Sunday, May 22, 2016

HOW INFLATION RATE AFFECTS IN THE FILIPINO PEOPLE?

The following article is an standard sample format of a Research Paper (Term Paper) by a High School student.  This format is as of 2014.





How Inflation Rate Affects in the Filipino People?

Research Paper By: Yves Von V. Villamayor

Teacher: Mrs. Antoinette Andromeda-Barrameda

Subject: Social Studies

Date Submitted: December 11, 2014



DEDICATION

This research paper is lovingly dedicated to my father who is working overseas for quite long year now, and to all Overseas Filipino Workers (OFW) who are scattered around the globe.  By making this research paper, I would like to put my hats off and give my big salute to all OFWs in valuing the hardship, perseverance and sacrifices they made just to provide the better living for their family.

My father decided to work in Middle East to sustain the increasing needs of our family and to provide a better future for my two siblings (and me).  As an engineer, he went to this barren land of sand dessert to receive a decent pay that most engineers like him are not compensated in local employment.  But this pay is not sufficient to cover the extreme lonesome of being away from home and will not ever equal the greatest moments that he’d supposed to spend with his children that he misses in his life.

The OFWs are the back bone of our economy, keeping it afloat with their huge remittances and making it alive amidst of economic crisis.  The dollar reserve of the government that is attributed to OFWs thru the remittances they send have contributed significantly in keeping the current account deficit manageable, making it the major source of the country’s national budget and stabilizes the value of the local currency. The OFWs embrace the challenge of leaving their families miles away from home and took the bitter pills of sacrificing so much of themselves in exchange of a better and brighter future and success for their family and country.

While I am writing this research paper, I came across to understand the significant role of the overseas Filipino workers who play a pivotal role in the ever changing global competition. We are lucky to receive their sacrifices dedicated to us who were left in our home.  And because of this, I am really grateful and proud to say that I am a daughter of an OFW.  True to its sense and meaning, they are the modern day heroes that are deserved to be honoured.


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ACKNOWLEDGEMENT

This research paper will not complete without mentioning my deepest appreciation to the persons who became part of this educational experience.  Before starting this research paper, I would like to thank the following persons whom I owe a great depth of gratitude:

Manong Jun De la Cruz, a pedicab driver who served as my means of transportation while going from one place to another in different corners of Manila.  Also to Manang Maria Santos who always assisted me in FX terminal in Crossing, Shaw Blvd, Mandaluyong City.

Thanks to my friends Mark Joseph and Fernan, to Roel and Richard R., the Tropang Mama's Boyz Ronald, Rodgee and Edwin, and to 3Rs Rob, Renz and Richard S. who were with me most of the times going to different places during the busy hours while making this research.

Engr. Ronaldo B. Real for the valuable comments, suggestions, advices and ideas about economics principles.

My auntie Professor Nelly T. Vitor for lending me some of her pertinent articles that I read and other available data while I am writing this research paper.

My mother, Mrs. Alliah V. Villamayor for her moral and financial support during the making of this research, who provided me her personal knowledge about the theme of this research paper when she explained me, and guided me while browsing the internet.

Special thanks to my father, Alexson V. Villamayor for many information he provided me considering that we are miles distance away but indeed his unwavering support to me has been constant until the completion of this research paper.

And to God Almighty who is giving me the strength till mid-night, sound mind to understand this assignment, and perseverance throughout the completion of my research.  To God Be the Glory.


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TABLE OF CONTENTS



Title Page                    ......................................... 1

Dedication                  ......................................... 3

Acknowledgement      ......................................... 4

Table of Contents       ......................................... 5

Introduction                ......................................... 6

Content                       .................................... 7 – 10

Definition of Terms    ........................................ 11

Finding/conclusion      ........................................ 12

Bibliography               ........................................ 15

Curriculum Vitae       ........................................ 16



INTRODUCTION

Throughout the years, inflation rate in the Philippines has become the defining factor of our economic lifestyle and our own financial status as well.  It is imperative to understand how and why inflation occurs in the world we live in. 

