RedBlueThoughts

BSP deputy governor Diwa Guinigundo finally let the cat out of the bag. He says that RP inflation would hit double-digit (possibly 12%) by this month, lasting up to the first 3 months of 2009. Lower consumer spending, effects of the US sub-prime crisis and the continuing rise of fuel prices are affecting the country’s inflation rate. Anticipating this, bankers are encouraging the Bangko Sentral ng Pilipinas (BSP) to hike interest rates. On a short term, this would be mean slower economic growth, possibly even lower than the 5.2% predicted by the Asian Development Bank for the country.

With a slower economy, companies will begin downsizing since it also means cutting down on production. With that, the possibility of a ballooning unemployment scenario is there. Unemployment rates may rise due to this. Hence, more families crossing the socio-economic line from middle class to the poorer classes.

Gloria tries to ally fears of further economic slowdown by saying that government is ready to share the fruits of VAT by infusing 4 billion pesos more for socio-economic programs. This may mean additional funds given directly to the poor to pay for electricity bills and higher costs of rice. While government subsidize the needs of what they perceive as those directly hit by the crisis, middle class families are left in their own devices. No subsidy or financial assistance is being extended to the middle class, which could prove to be disastrous in the end since they are the bigger consumers or spenders for goods and services.

So, expect a not so bright Christmas for everybody since the BSP already told us that inflation will continue to rise until 2009.

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