Nikko Jones Planos GE-RPH Group 19, MWF 11:30 AM - 12:30 PM 9/12/19

James Anthony Solatorio

Inflation is defined as a rise in general price level and/or a decrease in the

purchasing power of a nation’s currency. There are several factors exhibiting inflation in

the Philippines throughout the history. These are national debt, demand pull effect, cost-

push inflation, and interest rate.

National debt as a cause of inflation results when a nation decides to borrow

money from an international bank. In return, the nation is forced to raise taxes or print

more money and degrade its value to pay off the debt. Demand pull effect happens when

the demand for goods and services in an economy rises rapidly than the economy’s

capacity to produce them. As a result of the increased demand, companies will raise

prices to the level the consumer will bear in order to balance supply and demand. Cost-

push inflation occurs when prices of production process inputs increase such as rising of

raw materials prices, rising energy prices for production and transportation of goods, etc.

This forces companies to increase prices of goods to ensure profitability. Interest rate is

the proportion of a loan that is charged as interest to the borrower. Lower interest rate

drives people to borrow more money, causing economy to grow and inflation to increase.

How is then inflation related to economic performances of the different Philippines

Presidents? Higher inflation rate indicates a massive increase in general price level

and/or a huge decrease in the purchasing power of the nation’s currency. Using the trend

in inflation rates, one can somehow predict how capable a President is handling the

economy. Let us examine the economic performances of the past Philippine Presidents.

Fidel V. Ramos (1992-1998)

Nikko Jones Planos GE-RPH Group 19, MWF 11:30 AM - 12:30 PM 9/12/19
James Anthony Solatorio
On the first term of the Ramos administration, the Philippines was a country of

poverty and rebellion, yet he was able to turn the tables. In fact, the inflation rate in his

term decreased significantly from a double digit to a single one. President Ramos focused

on the production of goods and services to cater the needs of his people and on the

reduction of the cost of these goods and services. He increased agricultural production

with respect to the increase in consumer. He also solved the power shortage in Luzon by

reactivating a contract with Westinghouse Corporation to restart the construction on a

620 megawatt nuclear power plant on Bataan Peninsula. Moreover, he abolished tariffs

which favoured the poor. By increasing agricultural production and solving the scarcity of

power, President Ramos was able to produce what is demanded of him; thus, minimizing

the demand pull effect. By abolishing the tariffs, he was able to cut down the prices of the

goods and services, promoting deflation.

Joseph Estrada (1998-2001)

President Estrada’s term was a period of corruption, favoritism, cronyism, and

scandal. In fact, foreign investors were turned off by his favoritisim towards Philippine

companies and by his scandals. Foreign companies such as Philips Electronics and

Johnson & Johnson even pulled out of the country. The decrease in investment greatly

affected the countries capacity to produce. Moreover, despite him saying that he was a

friend of the poor, he failed to launch a meaningful anti-poor program. Interest rates even

reached up to 35% which discourages people to borrow and spend money. President

Estrada also took only less effort in building up infrastructures and setting up projects to

cater the needs of the people. All these things lowered the inflation rate negatively – they

deplete the economy.

Nikko Jones Planos GE-RPH Group 19, MWF 11:30 AM - 12:30 PM 9/12/19
James Anthony Solatorio
Gloria Macapagal Arroyo (2004-2010)

The economy under the Arroyo administration faced a variety of challenges from

attracting investments, raising revenues, and price hikes. At that time, the Philippines was

experiencing an energy crisis and was dependent on foreign energy. Meanwhile, there is

an increase in prices of oil which drives companies to raise prices due to the cost-push

effect. Furthermore, the Philippines encountered a ton of typhoons and floods which

greatly devastated agricultural products. The increase demand of these products with

inadequate supply drove the rise in the cost price. With high prices of commodities, the

Philippines was forced to borrow money and was forced to raise taxes in return to pay up

for the debt. This results to the sudden inflation by the year 2004, 2005, and 2008.

President Arroyo tried her best to mitigate the problem by promising to create 10 million

jobs, doubling power rates, and providing clean water and electricity but the plan was

seemingly impossible.

Benigno Aquino III (2010-2016)

The main problem during President Aquino’s term was job creation. In fact,

joblessness was blamed for the country’s 27.9% poverty rate as of June 2013. Due to the

shortage of man power and labor, there is scarcity of supply. In this case, companies

should hire more employees and increase their wages to increase the demand coupled

with the increased prices. In this case, inflation and economic growth would prosper.

However, President Aquino wasn’t able to fulfill this necessity leading to deflation.
Nikko Jones Planos GE-RPH Group 19, MWF 11:30 AM - 12:30 PM 9/12/19
James Anthony Solatorio
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