Inflation Is the Grinch Stealing Christmas in Philippines

Underprivileged families queue up to receive free bags of Christmas food items from a philanthropist in Manila. (File Photo: NOEL CELIS/AFP/Getty Images)

By Claire Jiao and Siegfrid Alegado

Christmas will be a little less merry this year for Filipinos as soaring prices force many families to scrimp on festive food and gifts.

While inflation is starting to ease, hosting the traditional Noche Buena Christmas Eve dinner in the Philippines is still going to cost a lot more than a year ago. Items like glazed leg of ham, quezo de bola (cheese encased in red wax), fruit cocktails and cream, are about 5 percent more expensive, said Steve Cua, who heads an association of 23 supermarkets. Juices have gone up by at least 10 percent and sodas have increased a whopping 45 percent.

(Source: Bloomberg)

Key Points

  • Consumer prices rose 6 percent in November from a year ago, easing for the first time in 11 months, a report on Wednesday showed
  • Economists had estimated 6.3 percent. Inflation was 6.7 percent in October and September, the fastest pace in nine years

“I used to buy individual gifts for all extended family members,” said Patricia Chiu, a media professional in Manila. “Now, I’m giving just one per branch of family. So I’ve cut down from around 20 or more gifts to four.”

December is typically a strong month for consumer spending with workers receiving a legally-mandated extra month of pay, while remittances from abroad are usually a record.

Good Tidings?

The new year may bring more cheer, with a drop in global oil prices helping to ease overall inflation. Bangko Sentral ng Pilipinas last month predicted inflation will return to the target range of 2 percent to 4 percent next year after breaching the goal this year.

The government is also taking steps to control price increases for basic commodities. It rolled back a Manila transport fare increase implemented in November and a bill to ease rules on imports of rice, a staple food, is set to be signed by the president this month.

The price respite would ease pressure on the central bank, which has already raised its key rate 175 basis points since May, among the most aggressive increases in Asia. The peso has also recovered, gaining more than 2 percent this quarter. Policy makers will meet to decide on rates next week.

(Source: Bloomberg)

“Easing inflation will definitely decrease pressure to increase rates,” Masyita Crystallin, an economist at DBS Group Holdings Ltd. in Jakarta, said before the data. “However, the Philippines still needs to catch up to make real rates competitive, as currently real rates are negative,” she said, referring to inflation-adjusted interest rates.

Still, in this predominately Catholic country, Christmas is Christmas, and Manila resident Lucita dela Peña plans to defy the higher prices by seeking bargains out of town or switching to cheaper brands for the yuletide feast.

“We don’t want to change a thing, even though it is getting more expensive,” said the 53-year old government worker, who hosts more than 20 relatives for the family dinner. “This is our family tradition and we want to continue it.”

 

© 2018 Bloomberg L.P