NATIONAL UNIVERSITY

Manila, Philippines

The Emergence and Stabilization of

Extreme Inflationary Pressures in the
Philippines

A Project Innovated Proposed Product

Presented to
The Faculty of College of Business and Accountancy
Accountancy Program
National University

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In Partial Fulfillment of the

Requirements for the course
ECONOMIC DEVELOPMENT
“’’’’’’’’
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Presented by:

Almera, Yuan Andrei O.

Mateo, Charles Kenneth T.
Mabitado, Berna Rose
Reyes, Angelique Francyne P.

Presented to:
MR.IRENEO R. AGUILAN

August 15, 2019

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Manila, Philippines

INTRODUCTION :

From the mid-1980s, the growing macroeconomic instability in the Soviet Union

has been connected to two primary components: first is the flow issue of a huge

government budget deficiency and rapid credit development, and the stock "monetary

overhang" of excess purchasing at prevailing levels of controlled prices and interest

rates. The greater part of overabundance request weight has showed up as

"repressed inflation" and a lack of products, instead of as open cost increments. In

1990, the official inflation rate pace of around 5 % was still at conventional single digit

levels, and even the most alternative estimates assessments would put it well in the

lower double digits. From the beginning of 1991, and slightly earlier in some portion of

the republics, arrangement policy clearly shifted towards an attemp to discharge some

inflationary weight through a blend of regulatory price increases and direct partial

compensation incomes. The outcome was a quick speeding up of inflation, with official

files in the first quarter of 1991 demonstrating a value level that was 22 % than in a

similar quarter of the first year. In many republics, an a lot bigger hop showed itself on

2 April, when the Soviet government raised fixed retail costs or value roofs for certain

merchandise, while freeing the costs of others. Official evaluations demonstrate this

expanded normal retail costs by 60 to 70 % however Given this was an recent

administrative increase, its effect on the center pace of expansion is as yet indistinct.

While few would presumably guarantee that continued value rises as of now arrive at

the 50% for every month limit frequently utilized to characterize hyperinflation, most

visualizations are at a further speeding up of cost rises. While some anticipate a value

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Manila, Philippines

ascent of around 150 % during 1991, warnings of a collapse into hyperinflation are

winding up always normal. These are sounded by Soviet polticians of various

influences, what's more, by residential and outside market analysts acquainted with

the Soviet economy. However, past general admonitions, we are uninformed of

studies which have analyzed the potential for outrageous expansion in the Soviet

Union all the more intently. mid-twentieth century Europe, Latin America and Israel

during the 1980s, and Poland in 1989 are incorporated into the dialog. These

encounters demonstrate the trouble of foreseeing precisely if and when hyperinflation

may happen. A few nations have confronted immense terms of exchange stuns

without high swelling. During the 1980s, both Mexico and Italy ran spending

deficiencies in the scope of 12-15 % of GDP, yet value rises never came to

hyperinflationary levels. Elements isolating reparable, constantly high, and

extraordinary swelling are undefined and differing. Vulnerability is exacerbated by the

inalienable shakiness of outrageous expansion. It isn't exceptional to watch significant

lots in which inflationary weights have all the earmarks of being leveled out. At that

point, when an imperceptible limit has been crossed, or the principles of the game

change, any further stun can all of a sudden "set the house ablaze in a matter of

seconds". Hence, we will not make forecasts about short-run Soviet swelling. Our

objective is basically to decide if the present Soviet Union offers fertile ground for

extraordinary swelling to develop and develop, and what may be done to diminish this

potential. We will do this in a few phases. Area II portrays the kinds of stuns which

have hit different economies before hyperinflation, drawing correlations with the

present Soviet economy. Segment III continues so also for the spread systems of

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inflation.Therefore, this case study is intended to evaluate and aims to answer the

following:

1.) How does the market are being affected by the inflation here in the Philippines?

2) What are the major factors that caused the emergence and and stabilization of the

extreme inflationary pressures in the Philippines?

3.) What are the advantages and disadvantages of having Extreme Inflationary

Pressures in the Philippines?

Background of the Study:

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Manila, Philippines

Inflationary Pressures in the Philippines are slowly getting down. Inflationary

pressure occurs when general price level rise due to pressure from demand or supply

side factors. Whereas the Inflation in the Philippines is still considered as a threat for

its macroeconomic stability. Stated by the government that the economic team is glad

to report to the public that the country’s inflation rate is pointing towards a downward

path. Meaning the Philippines has slowly having the inflation rate going down. As per

The Philippine Statistics Authority that, while the year-on-year headline inflation in

October 2018 was steady at 6.7 percent, seasonally adjusted month-on-month

inflation eased further to 0.3 percent. September adjustments in the overall price level

in Metro Manila alone slowed down further to 6.1 percent, while inflation outside Metro

Manila remained at 6.8 percent. While currently in 2019, The Philippines’ headline

inflation went up by 3.2 percent in May 2019. Inflation in April 2019 was recorded at

3.0 percent, and in May 2018, 4.6 percent.

Government officials are one of the factors that affects the outcome of the

economic growth of our country. Many of the government officials are corrupt. Which

is one of the major problems here in the Philippines. The government allots money for

a certain project but our officials use only some of the money given and put the

remaining money in their pockets.

One factor also is the National Debt that we owe to foreign countries such as the

United States. If the countries debts increased, chances are that the government can

come up with two options such as: they will tasked the Bangko Sentral ng Pilipinas

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(BSP) to print more money to pay off the debt or by either raising taxes to all of the

employees or workers.

Cost-Push Effect is another key factor that triggers the inflation in our country. It

basiscally means that when companies are faced with increased input costs like raw

goods and materials or wages, they will preserve their profitability by passing this

increased cost of production onto the consumer in the form of higher prices. (Pat,

2011)

Exchange Rates may affect the outcome of the economic growth of the

Philippines because increasing exposure to foreign investors and foreign

marketplaces causes Inflation. Exchange rates are also necessary in an increasingly

global economy because it is one of the most important factors in determining our rate

of inflation. (Pat, 2011)

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