How To Beat Inflation In The Philippines: Inflation is a common topic in business and economics in the Philippines, but what exactly is inflation? Inflation is the name given to a decrease in purchasing power of pesos. In other words, with 1000 Pesos, you would have been able to buy a lot more with your money 20 years ago than today. The inflation rate in the Philippines changes year after year and affects all of us.
So the ultimate question is how to beat inflation in the Philippines? Today, we will examine this question and look at the positive and negative effects of inflation in the Philippines and the general causes of inflation rates in the Philippines.
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How To Beat Inflation In The Philippines
In recent years, the inflation rate has hovered around 2-3%, which means 1000 Pesos will be 2-3% less valuable (in terms of purchasing power) compared to last year and the same for the year before.
Most economists and financial advisors agree that the best way to beat inflation in the Philippines is to invest in high return investments that generate at least 2-3% returns yearly which is the currently yearly inflation rate.
If you are looking to beat the inflation rate year after year, it’s important to ensure that your investment returns are higher than the inflation rates. However, most investors focus on the bigger picture and a longer time frame. Thus if you follow a similar process, you may find that you can beat inflation rates in the Philippines on average throughout the years.
In the last 10 years, the highest inflation rate in the Philippines has been just under 6%, and at the other end of the scale, the lowest inflation rate in the Philippines over the last 10 years has been less than 1%. On average, the stock market has a return of 8% – 12% in comparison. Other investments have been known to outperform the inflation rate.
Naturally, there are other ways to beat inflation in the Philippines. For example, purchasing assets rather than liabilities is a common method used. Additionally, budgeting and healthy financial management is also key to beating inflation rates in the Philippines.
Lastly, one key ingredient needed to beat inflation in the Philippines is income expansion. Investments often achieve this; however, receiving a pay rise and earning additional income / passive income are also strategies for beating inflation rates in the Philippines.
Causes Of Inflation Rate In The Philippines
There are several causes of inflation rates in the Philippines; however, these are all part of 2 separate categories.
- Demand-Pull – High demand for products and services which exceed production volume
- Cost-Push – When product costs increase in price
One common cause of inflation rates in the Philippines is increased money supply amongst the population. This additional money supply can result in higher demand for a product or service which exceeds the production volume (demand pull). Another example can include a higher VAT rate which could increase the prices of products and services (cost push)
Negative Effects Of Inflation Rates Philippines
Decreasing Consumer Purchasing Power
One obvious negative effect of inflation rates in the Philippines is that the general public has less purchasing power, leading to several results. First, individuals may need to purchase more which means they have less money to save and invest if their income stays the same. Alternatively, some may start to budget, which is not always good for the economy in the bigger picture.
Effects On The Way Of Life For Filipinos
As the inflation rate increases year after year, many Filipinos may find it difficult to continually live the same lifestyle they once had if their income is not increased in line with inflation. This could include downsizing accommodation and cutting back on expenses.
Could Affect The Peso
From the latest data and statistics comprising several countries over many years, it is clear that, on average, inflation negatively affects a country’s currency. Over the years, several countries have experienced high inflation rates, and as a result, the currency has weakened compared to other currencies.
Fewer People Use Savings Accounts
As we know, saving rates in the Philippines do not offer the best returns. As inflation continues and increases, more and more people are looking toward other assets and investments to beat inflation in the Philippines.
Positive Effects Of Inflation Rates Philippines
One of the best ways to beat inflation in the Philippines is to invest, and this is why inflation rates may lead to more investment which is positive for the economy at large. Investments are fantastic ways to offset the increase of inflation, and one positive effect of inflation is that it encourages investments.
Inflation is a completely normal process in economics. It helps boost demand, sales, and development, impacting the economy’s growth. However, too much inflation or too little (deflation) is not a good sign for the economy, currency, businesses, or the general public.
When looking at the positive effects of inflation rates in the Philippines, many economists and experts have different opinions on this topic. Some believe that inflation has positive impacts, while others believe it leads to negative results and more financial struggles for the public. What is certainly true is that when looking at the positive effects of inflation rates in the Philippines and the negative effects, there are both winners and losers. Still, unfortunately, inflation is not going away anytime soon.
One of the best approaches to dealing with the rising inflation rate in the Philippines is to be prepared and plan strategically for the future.
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