‘PiTiK’ update: 2 good, 1 not so

How’s the economy doing?” is a question people tend to ask me in almost every gathering I’m in, as if I would be a better judge of it. When they do, I’m pretty sure they have their own answer borne out of direct experience.

The real question ought to be how Filipinos in general are doing, and whether they feel better or worse off than, say, a year or five years ago. And so, when people ask me how the economy is doing, I feel like throwing the question back to them.

Many years ago, I coined the “PiTiK” test—capturing presyo (prices), trabaho (jobs), and kita (incomes), hence P-T-K—as an apt gauge for how well the economy is doing. These three, after all, are the indicators that directly impact on every Filipino’s life and welfare.

I have since consistently used PiTiK as my quick but reliable test of the health of our economy, much like the way people test the ripeness of fruit in the market with a pitik, or flick of a finger. Government statisticians routinely report the relevant data: monthly for prices (inflation rate and consumer price index), and quarterly for jobs (Labor Force Survey) and incomes (GDP and the rest of the national income accounts).

So how have we done lately on the PiTiK test? Not too long ago, it had been good news on all three fronts. But we all know that the “P” part has been not-so-good news lately, with the inflation rate reaching

7-year highs. Still, trabaho and kita have remained good news from an overall perspective, and two out of three is still good. Let’s examine the data more closely.

The May inflation data were released earlier this week, and the year-on-year (i.e., May 2018 over May 2017) overall inflation rate was at 4.6 percent, the highest we’ve seen since November 2011. Pulling it up were alcoholic beverages and tobacco, which rose 20.5 percent from a year ago, transport (6.2 percent), and food and non-alcoholic beverages (5.7 percent).

Overall prices in the National Capital Region (NCR) or Metro Manila rose slightly faster (4.9 percent) than in the countryside (4.6 percent), although food prices in the latter rose faster (5.9 percent against 5.1 percent in NCR). These imply that inflation has lately hurt the poor more, as their budgets are dominated by food and they are much more numerous in the countryside.

Mitigating measures targeted for the poor are thus crucial, especially given our already high prevalence of malnutrition. The measure that would make the most difference is changing the way we try to protect our two million rice farmers, from tightly controlled rice imports—which have long burdened our 22 million poor with unduly high rice prices—to calibrated protective tariffs on freer rice trade (aka rice tariffication).

Only Congress stands in the way of this change, though it’s on the verge of finally enacting it. The good news is that month-on-month inflation has actually slowed down since January, and was actually zero in May, telling us that prices are actually stabilizing in real time.

On the jobs front, the newest data are also just out, and unemployment has gone down to 5.5 percent from last year’s 5.7 percent. This good news is tempered by the nearly half a million increase in the underemployed, even as 83,000 new jobs were created over the past year.

Still, I have been noting a general improvement in quality of jobs, reflected in growing proportions of wage and salary workers (now 63 percent of all workers, from barely half 10 years ago), and in the self-employed who employ others (i.e., entrepreneurs in small businesses).

On kita, overall income as measured by GDP has sustained its annual growth rate of 6-7 percent, still among the fastest in Asia and the world. Falling unemployment and significantly reduced poverty incidence, based both on official data and on the regular Social Weather Stations data on self-rated poverty, suggest that such income growth is permeating more widely—that is, the rich no longer corner income growth as dominantly as they did in past years.

Our most urgent challenge, then, is to arrest the hysteria and domino effect of misplaced and exaggerated inflation expectations. On this, we can be our own worst enemies.

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