top of page

The Rise (and Occasional Fall) of Inflation in the Philippines

Amidst skyrocketing prices (then and now), we are faced with a sobering reality that was, is, and will constantly be with us—inflation.


How’s that pandesal you usually have for breakfast or even for meryenda? Surely, there’s no problem with the taste, as pandesal is pandesal; whether you pair it with egg, cheese, various spreads, or simply dunk it into coffee. This local bread definitely hits the spot as far as the vast majority of Filipinos’ diet is concerned. But have you noticed certain changes in your favorite pandesal lately? A bit smaller and, more significantly but sadly, a bit pricier, right? In this case, “pricier” is the key. Unfortunately, such a price increase has not only been observed currently in bread but also in virtually all goods and services we can think of: rice and grains, sugar, poultry and livestock, grocery items, clothes, petroleum products, haircut, medical and dental services. Amidst skyrocketing prices (then and now), we are faced with a sobering reality that was, is, and will constantly be with us—inflation.


Economists define inflation as the general rate of increase in prices across a country’s economy, in which the following basic formula is used: (current price – former price)/former price. In layman’s terms, this concept simply states that the prices of goods and services in the current month or year, for example, have increased by a certain percentage from those in the previous months or years.

To further illustrate, the typical price of a piece of pandesal in 2021 was Php2.50 but its 2022 price is Php3.00, with the increase caused by various factors, including (as expected) price increases of flour, sugar, and other ingredients; liquefied petroleum gas (LPG) and electricity for baking; salaries of bakers; and diesel/gas for deliveries.

Consumer Price Index. One of the most common tools to measure inflation rates is the consumer price index (CPI). CPI is used to assess the weighted average prices (i.e., retail prices) of a “basket of goods and services,” which refers to consumers’ primary needs, including food, housing, clothing, medical care, and transportation.

Economists calculate CPI by considering price changes for each item in the predetermined “basket” and obtaining the average based on the relative weight in the entire basket.

Purchasing Power. Inflation is generally associated with a decrease in purchasing (or buying) power, which is the value of a unit of currency (or money) expressed in terms of the number of goods and services that can be bought over a certain period. As inflation increases, purchasing power decreases because rising prices decreases the number of goods and services that people can buy. Again, to use the price of pandesal in the preceding paragraph as an example, one’s Php10.00 in 2021 can buy four pieces of pandesal but the same amount can only buy three pieces in 2022. Evidently, the buying power of Php10.00 in 2022 is definitely weaker than that in 2021.


The mechanism that causes inflation is generally classified into three types: demand-pull, cost-push, and builtin inflation. These classifications are ultimately based on the fundamental economic concepts of supply and demand. Demand-Pull Inflation. Demand-pull inflation occurs when demand for goods or services increases but supply remains constant. When people make more money, the corresponding increase in purchasing power enables them to buy more than they could previously. Inevitably, prices are “pulled up” because demand for goods and services increases more rapidly than the capability of companies to produce them. Cost-Push Inflation. Cost-push inflation is the outcome of the relatively limited supply of goods or services, possibly caused by various natural disasters and/or man-made events, but demand for such remains the same. Hence, companies are hindered from producing sufficiently to keep up with consumer demand, thereby resulting in prices being “pushed up.” Built-in Inflation. Built-in inflation refers to people’s expectation that present inflation rates will continue in the future. The possible result of such an expectation is the demand for higher wages to maintain a certain standard of living, which, in turn, causes higher costs of goods and services.

CURRENT INFLATION IN THE PHILIPPINES: ‘WE’RE NOT THAT HIGH’ President Ferdinand R. Marcos, Jr. recently commented that “We’re not that high,” referring to the country’s 6.1 percent inflation rate for June 2022, as reported by the Philippine Statistics Authority (PSA). Or are we? On July 5, 2022, the PSA reported that the 6.1 percent inflation rate in June was higher than those in May 2022 (5.4 percent) and June 2021 (3.7 percent), and the highest since the recorded 6.9 percent and 6.1 percent in October and November 2018, respectively. June 2022 inflation rate for the National Capital Region (NCR) also increased to 5.6 percent from 4.7 percent in May and 2.6 percent in June 2021. Areas outside NCR likewise had a similar general increase in the inflation rate (6.3 percent from 5.5 percent and 4.0 percent in May 2022 and June 2021, respectively). The PSA report indicated that the higher inflation rate in June was primarily driven by higher annual growth rates in the prices of food and non-alcoholic beverages (6.0 percent), transportation costs (17.1 percent), alcoholic beverages and tobacco (7.8 percent), and housing, water, electricity, and gas and other fuels (6.6 percent), among others. Note that economists also expect that the continuing conflict between the Russian Federation and Ukraine will cause the global prices of petroleum products and wheat to remain elevated in the near term, thereby affecting the prices of goods and services dependent or based on these commodities. Meanwhile, aggravating the situation was the announcement of National Statistician Dennis Mapa that the purchasing power of the Philippine peso (Php) has declined. That is, Php1.00 in 2018 is worth just Php0.87 in June 2022.


