Association (IPPCA) chairperson emeritus said that with the price hikes, people might use alternative energy resources such as electric cars, making it reduce the reliance of various countries on oil.
Oil Deregulation Law
Lawmakers opened a review of the Oil Deregulation Law to allow the government "intervene" despite fuel price hikes.
With the law, the government's authority to control oil prices has been removed, making oil companies become more competitive, however, preventing the government to take more actions amid soaring oil prices.
Reviewing of the Oild Deregulation Law was part of the government's medium-term response to the ongoing feud between Ukraine and Russia - the latter key crude producer.
Weakening of the Philippine peso against the US dollar
Positive effects
According to former Finance Secretary and congressman Gary Teves, there is a positive effect on the weakening of the Philippine peso against the US dollar.
He noted that the depreciation of peso may be beneficial to overseas Filipino workers (OFWs) and their families, explaining that it may add at least P400 or P500 to every $100 that they send to their families.
Teves added that the depreciation of peso will urge business establishments to focus on exporting products outside the Philippines, but gave a warning of its effect on affecting foreign debt of the national government.
Effect on water rates
The weakening of the Philippine peso against the US dollar may leave an impact on water rates, said the Metropolitan Waterworks and Sewerage System.
According to MWSS Chief Regulator Lester Patrick Ty, the foreign currency differential adjustment (FCDA) was eliminated from the water bills that Maynilad Water Services and Manila Water Deal invoiced their customers after MWSS signed a fresh concession agreement.
The FCDA enabled concessionaires to recoup losses or forfeit gains brought on by changes in foreign exchange rates.
