Bu-lat-lat (boo-lat-lat) verb: to search, probe, investigate, inquire; to unearth facts

Volume 2, Number 48              January 12 - 18, 2003            Quezon City, Philippines







Join the Bulatlat.com mailing list!

Powered by groups.yahoo.com

Commentary
Peso Loses More Than 2/5 Of Its Value

Most recent data on purchasing power give credence to the militant labor sector’s call for substantial wage hike and the institution of price control, particularly for basic goods.

By DANILO ARAÑA ARAO
Bulatlat.com

Media reported last Jan. 7 the relatively low 2.6% inflation rate in December 2002. According to government, this brings the inflation rate for the whole of 2002 to 3.1%, much lower than the target range of 4.5% to 5.5 percent.

The euphoria is there though government officials provide warning for what the future brings. Socioeconomic Planning Secretary Romulo Neri clarifies that the country’s inflation is expected to increase “in the coming months due to external developments and the possible recurrence of the El Niño dry spell.”

For his part, Central Bank Gov. Rafael Buenaventura stresses that the first half of 2003 would be a very challenging “due to the combined pressure from the brewing US-Iraq conflict, the drought and the budget deficit.”

Their views, no matter how circumspect, still lead the people to ask: What do the current data mean to those who are poor? Does a low inflation rate translate to more buying power?

Low purchasing power

Based on the December 2002 consumer price index (CPI), the basis for computing the inflation rate, it appears that the value of the Philippine peso is substantially eroded.

In Metro Manila, the purchasing power of the peso (PPP) is P0.58 ($0.0108 at an exchange rate of P53.595 per US dollar). In other regions, the PPP ranges from P0.52 or $0.0097 (ARMM) to P0.64 or $0.0119 (Central Mindanao).

These regional data bring the PPP’s national average to P0.59 ($0.0110).

PPP refers to buying capacity compared to a given base year. The National Statistics Office (NSO) currently uses 1994 as base year in computing the CPI.

An analysis of the past years’ data shows a downtrend in the PPP. In December 1997, the PPP was pegged at P0.78 ($0.0146) which slowly decreased to P0.70 or $0.0131 (Dec 1998), P0.68 or $0.0127 (Dec 1999), P0.63 or $0.0118 (Dec 2000), P0.61 or $0.0114 (Dec 2001) and P0.59 or $0.0110 (Dec 2002).

Low real value

The current PPP shows that the real value of one’s money is much lower than its nominal value. In the context of wages, the current daily minimum wage in Metro Manila of P280 ($5.2244) has a real value of only P139.11 ($2.5956).

In other words, prices have increased so much since 1994 (i.e., base year) that a person currently needs P280 ($5.2244) to buy goods and services which in 1994 cost only P139.11 ($2.5956).

The Autonomous Region in Muslim Mindanao (ARMM) has the lowest PPP, with the daily minimum wage of P140 ($2.6122) posting a real value of only P73.53 ($1.3720). (See table below)

Indeed, these data give credence to the militant labor sector’s call for substantial wage hike and the institution of price control, particularly for basic goods. Bulatlat.com

Nominal and Real Value of Daily Minimum Wage Rates 
as of December 2002 (non-agriculture)

 

Nominal
Value

PPP

Real
Value

Wage
Erosion (%)

Philippines

234.55

0.5931

139.11

41%

Metro Manila

280.00

0.5841

163.55

42%

Areas outside Metro Manila

189.10

0.5967

112.84

40%

 

 

 

 

 

CAR

190.00

0.6301

119.72

37%

Region I (Ilocos)

190.00

0.6079

115.50

39%

Region II (Cagayan Valley)

180.00

0.6127

110.29

39%

Region III (Central Luzon)

228.50

0.6135

140.18

39%

Region IV (Southern Tagalog)

237.00

0.5858

138.83

41%

Region V (Bicol)

182.00

0.5571

101.39

44%

Region VI (Western Visayas)

180.00

0.6285

113.13

37%

Region VII (Central Visayas)

200.00

0.5513

110.26

45%

Region VIII (Eastern Visayas)

188.00

0.5821

109.43

42%

Region IX (Western Mindanao)

175.00

0.6024

105.42

40%

Region X (Northern Mindanao)

192.00

0.5858

112.47

41%

Region XI (Southern Mindanao)

195.00

0.6184

120.59

38%

Region XII (Central Mindanao)

180.00

0.6406

115.31

36%

CARAGA

179.00

0.6094

109.08

39%

ARMM

140.00

0.5252

73.53

47%

Bulatlat.com computation based on DOLE and NSO data
Minimum wage rates are highest nominal wage as of November 2002
PPP - Purchasing power of the peso; computed using the equation (PPP=1/CPI x 100);
Real Value = Nominal Value x PPP; Wage Erosion = (1-PPP) x 100

 


We want to know what you think of this article.