Surging inflation has dampened the spirit of small businessmen but they remain optimistic the Philippines will weather the latest blip in the economy.
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When the inflation rate in July rose to 5.7 percent, the country’s largest groups of businessmen and micro, small and medium enterprise despaired. They could not help it but raised their hopes that consumer prices would taper off.
Philippine Chamber of Commerce and Industry chairman emeritus Francis Chua believes the inflation rate will soon reach its peak and make a gradual descent.
The business sector, he said, though bracing for things to come, remained upbeat the Philippine inflation would abate to give industries a degree of stability to recoup production costs, profit a little and expand, if possible.
From 4.6 percent in May, the inflation rate in June rose 5.2 percent and reached a five-year high of 5.7 percent in July.
Many sectors quickly blamed the Tax Reform for Acceleration and Inclusion, or TRAIN, law but businessmen like Chua were positive that once fully rolled out, the measure would stabilize the economy and prices.
Chua said the law had not even scratched the surface of all the reforms needed to stabilize the economy.
Chua downplayed the increase in demand for goods and services that normally occurs in the last quarter of the year, saying higher consumer spending would neutralize the expected rise in prices and demand.
He added the Bangko Sentral ng Pilipinas was taking monetary actions to help bring down inflation rate to tolerable levels.
The country’s exporters, meanwhile, said it was important to keep inflation down to help sectors vulnerable to the fluctuation of prices.
The private sector, especially the exporters’ group Philippine Export Confederation, says rising inflation rate must be checked to make local manufacturing and export activities more competitive.
“If we have to grow, we have to allow certain amount of inflation. It is not good to limit the flow of money, neither is it good limit credit. Remember 99.6 percent of our sector are MSMEs. This segment is credit-starved and the more the financial sector tighten its reins on credit, it will be more inflationary for our MSMEs,” said Philippine Export Confederation president Sergio Ortiz-Luiz.
He added the July inflation of 5.7 percent was not something to be frightened of.
“For a growing economy like ours, this level of inflation, if not at all that different from our neighbors, is still acceptable. Before in the ‘90’s, inflation hit double-digit, but we survived. There’s was even a study we commissioned in the past that says an 8-percent inflation rate is still manageable,” he said.
He stressed that the Philippines, at this point of economic growth, should not strive that hard to restrain inflation rate to 2 percent to 3 percent, citing that this would be disastrous to select industries and sectors “although some sectors are okay with that.”
While inflation was not much of a factor in exports, the foreign exchange rate was a key player in the growth of the economy, he said.