The Philippines’ Top 5 Property Developers: 2023 and Q4 Performance: The Seen and Unseen

  

Like all bubbles, it ends when the money runs out—Andy Kessler

 

In this issue:

 

The Philippines’ Top 5 Property Developers: 2023 and Q4 Performance: The Seen and Unseen

I. Top 5 Property Developers: Remarkable Headline Performance in 2023

II. 2023 Top 5 Property Developers:  Beneath the Headlines, Soaring Debt, Interest Expense and Decaying Liquidity

III. Big Boys’ Club: Q4 2023’s Incredible Spike in Real Estate Sales!

IV. The Real Estate Sector’s Predicament: More Signs of Escalating Concentration and Other Risks

V. Slowing Consumers, Rising Risks of a Material Slowdown in Rental Revenues

VI. Rising Imbalances from Credit-Funded Real Estate Demand Amidst Rising Debt-Financed Supply

VII. How Inflation Benefited the Top 5 Developers and Why this is Unsustainable

VIII. The BSP’s Path Dependence: The Rescuing of Banks and the Property Sector

 

The Philippines’ Top 5 Property Developers: 2023 and Q4 Performance: The Seen and Unseen

 

The Philippines' top 5 real estate developers showed an impressive headline performance in 2023 and Q4. Beyond that, there are rising risks from multiple fronts.

 

I. Top 5 Property Developers: Remarkable Headline Performance in 2023

 

Here's a summary of the aggregate financial performance of the top 5 PSE-listed property developers—or the 'Big Boys Club' (BBC)—in 2023. The firms included are SM Prime Holdings [PSE: SMPH], Ayala Land [PSE: ALI], Megaworld [PSE: MEG], Robinsons Land [PSE: RLC] and Vista Land & Lifescape [PSE: VLL].

 

The headlines looked great!

Figure 1

 

First. Despite a 15.4% increase to Php 422.7 billion, revenues remained lower than the 2019 record of Php 431.2 billion. (Figure 1 topmost pane)

 

Moreover, the pace of growth moderated from 19.9% in 2022 to 15.4% last year. SM Prime led the pack with a 21.09% growth rate, while RLC's 7.7% contraction pulled revenues lower.

 

Second.  Real estate (RE) sales surged from 7.8% to 11.03% in 2023, driven by ALI and VLL's growth of 20.44% and 19.07%, respectively. It's important to note that ALI's RE sales included rental revenues. However, RE sales in pesos remained 12.8% below the 2019 peak. (Figure 1, second to the highest image)

 

But here’s the thing: since peaking in 2021, the share of RE revenues to the total plummeted to its lowest level in 2023, indicating that the bulk of the BBC’s revenues emanate from rent. (Figure 1, second to the lowest graph)

 

Third. While rental revenues represented the core, growth slowed from 51.5% to 20.7%.   In pesos, rental revenues in 2023 reached an all-time high of Php 157.6 billion, surpassing the previous milestone of Php 133.43 billion set in 2019. (Figure 1, lowest chart)

Figure 2

 

Fourth. Net income reached a record of Php 112.9 billion, marking a brisk increase of 29.6% or a net gain of Php 25.8 billion. This marks the second consecutive year of 29% growth in 2023. VLL and SMPH posted the fastest growth, with increases of 39.2% and 32.92%, respectively. (Figure 2, topmost visual)

 

II. 2023 Top 5 Property Developers:  Beneath the Headlines, Soaring Debt, Interest Expense and Decaying Liquidity

 

Fifth.  The cumulative debt level surged to a record Php 950.5 billion, marking a 5.8% increase and reaching back-to-back record highs in pesos. (Figure 2, second to the highest window)

 

While the pace of increase was slower than income or revenue growth, it still grew by Php 52.31 billion, more than DOUBLE the income growth.

 

Ayala Land and SMPH, the two largest developers, saw the most significant peso gains of Php 22.215 billion and Php 14.3 billion, respectively.

 

Sixth. High-debt loans and elevated interest rates pushed financing costs higher. Interest expenses surged by 14.6%—the second-highest growth rate since 2018—to a historic Php 5.121 billion in 2023, representing the highest-level share of revenues at 1.21%. (Figure 2, second to the lowest graph)

 

Seventh and last.

 

The cash reserves of the Big Boys Club fell for a second consecutive year to their lowest level since 2018, dwindling to Php 90.4 billion. This represents the lowest level in the context of cash-to-debt and cash-to-interest payments since 2018. (Figure 2, lowest image)

 

With record net income and debt increases, why the plunge in the BBC’s liquidity conditions?

