Philippine Economy: Expansion slows as inflation hits five-year peak

World
Europe

02:43

The Philippines has been somewhat of an economic miracle in recent years – going from the sick man of Asia to becoming one of the region's fastest-growing economies. However, the country's latest GDP growth figure of 6 percent came in way below expectations. That leaves some worried that tax-driven inflation might be slowing the country's economic expansion. Our correspondent Barnaby Lo has more.

Grocery shopping for a family of eleven is never a simple task, especially when money is tight. It's always been a struggle for Tessie Beatingo.

TESSIE BEATINGO "Life is hard. If you don't work hard, you won't have anything to eat. My husband works even when he's sick because he doesn't want us to go hungry."

Tessie helps out by doing laundry for other households, but she says the extra income doesn't feel like it amounts to anything anymore.

TESSIE BEATINGO "Let's just take chicken, for example. Not long ago, I could buy a kilo for two dollars. Now it's at least three dollars."

No surprise there. Inflation in July hit a five-year high of 5.7 percent following fuel price hikes and the Philippine peso's depreciation. But economists say more than anything, new taxes pushed prices up and that in turn, slowed the country's consumption-driven economy.

SONNY AFRICA IBON FOUNDATION "Taxes are the biggest and most immediate crimp on household purchasing power. Why is the Philippines having the worst inflation in ASEAN? All countries are affected by high global oil prices. All countries are affected, in the region, by pressure on their currencies."

BARNABY LO MANILA "In the last half decade or so, the Philippines' economic story has experienced somewhat of a turnaround. Economic expansion has consistently ranked as one of the fastest in Asia, but the latest GDP figure of 6 percent was well below all expectations."

It is the slowest the Philippines' economy has grown in three years, but it remains one of the fastest in Asia. The trade war between China and the United States could exacerbate the slowdown.

SONNY AFRICA IBON FOUNDATION "If it's a full-blown trade war, I think the Philippines will be affected precisely because we've gotten on to this global supply chain, global value chain hype."

But with both sides so far acting with relative restraint, whether it can impact the Philippines' economy significantly remains to be seen. Barnaby Lo, CGTN, Manila.