Included in this research study are the causes and effect of inflation during its high and low.  While reading, it is aimed to give a useful information about inflation and understand how this happen in our everyday life.

In an ordinary citizen, the basic impression on inflation rate is the idea that it is the measure of the value of our money and the prices of goods and services.  It is said that the lower rate is the better for the country.  That is, the lower rate of the inflation, the lower prices of basic commodities.  In a country like Philippines, this very idea seems to be very difficult to understand because no matter how the government say the inflation is getting better, people cannot see it because the prices of goods and services are getting higher.

Money runs the economy.  It needs more business to operate and more customers to patronize the goods and services to make the money in the market circulate.  It needs more money to reduce the prices.  If this is the very reason, why then don’t we just print more money?  How I wish this to happen if this will answer the needs to have money circulating in the market to make our economy grow.

But it is really not as simple as that.  Why does the Bangko Sentral ng Pilipinas, Central Bank of the Philippines in english, (the independent monetary authority for regulating the money flow in the Philippines) cannot print more and more bills if that is that easy?  This is because printing more bills to address the inflation will give us the opposite: deflation.  The value of our money will devaluate if everybody can buy whatever they want.  Sounds good, yes but at the end of the day it is definitely no.  Having the money flooding in the market will make the banknotes less value because no matter how many banknotes you have; it is useless if you cannot find what you want to buy.  Because of the diving down prices, traders will no longer produce and manufacture products with less profit.  That is why it has to understand that there is need to control the amount of cash in the circulation.  It is check and balance.

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How Inflation Rate Affects in the Filipino People?

First, what is inflation?  Inflation is the term that describes the increase or decrease in price, products and services.  It is the nonstop increase in the general level of prices which is measured as an annual percentage increase.  Inflation rate is the percentage rate of change of a price index over time.  It is widely calculated by calculating the movement of change in a price index.  The National Statistics Office of the Philippines measures the inflation rate in the Philippines.  Every young student, every career men and women, even the bystanders in the street or even every plain housewife, whether we like it or not are all mobilized in one way or another by inflation.

The economy does well when there is money circulating.  When business and people and business can afford to buy goods and services, people can make a living.  Jobs and commerce, these what make us go round.  In this time of age, everybody must work in order to live their life and the world to keep goes round.  The more jobs in the market, the more labour force attract and the more jobs are the better to help everybody enjoy the inflation.  Every year, Philippines are producing thousands of young eager minds of new graduates.  This alone adds the growing unemployment rate searching for job, aside from the brain drains and underemployment who are aspiring a better position. True, the higher unemployment rate causes the inflation rate goes up too.

Because it needs to have full labour force to work in order generate and circulate the money and so the economy does good.   If people and the entrepreneurs can afford to buy goods or services, the cycle of trading, business, commerce and labour will goes on continued.  That is why it is important to have these new graduate and unemployed to land the job in order to continue the cycle.  The government and private companies launch job fair, in cases they cannot afford to accommodate all these competitive searchers loaded with full range of skills then the world of Overseas Filipino Workers opened the door to work in different countries.  More jobs to combat the inflation.

The businessmen and the general public as well are encircled with this inflation because our daily life has something great to do with it.  From the morning Filipino bread called “pan de sal” we eat during breakfast up to our plan of getting another out of town trip to Boracay, El-Nido, Batanes, etcetera, our decisions are without doubt depends on inflation rate.  This means, whether you are from the upper class or below the average class, whether you are doctor, lawyer, engineer and teacher or you are the noble farmer, street vendor, volunteer, and students, people from all walk of life is under the power of inflation rate.  From the public supermarket where the prices of basic needs such as cooking oil, garlic, onion are the mirror of inflation rate be it high or low, our standard cost of living then is depends on the prices of these basic commodities.  You may not use garlic, onion etcetera but whether you like it or not, it has the domino effect in our overall calculation of inflation rate.  Meaning to say, our purchasing power is strong when these commodities are at low prices and we are tightening our belt when the prices are high.

