THE recent increase in employment may not be enough to ensure higher incomes for Filipinos and guarantee the country’s recovery, according to the Bangko Sentral ng Pilipinas (BSP).
If the incomes of Filipinos in 2021 were adjusted for inflation, the BSP estimated that this would lead to a 10 percent drop compared to the 2018 level. If the income is not adjusted for inflation, incomes would only show a drop of 2 percent in 2021 from 2018. Based on the 2021 Family Income and Expenditure Survey (FIES), the average annual family income reached P307,190 in 2021, lower than the P313,350 in 2018. If this income level is adjusted for inflation, the average annual family income in 2021 would only be P282,080.
“What these highlight is the need to sustain income growth, more so among families which were hardest hit by the pandemic. The improvements in 2021 are much welcomed, but the economy in 2022 is again facing a new round of systemic risk,” BSP said.
“Oil and commodity market disruptions are already eroding purchasing power and can undermine the country’s efforts towards full recovery,” it added in its 2022 Financial Stability Report (FSR).
The decline in earnings, BSP noted, was more pronounced in the National Capital Region (NCR) where average incomes fell 9.2 percent.
The BSP said, however, that the average income of the first five deciles at the national level slightly increased. This could be due to the financial assistance extended by the National Government.
“Unlike the national results, all deciles, except the first, experienced income losses. This is not unexpected, as the region (NCR) accounts for a significant portion of the total Covid-19 cases and is therefore likely to feel the worst impact from the pandemic restrictions,” the FSR stated.
Meanwhile, in terms of expenditure, BSP noted that it “consistently fell across all income deciles.” On average nationwide, household spending saw a decrease of 4.1 percent, BSP said.
The lower-income households, it added, saw a smaller decline in average spending. This still presents a concern given that basic necessities account for the bulk of these household expenses.
There was also a decline in food expenses among these households. It accounted for 58.2 percent of the total expenditure of families in the bottom 20 percent versus 31.9 percent in the upper 20 percent income group in the first semester of 2021.
This could explain the increase in the number of families whose incomes are not even enough to purchase their basic food needs during the pandemic.
“All things considered, the welfare loss from Covid-19 could be summarized by one detail: the pandemic has pushed more Filipino families below the per capita food threshold,” the BSP said.
Recently, the purchasing power of the peso was at its weakest in four years as more expensive food and fuel caused inflation to accelerate to a 14-year high in 2022, according to data from the Philippine Statistics Authority (PSA).
The PSA reported the country’s headline inflation rate reached 8.1 percent in December and averaged 5.8 percent in 2022, the highest since 2008. (See story here: https://businessmirror.com.ph/2023/01/05/ph-inflation-up-8-1-in-december/)
Data from PSA showed the purchasing power of the peso fell by P0.0505 centavos to P0.8674 by the end of 2022 compared to P0.9179 at the end of 2021. This erosion of the purchasing power was the largest since 2018, when it declined by P0.0525 centavos.
This means every Filipino shelled out an additional P13.26 to buy goods worth P100 in 2022. Products worth P100 in 2018, which is the base year used to compute the Consumer Price Index (CPI), cost P113.26 last year (Full story: https://businessmirror.com.ph/2023/01/06/purchasing-power-of-peso-weakens-further/).