Bracing for another round of recession
The Philippine economy went into the longest recession in recent history when the Duterte administration imposed the longest and most stringent COVID-19 quarantine restriction in Asia during the first two years of the pandemic.
Just as we see industries and businesses start to make a rebound in the Philippines, talks about the impending collapse of the US economy become abuzz, with telltale signs such as the housing sector starting to roll over, and ‘exploding’ inventories which means businesses are not able to sell enough, layoffs in multiple industries, and US Fed stuck with the strategy of having to interest rates until inflation rolls over. Europe is going to follow according to some expert forecasts.
The Philippines is not immune to what the rest of the world has experienced, and its vulnerability is higher than other countries. We experienced exponential increases in the prices of petroleum products, food, farm inputs, utilities, and many more. The BSP responded similarly to the US Fed and other central banks by increasing interest rates.
What does this mean to the ordinary Boholano?
The recession’s most immediate and tangible impact is the risk of losing our job or livelihoods. The successive interest rate hikes will discourage spending. Higher interest rates will encourage people to postpone using their money due to higher prices of commodities and better incentives for saving courtesy of higher interest rates. As a result, demand will contract, forcing businesses to cut back on costs and expenses. Cost-cutting measures will lead to layoffs, many people will become jobless, and there will be widespread poverty and hunger across the country.
The government must intervene to provide social protection to the most vulnerable sectors. This was done during the lockdowns in the early part of the pandemic. But one of the bitter pills we have to swallow is that government funds are never enough to provide aid to everyone.
There are a lot of risks that accompany the impending recession. It is high time that we should learn to identify these risks and find strategies to mitigate their impact on our families. During times of financial crisis, the rule of thumb is always to distinguish between our needs and wants and to set aside our wants during times of crisis. Let’s not forget to live within our means. Even without an economic recession, spending beyond our means has always been the root cause of financial disasters.