Department of Finance (DoF) Secretary Benjamin Diokno has endeavored to allay the public’s apprehensions and assured “that the government is diligently working to maintain price stability.” He added that “the recent acceleration of inflation will be arrested by the government through addressing constraints in the food, energy, and transportation and logistics sectors.” In response to Marcos, Jr.’s comment on the June inflation rate, Diokno clarified that the president referred to the full-year inflation rate, in which the year-to-date average (as of June 2022) is 4.4 percent. The Bangko Sentral ng Pilipinas (BSP) and Development Budget Coordination Committee (DBBC) had earlier indicated that current inflation figures (as of June 2022) are within their forecast range of 5.7 percent–6.5 percent for June 2022 and 4.5 percent–5.5 percent for the full-year forecast. Diokno reiterated that the high inflation rate is not only a concern in the Philippines but globally. “Among our peers, Indonesia’s overall inflation climbed to 4.4 percent in June from 3.6 percent in May. Thailand’s inflation rate increased to 7.7 percent in June from 7.1 percent in May. Inflation in the Euro zone, which includes Germany, Italy, Spain, etc., stood at 8.6 percent in June, the highest in 11 years. The United States’ inflation rate in May reached a 40- year high of 8.6 percent.” Meanwhile, among the immediate measures of the government to address the impact of inflation are the provision of a Php6,500-worth of fuel subsidies for public utility vehicle (PUV) operators and drivers and the importation of products that are in short supply. Diokno further explained that these and other similar measures have been implemented in past administrations.


Clearly, the effects of the recent rising inflation rates are being felt by virtually all sectors of society. But despite Diokno clarifying Marcos, Jr.’s comment, we go back to the president’s comment: that although a 6.1 percent inflation rate is “not that high,” it is certainly the highest, so far, in 14 years or since 2008 (8.26 percent, during the Asian financial crisis). Although 6.1 percent is considered a “walk in the park” if we go by raw numbers, a developing country like the Philippines simply cannot be complacent that everything is well and that the country is doing fine, particularly given that the government’s target inflation rate for 2022 is from 4.5 percent to 5.5 percent. Looking back at the country’s recent economic and financial history presents a telling realization: numbers do not lie. Inflation numbers in the past actually provide us with a glimpse of where the country stood (or stands presently) as far as its economy and finances are concerned. From 1960 to 2021 (62 years), there have been 30 years when inflation rates were above 6.1 percent, and 16 years when there were double-digit inflation rates. However, of particular interest are certain periods (i.e., consecutive years) in the 62 years when the Philippines practically recorded double-digit inflation rates, which were the result of the prevailing developments in those periods. The period 1979 up to 1985 is of particular interest. Debt-driven growth that eventually led to a debt crisis, global oil shocks, economic mismanagement, and problems with the exchange rate all contributed to high inflation rates. The eventual sustained slowing of economic activity coupled with a staggering 50.34 percent inflation led to the 1984 stagflation—sustained economic stagnation along with high double-digit inflation. Double-digit inflation persisted in the mid-to-latter part of the Cory Aquino administration, peaking at 19.26 percent in 1991. Slow economic growth exacerbated by a massive power crisis as well as natural calamities and persistent coup attempts proved to be the main culprits.


Is there a silver lining somewhere in the case of rising inflation rates in the Philippines? Can we still enjoy our favorite pandesal? Evidently, the majority of the burden should be carried by the government, specifically by providing the needed leadership to enable the country to navigate the intricacies of inflation. However, we as citizens also have a role in mitigating its impact on our daily lives. Creating a budget, exploring and pursuing other sources of income, reducing expenses, investing, and even paying the correct taxes are among the strategies that everyone can apply to address our current situation. At the end of the day, there is a silver lining that will eventually still let us enjoy our pandesal for breakfast or meryenda.

bottom of page