 

Are these companies overstating the headlines or understating the delinquencies?

 

That's the unseen segment behind the good news.

 

III. Big Boys’ Club: Q4 2023’s Incredible Spike in Real Estate Sales!

 

More to the point.

 

Another perspective is the performance on a quarterly basis. After all, the annual report signifies an accumulation of the four quarters. From here, we observe changes that led to the annual outcome.

 

Surprisingly, after slightly picking up in Q2 and Q3 compared to last year and Q1's slack, real estate sales spiked in Q4, both in peso (Php 78.8 billion) and in percentage (25.8% YoY).

 

However, it's important to note that ALI includes rent in its real estate revenues.

Figure 3

The record surge in RE sales (in pesos) powered total revenue growth (20.3% YoY) to a fresh record of Php 126.4 billion. (Figure 3, topmost chart)

 

Stunningly, the Q4 spike elevated the sales level of the Big Boys' Club, resulting in its higher share of Q4 (nominal) NGDP. (Figure 3, second to the highest image)

 

IV. The Real Estate Sector’s Predicament: More Signs of Escalating Concentration and Other Risks

 

Alternatively, if the Real Estate GDP estimates are accurate, the BBC accounted for 35.35%, which means that even with numerous competitors, the group continues to corner a larger share of the industry!  Talk about the Big Boys getting Bigger! (Figure 3, second to the lowest diagram)

 

The Real Estate NGDP and Real Estate revenues seem to have parted in direction in Q4.  (Figure 3, second to the lowest window)

 

With the spike in RE revenue growth and a 35% share, it's curious that the industry reported only an 8.7% growth rate (NGDP)—which likely indicates that the rest of the playing field experienced significantly below-average growth in Q4!

 

Or, has the BBCs cannibalized the markets of their lesser competitors, including the SMEs?

 

Importantly, it reveals the industry’s mounting concentration risks.

Figure 4

After all, the sector's declining contribution to real GDP, coupled with its increasing share of the bank lending portfolio, is symptomatic of credit-fueled overspending or malinvestments. (Figure 4, topmost chart)

 

Rising vacancies are just another sign of imbalances or supply-demand disorder.

 

Furthermore, given that the growth of the BSP’s real estate index materially slowed in Q4, this likely indicates a slowdown in speculative activities in the secondary markets, with the same activities shifting towards sales via the primary markets (property acquisition via developers). (Figure 4, middle picture)

 

It is important to point out too that the property sector and banks are closely intertwined or "joined at the hip." The property sector accounted for a significant share of Universal Commercial Bank loans: 23.8% of production loans, 21.1% of net RRPs loans, and 20.4% of gross RRPs loans. (Figure 4, lowest diagram)

 

That is to say, the industry’s decaying liquidity conditions and overreliance on leveraging to generate revenue and income growth are also manifestations of accruing imbalances.

 

V. Slowing Consumers, Rising Risks of a Material Slowdown in Rental Revenues

 

There’s more.

 

Risks are rising even in the industry’s core revenues: rental operations.

Figure 5

 

The decelerating cumulative revenue growth of listed non-construction retailers (SM Retail, Puregold, Robinsons Retail, SSI Group, Philippine Seven, and Metro Retail) mirrors the moderating growth of the BBC's rental revenues. (Figure 5, topmost window)

 

Since reaching its peak of 28.6% in Q2 2022—attributed to the BSP’s unprecedented injections and the ‘reopening’—year-over-year growth has steadily declined. The aggregate sales growth of the retail titans slowed further from 8.27% to 8.23% in Q4. (Figure 5, middle image)

 

Following the money trail, the slowing universal commercial bank credit growth rate has aligned with the BBC’s rent revenue growth. Credit growth has been indicative of the demand for rents.

 

By inference, rising rates would eventually exert pressure on rental revenues as vacancies increase due to retailers' faltering viability.

 

In short, misled by false monetary signals, retail entrepreneurs rush in to capitalize on the highly anticipated boom in consumer spending, even as the latter’s spending capacity is being eroded by inflation, the crowding-out effects of deficit spending, and malinvestments.

 

Such increasing divergence should amplify the exposure of malinvestments as unviable ventures.

 

VI. Rising Imbalances from Credit-Funded Real Estate Demand Amidst Rising Debt-Financed Supply

 

It's not just rent, but also the demand for real estate that has been anchored by bank credit expansion.

 

Therefore, it's unsurprising to see real estate (RE) revenues boosted by an upswing in the bank's consumer real estate credit growth.

