Philippine Economy Talk

[dreamur]

Nagiging normal and standard na yata ang pagnanakaw. [emoji35]

"JUST IN An online betting company has filed a complaint at the Office of the Ombudsman Visayas against officials and agents of NBI 7, alleging that they took P8.3 million of the firm's earnings while executing a raid in Minglanilla, Cebu. During the search, CCTV cameras set up in the company captured footage indicating that the NBI 7 agents were pocketing tje cash earnings. The accused parties named in the complaint are NBI 7 Director Rennan Augustus Oliva, supervising agents Wenceslao Galindez and Donaver Inesin, as well as agents Contessa Lastimoso, Agapito Gierran, Bienvenido Panacean, and Niño Rodriguez."

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[uls]

people won't easily downgrade their lifestyle just because it's getting more expensive to maintain

people turn to loans if their income is insufficient

inflation will slow down when people consume less

since people have access to loans consumption isn't slowing down

central bank rate hikes are supposed to make borrowing more expensive (to discourage borrowing)

but it takes time to see the effect

Bank lending softens in January as rate hikes take effect | Philstar.com

MANILA, Philippines — Credit growth softened in January, as the impact of the Bangko Sentral ng Pilipinas’ aggressive interest rate hikes to tame consumer demand fueling painfully-high inflation seeped into the economy.

Excluding lending among each other, outstanding loans of universal and commercial banks rose 10.4% year-on-year in January. This was slower than the 13.4% outturn recorded in the previous month, the central bank reported on Tuesday.

Data showed this was the 18th straight month of loan growth despite the BSP’s aggressive interest rate actions. Month-on-month, credit stayed flat.

At the same time, more money circulated in the domestic economy during the month. A separate BSP report also released on Tuesday showed M3, the broadest measure of money supply, fattened 5.5% year-on-year in January to P16 trillion.

Sought for comment, Domini Velasquez, chief economist at China Banking Corp., noted that the latest figures still showed signs of growth but she offered some caveats.

“The continued double-digit growth still pointed to robust demand and was likely supported by positive sentiments on the economy’s growth prospects. However, we may see loan growth further soften as the economy is expected to feel the full impact of the BSP’s rate hikes this year,” she said in a Viber message.

Interest rate adjustments typically take 12 to 18 months before the domestic economy feels the effects. This was the case in 2021, which saw bank lending snap a losing streak once BSP slashed interest rates to 2% in November 2020.

Data broken down showed loans to businesses jumped 9.2% on-year in January, albeit lower compared to the revised 12.4% growth in the previous month. Double-digit increases in credit growth were seen in electricity, gas, steam and airconditioning supply, wholesale and retail trade, repair of motor vehicles and motorcycles, manufacturing, and information and communication.

Nicholas Antonio Mapa, senior economist at ING Bank in Manila, agreed with Velasquez’s assessment. The ING economist made the case for BSP’s aggressive interest rate hikes shaping economic activity.

“Aggressive monetary tightening weighing on bank lending with loans to productive sector in single digit expansion now,” he said in a Viber message.

“This shows that rate hikes do work in snuffing out growth momentum and we can expect bank lending to slow further in the coming months as the full effect of the monetary rate hikes surface,” Mapa added.

[uls]

i don't see inflation slowing down

there's a lot of money in circulation (BSP M3 data)

and more money coming

[uls]

how to NOT slow down inflation:

cost of living rise ---> people demand wage hike / gov't support

populist politicians grant wage hikes and cash subsidies

more money in people's hands ---> more demand for consumer goods --> prices go even higher

repeat

[dr. d]

how to NOT slow down inflation:

cost of living rise ---> people demand wage hike / gov't support

populist politicians grant wage hikes and cash subsidies

more money in people's hands ---> more demand for consumer goods --> prices go even higher

repeat

that's all well and good.
but the question is, how do we slow down or reverse inflation?

[uls]

that's all well and good.
but the question is, how do we slow down or reverse inflation?

don't keep pumping money into circulation

the central bank is already trying to do that -- make borrowing more expensive

less money in people's hands --> people have less to spend --> demand slows down --> prices fall

but not having enough money means lower standard of living

of course people don't want that so people will demand the gov't do something

the gov't will be pressured to give people what they want -- higher wages and subsidies

which is why i think inflation isn't slowing down soon

[uls]

you have the central bank trying to slow down inflation with interest rate hikes

then you have the gov't increasing social spending to help citizens cope with inflation

the effect of central bank action is being neutralized by gov't action

that's why inflation is quite stubborn

[dreamur]

I will never get tired of posting this. Wonder what Pnoy did right to hit those numbers.

Sabagay, may tallano gold pa pwedeng ipamudmod sa 31M idiots.

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[uls]

because financial conditions were favorable during pnoy's term (2010 to 2016)

this is US fed funds rate

all throughout pnoy's term Fed interest rate was at zero



since there was so little yield in developed markets, dollars flowed to emerging markets to chase yield

tons of $$$ flowed into emerging markets including PH

sa sobra dami $$$ pumasok sa pinas USDPHP fell as low as 40 during pnoy's term

[uls]

malas si bbm

he assumed office right when the US is experiencing inflation (caused by pandemic supply chain disruptions and too much stimulus during lockdowns)

the fed has been raising rates aggressively

global inflation + strong dollar