On how the inflation rate affects on the people from class A to ordinary citizens, the inflation rate play very important role. When our currency (peso) gets strong, the purchasing power of peso becomes strong too.  This means the inflation rate will go down and the prices of commodities will go down too which the consumer will take advantage to buy more products and services.  And this too means the money that will come in every company is bigger while the money that will go out is less.  And when the consumers are buying the products, the law of supply and demand take into the scenario.  The law of supply and demand is an economic model of price determination in a market. It concludes that in a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers (at current price) will equal the quantity supplied by producers (at current price), resulting in an economic equilibrium for price and quantity.  In economics, there are four basic laws of supply and demand:

1. If demand increases (demand curve shifts to the right) and supply remains unchanged, a shortage occurs, leading to a higher equilibrium price.
2. If demand decreases (demand curve shifts to the left) and supply remains unchanged, a surplus occurs, leading to a lower equilibrium price.
3. If demand remains unchanged and supply increases (supply curve shifts to the right), a surplus occurs, leading to a lower equilibrium price.
4. If demand remains unchanged and supply decreases (supply curve shifts to the left), a shortage occurs, leading to a higher equilibrium price.

For the economy to function, producers must supply the goods that consumers want. This is known as the law of supply and demand. “Supply” refers to the amount of goods a market can produce, while “demand” refers to the amount of goods consumers are willing to buy. Together, these two powerful market forces form the main principle that underlies all economic theory.

The law of supply and demand explains how prices are set for the sale of goods. The process starts with consumers demanding goods. When demand is high, producers can charge high prices for goods. The promise of earning large profits from high prices inspires producers to manufacture goods to meet the demand. However, the law of demand states that if prices are too high, only few consumers will purchase the goods and demand will go unmet. To fully meet the demand, producers must charge a price that will result in the required amount of sales while still generating profits for themselves.  During the low inflation rate, this will make the company to produce more products and services in low capital.  In short, they are getting more pesos while the value of their payables which is in dollars is getting small.

On the other side, when the value of peso devaluates which is happening when the inflation rate goes up, the effect is most likely not favourable to company and consumer as well.  This means, the company, the producers, and manufacturers are putting bigger capital in order to produce the product and to provide the service to their customers.  It is because while they are manufacturing their products or services, the cost of materials that are needed in making their products or services is getting high too.  If this is the case, definitely the manufacturer will add to the price of their finished products or services offered in order for them to continuously produce again or operate their service.  It needs to happen otherwise the business will stop or close.  If this closure happens, it will mean more demand from the consumers and here the law of demand and supply will again take into scenario. If the demand is high and the supply is low, this will be the chance of other producer to take advantage the necessity of the consumer by increasing more on the price of the product.  This is because during the shortage of supply in the market especially the lack on basic needs, the consumers will buy the product regardless of it is at high price because they need it basically.  As a measure for this, our government has the Department of Trade and Industry (DTI) who regulates the prices.

From businessmen, entrepreneur, and capitalist to ordinary people, inflation rate hits everyone.  If the inflation rate is high, an ordinary housewife who is making a weekly grocery will unable to follow her grocery budget.  Increase in prices will exceed her budget by as much as half percentage despites cutting on some items and she may not make it even close to the borderline.  Not only in the basic need, the mother has to pay the increasing bill for services starting from their electricity, water and communication service to service for their children like tuition fees, medical and health care needs, hair cut for her boys and girls, and even the transportation service they use to go anywhere they need.  These are the times when the producers or manufacturers are making their products at high cost of materials due to inflation rate too, and eventually transferring to the consumers the cost they have used to continue the cycle of commercial trading.