 

The banking system’s real estate consumer loans grew by 7% in Q4 2024. However, its 38.4% share of consumer loans signifies the lowest since March 2020, as credit cards and salary loans have outperformed. (Figure 5, lowest diagram)

 

By the same token, unless productivity defines the character of the economy's development, the increasing credit-funded bets on the property sector would prove unsustainable.

 

Rising supply in the face of leveraged demand further magnifies its various financial and economic risks.

 

VII. How Inflation Benefited the Top 5 Developers and Why this is Unsustainable

 

That's not all.

Figure 6

 

The era of inflation has benefited property firms. Profit margins rose alongside the core CPI. Expanded profit margins have contributed immensely to the so-called 'bottom line,' supported by bank credit growth. (Figure 6, topmost and middle charts)

 

The fact of the matter is that the industry breathes in leverage, which drives the industry’s survival and expansion while providing less and less economic value added. (Figure 6, lowest graph)

 

The fiat money-based financial system requires ascending property prices to increase collateral values that buttress credit expansion. Therefore, policies have always been geared towards this process.

 

Unfortunately, diminishing returns plague the artificial boom from inflationism—where rising rates in response to inflation, malinvestments, and falling savings offset easy money policies.

 

VIII. The BSP’s Path Dependence: The Rescuing of Banks and the Property Sector

 

Ultimately, despite elevated inflation, the BSP will likely resort to its 'path dependence' of implementing an easy money regime when confronted with economic and financial risks.

 

It will likely deliver the 2020 bailout template, incorporating a mix of monetary policy rate cuts, direct and indirect liquidity injections (via financials), and revive, extend, and expand capital, regulatory, and operational relief measures.

 

On the other hand, political authorities will ramp up their fiscal tools, 'stabilizers,' where the political justification to increase defense spending will likely play a critical role in the coming series of 'stimulus.'

 

Deficit spending to GDP will hit new milestones.

 

The vent for all the series of political rescues of the elites will be vented on the exchange rate: the USD Peso.

 

Figure 7

 

Lastly, the recent market rout stock market rout has been led by the shares of the BBC.  

If anything, the recent downshift in their share prices reinforces a massive "rounding top." (Figure 7)

 

Have share prices of the Big Boys' Club been showing the way?

 

 

Navigating the Risks of the Record Philippines’ Savings-Investment Gap, February Public Debt Hits All-Time High and March CPI Reinforces the Deficit-CPI Cycle Tango

  

In a progressing economy the production processes are longer and more productive due to an increase in gross investment and capital accumulation, supported by growing savings as time preference and interest rates fall. In a regressing economy, the opposite is true—gross savings and investment decline and consumption increases. Time preference increases together with the interest rate, widening the spread between cumulative prices in the stages of production (Rothbard [1962] 2009, 531). Wicksell ([1898] 1962, xi) argues in the same way that the real rate of interest will fall when the quantity of real capital increases—Dr. Mihai Macovei

 

In this issue:

Navigating the Risks of the Record Philippines’ Savings-Investment Gap, February Public Debt Hits All-Time High and March CPI Reinforces the Deficit-CPI Cycle Tango

I. The Savings-Investment Gap Represents the Philippine Economic Development Paradigm

II. The SIG’s Three Fatal Flaws

III. Speculative Activities or Malinvestments Drain Savings; Promotes Inequality

IV. Deficit Spending Depletes Savings

V. The SIG: A Manifestation of a Credit Bubble and its Inherent Consumption of Savings

VI. Intrinsic Inflationary Pressures of the SIG: Escalating Risks Ahead

VII. February’s Record High Public Debt and Historic Government Liquidity 

VIII. Government’s Aggressive Borrowing: Is it Because of a Coming Stimulus, a Surge in Defense or Pre-Election Spending?

IX. March 3.7% CPI Reveals that the Fiscal Deficit-CPI Cycle Tango Remains Intact

 

Navigating the Risks of the Record Philippines’ Record Savings-Investment Gap, February Public Debt Hits All-Time High and March CPI Reinforces the Deficit-CPI Cycle Tango

 

The widening and record Savings-Investment Gap exhibit the entrenched and deepening dependence on systemic leveraging. This, in turn, increases the fragility of the economy and financial system. 

