Inflation and peso in focus as risks rise in early Marcos

(Bloomberg) – The Philippine currency plunging to a record low and inflation at its highest level in four years took center stage at the start of President Ferdinand Marcos Jr’s term, risking a faster economic recovery and his popularity .

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The country’s central bank has embarked on one of the most aggressive monetary tightenings in the region to contain price pressures, which, if left unchecked, tend to stoke discontent. In the survey conducted by Pulse Asia Research Inc. last month, managing inflation was respondents’ top priority and almost half disapproved of the government’s performance.

“The recovery story is holding up and the fundamentals are strong, but that could quickly take a turn if inflation and depreciation spin out of control,” said Dan Roces, an economist at Security Bank Corp. Close coordination between the government and the central bank is “paramount”, he said.

Marcos, who came to power after a landslide victory, said he would prioritize protecting purchasing power by managing inflation and improving food security. He called his government “functional” after appointing technocrats to manage the economy.

He faced a shortage of sugar and salt in his first 100 days in office, while prospects for the local rice crop dimmed after a recent typhoon.

Here are charts that track the economy in Marcos’ early days:


The Southeast Asian nation is vulnerable to global price shocks as it imports key commodities including fuel and rice. To mitigate the impact of high prices, the government has pledged to accelerate fuel rebates and cash transfers to the poor, while Marcos plans to buy fuel from Russia.

These moves will take time to be felt by the public, said Jonathan Ravelas, chief executive of consulting firm eMBM Services. ” It is a work in progress. We are simply caught in a global storm of inflation and high interest rates. Without the war in Ukraine, the government would actually have made gains. »

While Marcos likely retained strong public support in his early months, how he tackles issues affecting purchasing power could impact his popularity going forward, political scientist Cleve Arguelles said.

Falling pesos

As the peso plunged, the country’s main stock index entered bearish territory. About $34 billion in stock market value was wiped out in September due to fears of a global recession.

While a weak currency tends to increase government revenue from import duties, it also makes foreign currency debt more expensive.

Debt and taxes

A windfall from high crude import prices means the customs agency’s collection exceeded targets, boosting total tax revenue by 28% from a year ago in August.

This helps offset the higher cost of borrowing for the Office of the Treasury which had to reject bids at recent auctions to cap yields. The government recently raised $2 billion in the global bond market.

Marcos had pledged to reduce the debt-to-GDP ratio to 61.8% by the end of the year before bringing it further below 60%, a commitment the government must keep to keep the rating. current debt, if not improve it.

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