On the other side, it should be felt by the ordinary people when the inflation rate is low because the prices are going down too.  It is said that a strong currency means higher purchasing power that will enable us to buy more goods and services.  However, the law of economics seems not applicable in Philippines.   Low inflation rate is not being felt at all by consumer sectors in fact instead of going down the prices, the prices of prime commodities are rising.  In our case as citizen of the third world country, the effect of peso appreciation and the strong stock market is not an overnight result to reap the immediate benefits.  It will take years of sustained economic growth for us to see the benefits of strong value of peso due to several reasons like population explosion, infrastructure, peace and order, political crisis, etcetera.  Our life, or better to say our modern life is dependent to inflation.  The attorneys, the doctors, street vendors, all of us, we as Filipino feel the dramatic effect of inflation rate during its high and low.  Aside from the businessmen who are the first in line to like or dislike the inflation rate, ordinary people specially the family of those who have father, mother, children, or siblings who are working in other countries are also receiving the loss or benefits of inflation.  While the OFW is working in other country that has no major issue in inflation, the poor OFW has nothing in control to the family every time the inflation rate in the Philippines is going up.

If a strong peso means having a higher purchasing power, then there should be nothing to worry for the families of OFWs in the decrease in the dollar’s exchange rate since it will be covered up by an equivalent decrease in the prices of basic commodities and services.  But this is not the case.  While the value of the regular amount remitted by an OFW reduces, the power to purchase reduces too because of the increasing prices of commodities.  This is the dilemma of the Filipino family.  To cite an example, if an OFW is maintaining a monthly budget of 22,000 pesos for the last few months which is equivalent to 400 US dollars, if the inflation goes down which will cut on the value of dollar rate, then this means the OFW cannot send anymore the same 400 US dollars and the family cannot live the same life as before.  Because, while the value of the peso is appreciating but the prices of basic commodities remain stagnant.  Here, it is loss for the OFW, the family and the economy where the significant volume of remitted money of the OFWs saves the economy of the country.  In order to maintain the equivalent value of peso against dollar, the OFWs have to tighten their belts in able to send more dollars to sustain the need of their family back home.  While the family of the overseas workers have to make the best of what how much they received from family members abroad.

In reality, the daily life of every Filipino people lies on inflation and deflation.  It can tell how much we can do if we can afford the command of prices and the demand of our needs.  Sad to realize, inflation reflects our life in negative way.  It tells poverty that reflects in our society where poor is outnumbering the rich.  It shows how is our life, the cost of living, different means of savings to survive, the quality of life we are living.  On how the inflation affects in the Filipino people is huge and remarkable because life in this age and time is a matter of survival amidst of the commercialization.


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DEFINITION OF TERMS

Bank Notes – this is referring to the paper bill printed by Bangko Sentral ng Pilipinas.

Colonial Mentality – is a conceptual theory around feelings of inferiority within some societies post-European colonialism, relative to the values of the foreign powers which they became aware of through the contact period of colonization.  In Philippines, it is refer to preference of foreign brands.

Deflation – is a decrease in the amount of available money or credit in an economy that causes prices to go down.

Global crisis – the financial crisis of 2007–2008, also known as the Global Financial Crisis and 2008 financial crisis, is considered by many economists to have been the worst financial crisis since the Great Depression of the 1930’s.

Inflation – it is defined as a sustained increase in the general level of prices for goods and services.  Merriam-Webster Dictionary defines inflation as a continuing rise in the general price level usually attributed to an increase in the volume of money and credit relative to available goods and services.

Inflation Rate – the rate of change of prices as indicated by a price index and calculate on a monthly or annual basis.

Law of demand and supply –the theory that prices are determined by the interaction of supply and demand: an increase in supply will lower prices if not accompanied by increased demand, and an increase in demand will raise prices unless accompanied by increased supply.  In economics, “supply” refers to the amount of goods a market can produce, while “demand” refers to the amount of goods consumers are willing to buy.

Purchasing power – the worth of money as determined by what it can buy at a given time in comparison with what it could buy at a specified previous time.

Recession – a period of general economic decline, defined as a decline in GDP for two or more consecutive quarters.  It is typically accompanied by a drop in the stock market and increase in unemployment. 

Return On Investment – A profitability measure that evaluates the performance of a business by dividing net profit by net worth.