I. The Savings-Investment Gap Represents the Philippine Economic Development Paradigm

Figure 1

 

Businessworld, April 3, 2024: The savings-investment gap (S-I) gap, the difference between gross domestic savings and gross capital formation, reflects a country’s ability to finance its overall investment needs. An S-I deficit happens when a country’s investment expenditures exceed its savings, leading a country to borrow to fund the gap. In 2023, the country’s savings rate — gross domestic savings as a share of gross domestic product (GDP) — reached 9.2% (P2.23 trillion) while the investment rate stood at 23.4% (P5.7 trillion) of GDP, resulting in a P3.47-trillion gap. (bold added)

 

First, the Definition of Terms: (bold mine)

 

Gross capital formation (GCF) is measured by the total value of the gross fixed capital formation, changes in inventories and acquisitions less disposals of valuables for a unit or sector. (PSA, GRDP)

 

Gross fixed capital formation (GFCF) is defined as the acquisition of produced assets (including purchases of second-hand assets), including the production of such assets by producers for their own use, minus disposals.

 

The gross savings of the sector is the difference between the total income and the sum of uses of income. (PSA, 2022)

 

General government: The following are the components of income of the general government: gross operating surplus (which only includes the fixed capital formation), property income, taxes on production and on imports, current taxes on income and wealth, etc., compulsory fees and fines, social contributions, and other current transfers. (PSA, 2022)

 

Why is this chart important?

 

The savings-investment gap (SIG) represents the developmental paradigm of the Philippine economy.

 

Or, this chart, based on the Keynesian concept that "spending drives the economy," is the essence of the domestic GDP.

 

Savings, in this context, signify a hindrance to spending and, therefore, to "statistical growth."

 

As a side note, government fixed assets are part of "investments."

 

It tells us something we've been saying for a long time: savings (even by the government's definition) have been trending lower—and adrift at all-time lows—even as physical stocks (investments) in 2023 remained below the 2018 peak.

 

That noted, the SIG was at its highest level in 2023!

 

But as the article noted, this deficit leads a "country to borrow to fund the gap."

 

As we have previously observed,

 

With the government and major corporations as net borrowers and the low levels of household savings, the domestic political economy increasingly depends on foreign savings to fill its FX requirements gap. (Prudent Investor, 2024)

 

II. The SIG’s Three Fatal Flaws

 

Yet, this economic model has three fundamental fatal flaws:

 

One, it disregards productivity from entrepreneurial activities.

 

Two, it ignores the impact of endless borrowing on household, corporate, and even public balance sheets, and its effect on the economy (prices, production, and allocation).

 

Three, because it adheres to the top-down framework for its growth model, it discounts 'opportunity costs.'

 

III. Speculative Activities or Malinvestments Drain Savings; Promotes Inequality

 

Productive investments should increase, not decrease, savings.

 

As Dr. Macovei explained:

 

If time preference goes down in a society and the saving propensity grows, the increase in real savings would be matched by an increase in real investments, i.e., the saving-investment pattern would shift simultaneously. (Macovei, 2021)

 

Why would productive investments cause a drain in savings?

 

Further, the notion of boosting returns by requiring the ramping up of leverage translates to increasingly riskier speculative activities—amplifying probabilities of losses and unproductive undertakings. In a word, malinvestments.

 

Increasing leverage also translates to more spending than income.

 

With the penetration level of bank credit with a paltry 17.4% of the adult population (World Bank Findex 2021), according to the BSP's Q1 2023 Financial Inclusion Report, this elite group comprises the chief beneficiaries of the BSP’s "trickle-down" policies of borrowing to spend.

 

Thus, the BSP's easy money policies implicitly redistribute wealth from savers to borrowers, or from the underprivileged and the middle class to these elites.

 

Such widening inequality, therefore, constitutes an 'opportunity costs' from a broader or 'inclusive' (to borrow the mainstream’s lingo) economic growth. 

 

IV. Deficit Spending Depletes Savings

 

Magnifying government activities to substitute the slack from the private sector also redistributes wealth from taxpayers and currency holders to tax consumers.

 

The so-called "investments" by the government are, in reality, consumption activities funded by present taxes, future taxes (debt), and inflation.  Because these represent consumption, these activities drain on the savings.

 

Also, public activities magnify the inequitable distribution of cash flow, income, and wealth to the government and the connected few in the private sector partaking in these political projects.

 

V. The SIG: A Manifestation of a Credit Bubble and its Inherent Consumption of Savings

 

The thing is, this unbounded credit creation to fund political projects or speculative undertakings represents a credit bubble.

Figure 2

Thus, the surging SIG signifies a disguised credit bubble, effectively taking the shape of the GDP.

 

An inflating credit bubble diminishes savings, a fact that becomes apparent when it eventually implodes.

