Buying from the broadsheets

Some 13 years ago, Nobel Laureate Joseph E. Stiglitz published The Price of Inequality. He anticipated that readers might be surprised to encounter a chapter on macroeconomics — growth, inflation, interest rates, and employment — in a book ostensibly about inequality. Yet the connection is fundamental. Macroeconomic instability is not socially neutral. When inflation accelerates, growth falters, jobs become scarce, or interest rates rise, the burden falls most heavily on those at the bottom. With no savings to draw on and little margin for error, they live perpetually on the edge — isang kahig, isang tuka.*

This reality provides the proper lens for interpreting last Tuesday’s announcement by the Philippine Statistics Authority (PSA) that headline inflation in 2025 averaged a nine-year low of 1.7%. We do not question the credibility of official statistics. What deserves scrutiny is the narrative that often accompanies them. For millions of Filipinos, especially the bottom 30%, this headline number offers little comfort. Low inflation does not necessarily mean affordable living.

The reason is straightforward but frequently overlooked. Inflation measures the rate of change in prices, not the absolute level at which prices already stand. An economy can register low inflation and yet remain a very expensive place to live. This is precisely the Philippine condition today. Price pressures may have slowed, but prices themselves remain elevated, particularly for the essentials that dominate the budgets of poor households.

Former Agriculture Undersecretary Fermin D. Adriano articulated this clearly in his recent Manila Times column. Under the 2018-based consumer price index, food and non-alcoholic beverages account for 39% of total household spending. For the bottom 30% of Filipinos, the share rises dramatically to about 70%. This implies two things. First, Filipino households already devote an unusually large share of income to food compared with their regional neighbors. Second, any increase, however small, in food prices disproportionately erodes the welfare of the poor.

Even in periods of low inflation, purchasing power remains under severe strain because incomes lag behind already high prices. Comparative data makes this stark. Average retail chicken prices in Vietnam are nearly 40% lower than in the Philippines. Pork prices here are roughly 50% higher. In Thailand, refined sugar sells for around P30 per kilo, compared to no less than P80 locally. Jasmine rice costs P35-P37 per kilo in Thailand but Filipinos pay at least P60.

What renders these comparisons especially troubling is that daily wages in the Philippines are not dramatically higher than those in Thailand or Vietnam. When prices are far higher but incomes broadly similar, the result is inevitably weaker purchasing power. As Mr. Adriano correctly observes, a nutritious diet becomes unaffordable for a large segment of the population or roughly half of Filipinos. This explains the persistence of malnutrition and stunting, and why inflation remains the top concern in public opinion surveys even when headline figures appear benign.

The persistence of high prices is not accidental, cyclical, or purely market driven. It is structural and policy induced. Adriano identifies three deep-rooted causes: low agricultural productivity due to fragmented landholdings and weak technology adoption; an inefficient marketing and logistics system marked by multiple layers of intermediaries; and a protectionist regulatory framework governing agricultural trade. These constraints interact and reinforce one another, raising domestic prices well above regional benchmarks.

These are not new diagnoses.

What is striking is their persistence. For nearly three-quarters of a century, policy responses have failed to meaningfully dismantle these constraints. Congress and successive administrations share responsibility for preserving a system that protects producers and intermediaries at the expense of consumers — particularly poor consumers. Leadership changes, slogans evolve, but the underlying policy architecture remains largely intact.

Recent inflation data underscore the fragility of the current situation. While December inflation slowed to 1.8% year on year, it rose from 1.5% in November, hinting at renewed price pressures into 2026 and 2027. Food and non-alcoholic beverages, housing and utilities, and restaurants and accommodation services together accounted for more than one percentage point of inflation in December. These same components dominated inflation dynamics throughout 2025, underscoring that the inflation problem remains concentrated in basic necessities.

Rice, as the single most important item in the consumer price index (CPI) basket, remains pivotal. Prices are unlikely to fall meaningfully and may rise further. Even under a liberalized import regime, cartel-like behavior appears to have persisted despite government enforcement efforts. Compounding this risk is the likely upward adjustment of rice tariffs from 15% to 20%. While framed as support for farmers, higher tariffs effectively tax consumers and entrench inefficiency. The long-standing failure to separate farmer support from consumer price stabilization continues to distort policy choices.

Monetary policy enters this picture with sharply limited tools. With growth momentum stalling and the Bangko Sentral ng Pilipinas (BSP) signaling a dovish bias, interest rates are expected to drift lower. However, monetary easing in an economy constrained by supply-side rigidities risks producing adverse side effects. Lower rates may weaken the peso, amplify imported inflation, and fuel speculative rather than productive activity. The peso’s depreciation to P59.21 per dollar last Tuesday, potentially a prelude to sustained weakness near P60, illustrates the sensitivity of prices to exchange rate movements in a heavily import-dependent economy.

The Philippines imports a significant share of its food, fuel, and intermediate goods. Peso depreciation therefore transmits quickly into higher domestic prices, especially for rice substitutes, meat inputs, fertilizer, fuel, and transport. In this context, aggressive rate cuts could undermine price stability rather than support real incomes. Monetary policy cannot offset the inflationary consequences of weak agriculture, protectionist trade rules, and inefficient logistics.

More fundamentally, the binding constraint on growth today is not the cost of credit but the collapse of confidence. Unresolved governance failures, most notably allegations of corruption in flood control and infrastructure spending, have eroded trust. Infrastructure disbursements slowed last year as congressional investigations and institutional reviews produced a chilling effect across implementing agencies. In such an environment, cheaper money alone will not induce investment. Businesses hesitate not because borrowing costs are high, but because policy credibility and institutional integrity are in question.

This underscores a central policy lesson: inflation and high price levels in the Philippines are overwhelmingly structural in origin. Monetary policy can smooth cycles, but it cannot substitute for reforms in agriculture, trade, competition, and governance. There is space for the BSP to balance growth support with currency and inflation risks, while the real work of price reduction occurs elsewhere.

If the disconnect between low inflation and high prices is to be resolved, policy must move beyond optics and tackle fundamentals:

1. Accelerate agricultural productivity reform through land consolidation, irrigation expansion, and technology adoption.

2. Reform food marketing and logistics by reducing intermediaries, improving storage, transport and logistics, and fostering competition.

3. Rebalance trade and import policy by replacing blunt protectionism with targeted, time-bound farmer support while keeping borders sufficiently open to discipline prices.

4. Strengthen competition and anti-cartel enforcement, particularly in rice, meat, and sugar markets.

5. Restore governance credibility to revive business confidence and unlock investment.

6. Align monetary policy with structural reform, recognizing its limits in the face of supply-side constraints and exchange rate risks.

Ultimately, the persistent gap between official inflation headlines and lived experience explains the cynicism heard on the streets. When people are told inflation is low and growth outperforms regional peers, yet they continue to pay exorbitant prices for rice, meat, and sugar, trust erodes. In such moments, Filipinos wryly conclude that perhaps the most affordable goods are not found in the markets — but in the broadsheets.

* A Filipino saying on life’s difficulties that literally means “one scratch, one peck.”

Diwa C. Guinigundo is the former deputy governor for the Monetary and Economics Sector, the Bangko Sentral ng Pilipinas (BSP). He served the BSP for 41 years. In 2001-2003, he was alternate executive director at the International Monetary Fund in Washington, DC. He is the senior pastor of the Fullness of Christ International Ministries in Mandaluyong.