Stock Market – a system for buying and selling stocks or a place where stocks are bought and sold.

TTG - Travel Trade Gazette is a weekly newspaper for the travel industry based in UK and Ireland.
Underemployment – is the condition in which people in a labour force are employed at less than full-time or regular jobs or at jobs inadequate with respect to their training or economic needs.

Unemployment – Condition of a person who is able to work, is actively seeking work, but is unable to find any.


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CONCLUSION

Managing the inflation is bigger than our life that is so tough to sustain.  It has to act all government agencies to keep it manageable.  Because inflation means our economy, it is the measure how far can we go and how much we are behind.  After I read several articles, news and blog, gathered some information and until I wrote this research paper, I sat in my bed and tried to think what it should supposed to do to handle the inflation in the Philippines.  As a young mind, as an ordinary citizen and as a high school student, I think inflation can be controlled by imposing real serious mechanisms so that every people of the Philippines be it young, old, rich and poor can enjoy the distribution of government return to its citizens.  It’s purely finance, meaning all these things that are happening to our inflation are about money, business, job, and manpower.  To sustain this inflation, the government must generate more jobs and rely on local jobs.  Generate more jobs, invite foreign investors and encourage the local entrepreneurs to engage in business.  More jobs mean more employment and eventually bigger taxes collection.  We need to give jobs to those unemployed in order for them to buy commodities, to save money in the bank, and to improve their lives.  This makes the money is circulating.  This is the return of investment that sustains the inflation rate go down, appreciates the value of currency and gives purchasing power of peso.  Local job is important in order for us to be self-reliant.  For the longer time of our being independent country, I think we must also independent in relying to our own resources.  Boost the agricultural sector, this is the sector where we will not need to heavily rely on the foreign investors.  We must self-sufficient in our own crops especially in rice which we need to import rice while we have abundant, wide open and perfect land for farming.  And in rural places like most in provinces, farming has been the livelihood that could maximize the resources both the labor force and the soil by aiding them with full support.

Let us patronize our own products.  I believe it is about time for us to disown colonial mentality.  We have to remove in our principle the concept of having the important products are better than locally manufactured products in terms of quality and service.  We have many talented workers who can equal or even surpass the caliber of those foreign labors who are making the imported home furniture, shoes, perfume, apparels, and etcetera.   We have to stop choosing the imported chocolates, candies, garlic, corn over the locally manufactured and harvested.  By patronizing our own products, we are giving our fellowmen more capital to produce more, helping their industry to keep on going and helping them to grow and expand.  And definitely it helps our inflation manageable.

Invest in tourism.  Our country has an array of beautiful places that we can be proud of and showcase to whole world.  There are still many hidden and undiscovered places that are waiting to uncover.  Earning the international recognition as the “Destination of the Year” during the 25thAnnual TTG Travel Awards 2014, it is the perfect time to promote and improve our local tourist spots by securing the safety of the foreigners and giving them the convenience from the point of entry in our international airport to their point of destination.  But this is not only goes for the foreign guests only.  It is equally important to promote our tourist spot to our locals.  It is common reaction and grievance from local tourists when comparing the cost of travel to domestic and going to neighboring countries for tour that it is either the same or sometimes it is even cheaper to go outside than to go for local tour. If the Department of Tourism can lower the cost such as the travel tax, the airway fair, and hotels through coordination with travel agency, ticketing offices and resorts proprietors, then it will be a big come-on to locals to try visiting own country.  Lower the cost and let us not be foreigners to our own country.

