"Authorities should be on their toes to check rising prices."
The Philippines will ultimately join the global economic recovery bandwagon as more vaccines are rolled out across the country. Our economic managers predict a 6-percent to to 7-percent economic rebound this year, mainly because of the low base effect or after coming out from a deep contraction for two-thirds of 2020.
The global economic recovery is starting to shape up, especially in the United States, the United Kingdom and the rest of the Western world which had the first shot at several COVID-19 vaccines. More and more are being inoculated in that part of the world, giving their governments a legitimate reason to re-open their respective economies at a faster pace.
More restaurants in the US, for example, are opening their indoor spaces for customers while tourism activities are beginning to emerge in the UK and Greece after months of lockdown. With laxer quarantine rules, more people are coming out of their homes and participating in the economy.
A pent-up demand, however, is to be expected from the economic re-opening after the reduced spending induced by the pandemic. This economic condition can lead to a surge in inflation and prompt financial authorities to eventually stop their stimulus programs that offered historically low interest rates.
The inflationary pressure being exerted by the economic reopening has naturally worried many stock market investors and private companies that have enjoyed the regime of low interest rates. Monetary authorities may take a pause to rein in inflation. Prices will expectedly rise as consumers go back to their old spending habits and as more workers rejoin the labor force.
Here in the Philippines, household spending will start to rise as the economy re-opens further. Consumers will regain their confidence to spend more as the vaccination program progresses. And as more retail outlets, fast-food restaurants, tourism establishments and offices are re-opened, the spending cycle will return to fuel the economy.
Higher inflation, though, accompanies economic growth. Authorities should be on their toes to check rising prices in order to preserve the economic recovery.
