News stories from across the nation. Visit www.bworldonline.com (section: The Nation) to read more national and regional news from the Philippines.
By Reicelene Joy N. Ignacio
Reporter
THE OVERALL RISE in prices of widely used goods likely slowed from a year ago in May though it could have steadied at April’s 16-month-low pace, according to a poll of economists late last week, even as the central bank’s estimate on Friday bared expectation that May could have paused a monthly inflation decline seen since November 2018.
A poll among 11 economists yielded a three percent estimate median, lower than the 4.6% inflation recorded in May 2018 and flat from April that was the slowest in 16 months or since December 2017’s 2.9%.
The Bangko Sentral ng Pilipinas’ (BSP) Department of Economic Research said on Friday last week that it expected May inflation to come in at 2.8-3.6% when the Philippine Statistics Authority reports official data on June 5.
A sustained slowdown in inflation coupled with a disappointing four-year-low 5.6% gross domestic product growth last quarter prompted the BSP’s Monetary Board (MB) to cut benchmark interest rates by 25 basis points (bp) in its May 9 meeting, partially dialing back a cumulative 175 bp hike fired off last year as inflation spiked.
The MB followed the May 9 rate easing with a 200 bp gradual cut in banks’ reserve requirement ratio (RRR) that is estimated to free up more than P200 billion for lending when the adjustments are completed in late July.
Emmanuel J. Lopez, Colegio de San Juan de Letran Graduate School dean, said in an e-mail: “I surmise that inflation rate for May has further gone down to 3.4% because prices remain stable despite intermittent oil price hike. Interest rate also has gone down, proof that there is no excess money in circulation…”
Robert Dan J. Roces, chief economist at Security Bank Corp., said: “We have been mentioning in the past the upside risk from higher oil prices but this month’s price averages for West Texas (Intermediate) and Brent have decreased 2.29 per barrel and 1.05/bbl, respectively, from last month’s mean. Further, retail pump price for premium gasoline… have fallen by around P1.15 since April 30.”
At the same time, “[r]isks to global oil prices remain… on the back of a prolonged United States-China trade war, Organization of Petroleum Exporting Countries’ cuts and (US) sanctions on Iran and Venezuela.”
“Food inflation has also continued to fall. The BSP has raised concerns about the effect of El Niño on food prices. Yet, despite minor disruptions, El Niño has not affected retail prices… Add to this, the effects to food price easing by the rice tariffication law that boosts imports of rice, ensuring stable supply.”
For his part, Michael L. Ricafort, head of economics research at the Rizal Commercial Banking Corp., noted that “[t]he peso exchange rate versus the US dollar has been confined in a relatively narrow P1 range (mostly at the range of P51.70-P52.70 levels) since the start of 2019 and currently near the lower part of the range… that helps lower prices of imports such as oil, rice, capital goods, other consumer goods, as well as… in easing overall inflation.”
Mr. Ricafort added that a “[h]igher base/denominator of inflation a year ago due to bigger and more price increases in most months of 2018… has mathematically reduced the year-on-year inflation since the start of 2019 and may lead to further easing of inflation for the remaining months of 2019 to the two percent levels or even lower especially in the latter part of 3Q in 2019 to the early part of 4Q 2019…”
Moody’s Analytics’ Katrina Ell said that “[s]ubdued rice prices are an important contributor to the deceleration” while “[o]il prices are an upward contributor.”
“We expect further interest rate cuts from the BSP this year to shore up domestic demand. There’s no need to keep the tightening from last year in place as inflation has cooled and capital is not flowing out of emerging markets as it was last year.”
HSBC, in its Global Economic Calendar, meanwhile said, “We expect headline inflation rose moderately to 3.1% y-o-y in May from 3.0% in April as a result of elevated oil prices and a continued increase in vegetable and fruit prices.”
“All things considered, however, inflationary pressures remain benign and headline prices are likely to hover around the midpoint of the Bangko Sentral ng Pilipinas’ 2-4% target,” it added.
“We expect full year inflation to average 3.1% in 2019, enabling the BSP to further loosen monetary policy in 4Q. We believe the BSP has scope for another 100-bp of RRR cuts and a 25-bp policy rate cut by yearend.”
THE OVERALL RISE in prices of widely used goods likely slowed from a year ago in May though it could have steadied at April’s 16-month-low pace, according to a poll of economists late last week, even as the central bank’s estimate on Friday bared expectation that May could have paused a monthly inflation decline seen since November 2018. Read the full story.
We are so accustomed to using “growth” to refer to aggregate economic expansion that we forget it is really just a metaphor. It cannot be found in Adam Smith, who spoke instead of the “progress of opulence,” nor a century later even in Marshall who still used “progress” to mean the antithesis of poverty. Keynes used “growth” to denote increases in wealth or population — a proper application to stock-concepts. Harrod may have been among the first to apply the term to the proportionate increase in aggregate income, perhaps illegitimately stretching the metaphor to cover a flow-concept as well. These days, of course, “economic growth” refers almost automatically to increases in measured income.