Create more jobs.  It is nice to generate jobs in provinces where its inhabitants will not need to go to crowded Manila.  Industries can bring to these regions to spread the employment across the country.  By doing so, it is enhancing the lives of the residents and reinforcing the local community as well.  And it also makes the provinces into developing region into cities.  And also, this will withhold every Filipino who is planning to work to other countries if there is available job nearest to their home and family.  Being a daughter of an OFW, I know how much the sacrifice of an OFW and the family.  Working in a foreign country is difficult.  It is not secured that anytime an OFW can be repatriated to give their job to the locals of the host country.  During localization, recession and war, all these uncertain factors are stimulating the OFW’s job security that when laid off, bunch of unemployment is waiting for them.  That is why it is important to create more jobs.  As we know, OFWs are the living heroes.  From the ten million OFWs who have kept the Philippines alive and its economy afloat, their remittance alone enabled our economy to survive regional and global crises.  The OFW phenomenon, which was supposed to be a temporary solution to the country’s growing unemployment during the 1970’s has become an important part of the economy.  Imagine what would happen to our unemployment problem if the ten million OFW were suddenly come home due to mass lay off?  This might be a hypothetical question but can put in reality.  Employment is only one of the major contributions of the OFWs.  Their remittances saved our economy from collapse during the debt crisis in the early eighties (1980’s) and enabled us to avoid recession during the global financial crisis in 2008.  It is not an exaggeration to say that the OFWs fueled the boom in the property business, banking, retailing and even the automotive market, making the inflation rate tolerable.  The reality is that the OFWs are driving the Philippine economy and this is even more significant given that our economy continues to be driven by consumption spending because we still lack an industrial base.

Designate an OFW Bank for our overseas workers.  Since OFW losses when the dollar weakens due to strengthening peso that they themselves are strengthening it, a designated bank that will take care the hard earned money that they remit to Philippines should assign.  A fixed rate may help them to remit more money against the unstable rate of peso against dollar.  More remittances, more money circulates lower inflation.  Because beyond the economy, the OFWs have changed the lives of millions of their countrymen as well as the Philippines landscape when they brought us so many benefits.  Given their many contributions, they deserved the assistance and attention that the government and nation can give.

Having said these, I would like to give my sincerest thanks to our all OFWs. They may not know or realized it yet but their contributions to our country have been playing significantly in every aspect of our economy.  This is how I appreciate the OFWs.  But then it should go to all.  We need to empower the people because on the first place, they are the grassroots who are the first in line customers of the products and services available in the market.  They are the very reason why the entrepreneurs have confidence to invest the business.  Like what I said, it has to act all government agencies to keep inflation manageable.  The fast growing population explosion cannot get along with the improvement of economy.  Although the economy may really growing but the growth is not enough to distribute largely to medical, educational, social and military needs of the Filipinos.  It is outnumbered, many are sharing with the slight growth making this inflation unable to feel by ordinary people.  Many are sharing with the slight growth.  The peace and order should also be addressed.  More investors are supposed to come if not for the danger of extremists, leftish and the radical groups including the political stability – it disappoints the prospected investors.  Infrastructure like road, bridges, electric power, telecommunication facilities to name a few should improve to ensure the fast and continuous appreciation of inflation rate.

All in all, the most urgent solution that I believe to handle inflation is generating more jobs to make the money circulate in the market.  Being a country that is politically active, it must start from the top to lead the determination and the rest will follow.  Everybody is affected with the flow of inflation, even the simple Manong who peddles bottled water in the street.  If there are more decent jobs available in the market, the poor street vendor will employ himself where he can earn no less than his income in peddling bottled water and for sure will empower him to patronize the Philippines made products.


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BIBLIOGRAPHY


Insights, “Sharing the Trench” Dec. 8, 2012.
Date viewed 7 Dec. 2014< http://alex-insights.blogspot.com/2009/12/sharing-trench.html>

Merriam-Webster. “Purchasing Power” Date viewed 8 Dec 2014 

Wikipedia The Free Encyclopedia. “Inflation” Date viewed 7, Dec. 2014 

Wikipedia The Fee Encyclopedia. “Supply and Demand”.Date viewed 7 December 2914


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CURICULUM VITAE


Full Name:       Yves Von Vitor Villamayor

Nick Name:       Ibon, Bon

Date of Birth:   June 30, 1998

Age:             16

Height:          143 cm.

Weight:          45 kg.

Name of School:  Manila Science High School

Interest:        Computer Surfing

Personal Motto:  Patience is virtue.



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