Inflation rates in the Philippines next year are projected to be milder than in 2008. Must be good news. But what do I care? You and I should at least keep track of this economic indicator once in a while. We may earn in currencies that when converted give us loads of pesos, but when inflation rates are red-hot, we lose. Okay, lemme listen to my pea-sized economist part of my brain.
With lower inflation rates, the Bangko Sentral ng Pilipinas can have more room to cut interest rates. That's because the Bangko Sentral has to see to it that inflation in the country does not zoom and bring the entire economy down like in Zimbabwe (hehe, that's a bit too much of a picture). When inflation rates are high, central bankers keep interest rates high. That's the way it works although there are other factors.
One other factor is the strength of the Philippine peso --- yes, that's your money, like it or not. When abang piso is depreciating or under attack by speculators, the central bank's got to raise interest rates or maintain high interest rates. That's because high borrowing rates will deter speculators from taking out peso loans to speculate in the money market.
(Teka muna, a weak peso means a more attractive forex for my remittances. But that's another story.)
Anyways, a milder inflation rate is good for us, whether we live in the Philippines or not. We send money home and we want our loved ones to be able to buy more with the money we send. And over the long haul, a milder inflation rate will do us good in terms of our ability to consume goods and services with the retirement money we're setting aside for the future (I shouldn't be talking retirement here because I've not really started preparing for it).
Tama ba ako?
Below are quotes from Bangko Sentral governor Amando Tetangco Jr in an interview with EuroMoney:
(outlook for 2009)
"The economy, while definitely affected by the challenges facing global markets, has proven to be quite resilient and has done better in relative terms than many other emerging makets. For example, we saw a respectable growth rate for the first three quarters of 2008 of 4.6%. The banking system has also been resilient, for a couple of reasons.
...local banks' exposure to foreign financial institutions is fairly minimal, so going into 2009 we are in a better position despite the fact that there will clearly be challenges ahead. the government has revised its estimate for gdp growth for 2009: between 3.7% and 4.7%, down from a range of 4.15 to 4.8%.
What's helping us is that inflation has started to come down because of declines in food and oil prices, so that gives us more room from a policy standpoint.
...Inflation picked up in 2007 as food and oil prices rose, and now it's started to come down. We forecast an average between 9% and 11% for 2008 and for the first11 months its been 9.4%. For 2009 we think we'll see a single-digit inflation rate, with a forecast average of 6% to 8%. Towards the end of the year it could be as low as 4% to 5%. We announce targets on a two-year basis, so for 2010 the target is 4.5% plus or minus 1%.
::: THE PICTURE: My condo, if you're not aware yet, will be the envy of my neighbors. Expensive. Like in any house owned by the rich, some fire-fighting gizmo must be installed inside the unit.
::: First time to visit this blog? You'll have a better idea of what this blabber is all about if you click on previous entries below.
I bought a house
Poor guy signs a cheque for 4m++ pesos
::: btw, i found very good and interesting reads on these sites.
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