The original context of growth, however, is biology which, according to Marshall anyway, is “the Mecca of the economist.” What few people are aware of is the link between the metaphorical and the literal — i.e., the economic and the biological — meanings of growth. That is, over the long term, “linear growth” or change in height among humans is actually associated with economic growth.
It was the Nobel Prize-winning economist Angus Deaton (e.g., “Height, health, and development,” 2007) who called attention to the fact that height is associated with economic development. While a genetic element is always involved, human height is everywhere the result of an interplay between nutrition and the disease environment working their effects on genetic material, especially in early childhood. As a result, the average adult height of the population — and more importantly how this changes through time — can be an objective, nonmanipulable measure of well-being. Deaton calls adult height “an indicator of both the economic and disease environment in childhood.” Other researchers since then have found sharper associations between height and income per capita and life expectancy. One paper (Akachi and Canning 2015) finds that across countries a one-centimeter increase in the height of a female cohort is associated with a 6-percent rise in income per capita and 1.25 years increase in life expectancy.
For all its chest-thumping about GDP growth under this or that administration, however, the Philippines has performed dismally in terms of actual, i.e., physical growth. A few years ago, some news articles reported that Filipinos were the shortest people in Southeast Asia. Actually, for cohorts of 1996 (i.e., people who were 18 years old in 2014), Filipinas are the second-tiniest women in the world (149.61 cm. or about 4 ft., 10 and 7/8 in.) after Guatemalan women (149.38 cm.). Adult females elsewhere in the world are at least five feet tall on average. (Data are from the 2016 NCD-RisC study published in the journal eLife.)
An even more worrying trend, as the table shows, is that over the half-century since 1946, Filipino women have in fact shrunk. That is, Filipinas born in 1946 were taller by 1.43 cm. (i.e., 151 cm. tall or 4 ft., 11 and 1/16 in.) when they reached adulthood compared to those born fifty years later. Beginning in the mid-1950s (see figure), for reasons still exactly to be determined, there was a slow and steady decline of female height, reaching its lowest point (149.304 cm.) in 1980. It has gradually risen since, but full recovery still has to be attained. Indonesian women overtook Filipinas in height in the mid-1950s and done so ever since. The Philippine record is anomalous in view of the worldwide trend of increasing stature. Even Vietnam and Cambodia managed to eke out height improvements despite suffering through major wars. The Philippines is the only major Asian country aside from Pakistan where height impairment has occurred (the great majority of other examples being found in Africa).
Why does height matter? The reasons go beyond the merely cosmetic and cultural (e.g., taller people getting the better jobs, or Catriona Grey being 178 cm., although some studies may show that as well). Much of adult height is determined in early childhood and during the crucial prenatal period. It is affected by the state of nutrition of the mother and child, their scarring by disease, the stress and anxiety in their environments, and by general conditions of poverty. Moreover height tends to be inherited, since smaller birth canals of smaller women can accommodate only smaller offspring. Short stature has been statistically associated with cognitive impairment, susceptibility to cardiovascular and other diseases, emotional and inferior adult wages. The jury is still out whether short stature by itself — or the poverty correlated with it — is directly responsible for these effects. What is not at issue however is that a society failing to make progress in height — or worse, retrogressing in stature like the Philippines — “cannot be in a wholesome state,” to use Mill’s phrase. It would mean society was failing to address serious problems of nutrition, disease, and poverty.
Nor is this a problem of some dark bad past that has been gradually overcome. The most recent available demographic and health survey (2015) continues to show a high rate of stunting. One-third of all children 0-5 years old are stunted; and among the poorest 20 percent that rate is 50 percent. These numbers exceed even those of East Africa, the most afflicted region of the world. (Shameless plug: some of these issues are tackled in the forthcoming Philippine Human Development Report.)
To be sure, height for individual persons is not necessarily destiny. The brain’s plasticity, a person’s hard work, and her motivation — to the extent these have not been permanently impaired — may make up for prior environmental, economic, and genetic disadvantages. But then a nation’s history becomes not the story of massive collective achievement and uplift but one of exceptional individuals and isolated geniuses who manage to rise above the mediocre mass. A society that is content to thrive on singular success cannot escape failure as the general rule.
As a postscript: Filipinos have a reassuring theory about small size and scale. Many subscribe to the folk wisdom that smaller is in fact better, reminiscent of the saying that “good things come in small packages.” After all, a small labuyò packs more punch than a green siling habâ; a smaller head of native garlic is said to yield more flavor than big imported ones; a small calamansi is more sour than a large foreign lemon. And so forth and so on. Arguing analogously, therefore, we may have reconciled ourselves to thinking that small stature is not a problem — perhaps it is even a virtue.
But there’s another older name for that meme: Consuelo de bobo.
Emmanuel S. de Dios is O.M. Lopez Professor at the University of the Philippines School of Economics.