 

System leverage (bank lending + public debt) reached Php 26.942 trillion in January 2024, accounting for 111% of the NGDP. The data excludes all other forms of leverage, such as capital markets, derivatives, shadow banking, informal financing, and FDI debt. (Figure 2, upper chart)

 

VI. Intrinsic Inflationary Pressures of the SIG: Escalating Risks Ahead

 

The insufficiency of production stemming from dislocations, as a consequence of credit-fueled speculative momentum activities and the relentless upward trend of public spending, results in what is known as the 'twin deficits.'

 

These deficits often necessitate tapping overseas funding or increasing inflation to reduce the 'real' debt burden.

 

Philippine external debt reached USD 125.4 billion—a record high—in the last quarter of 2023. (Figure 2, lower graph)

 

By extension, because economic and financial imbalances arise from resource misallocations due to speculative activities and public expenditures relative to credit-funded demand, this results in inflation.

 

Accordingly, the SIG is inherently inflationary, which results in the debasement of the purchasing power of the peso—an indirect consumption of the public's savings.

 

Overall, the SIG economic model reduces the average citizen's standard of living through boom-bust cycles and inflation, which can be seen as a form of tacit political redistribution.

 

Moreover, the SIG model depends not only on unfettered access to domestic and foreign savings but also on two other principal considerations: easy monetary conditions and liberal capital flows.

 

However, deepening deglobalization and the prospect of 'higher for longer' international rates pose a pivotal risk to sustaining this model.

 

As the late economist Herb Stein wrote (Stein’s Law), "If something cannot go on forever, it will stop."

 

VII. February’s Record High Public Debt and Historic Government Liquidity 

 

Transitioning from the SIG framework to present developments, we'll examine two recent entwined aspects: the fiscal deficit of the last two months and March inflation.

 

Philstar.com, April 2, 2024: The government reverted back to a budget deficit in February after a quick surplus at the start of the year, but a narrower gap can still be expected as the tax season draws near. Data from the Bureau of the Treasury showed that the government swung back to a budget deficit of P164.7 billion in February from a brief surplus of P88 billion in January…For the two-month period, the budget deficit also picked up by 27 percent to P76.7 billion from P60.6 billion as state spending outpaced the expansion of revenue collections.

 

The sharp reversal in February’s fiscal balance wasn't surprising, given the DBCC's 5.1% deficit-to-GDP target for 2024.

 

 

Figure 3

 

However, instead of a boom in public spending, the deficit surge in February stemmed from a sharp decline in revenue growth (+5.73%) following January's surge (+21.2%)—caused by regulatory reporting adjustments. (Figure 3, topmost image)

 

Even so, the two-month deficit of Php 76.7 billion accounted for the third largest, outpacing last year's Php 60.6 billion. Treasury borrowings of Php 536 billion also signified the third-largest. Meanwhile, the Treasury's cash holdings sprinted to an all-time high of Php 1.26 trillion, marking a threefold increase! (Figure 3, middle chart)

 

Much of the debt came from the Treasury's issuance of Php 584.5 billion in retail bonds in February.

 

Consequently, the Philippine debt stock soared to a fresh all-time high of Php 15.178 trillion, with February's Php 388 billion expansion accounting for the largest monthly increase since September 2022! (Figure 3, lowest visual)

Figure 4

 

The debt stock has surged significantly beyond the level of public spending. (Figure 4, topmost graph)

 

Nonetheless, the government is swimming in liquidity! And yet, are we to believe that the BSP is "tightening?"

 

VIII. Government’s Aggressive Borrowing: Is it Because of a Coming Stimulus, a Surge in Defense or Pre-Election Spending?

 

Why has the government been borrowing aggressively?

 

Could it be because debt servicing in February and the first two months of 2024 reached a record high? (Figure 4, middle and lowest charts)

 

Are authorities preparing for a jump in amortizations, which are excluded from expenditure allocations?

 

Is the government expecting a sharp downturn, prompting them to raise liquidity as a contingency? The government revised downward its GDP projection for 2024 last week.

 

Once again, while expenditures are programmed, revenues stem from economic conditions and the efficiency of tax administration. Thus, economic weakness has the potential to derail the government's deficit targets.

 

The NEDA chief was recently quoted saying, "It’s not in our best interest to drastically reduce our (budget) deficit because that will affect our growth."

 

Using reductio ad absurdum to address this premise, why should the government stop at a 5.1% budget-to-GDP ratio in 2024? If deficits represent the wellspring of economic prosperity, why not 50%? Pushing it to the limits, why not 100% or the embrace of full socialism?

 

Would further increases in the budget deficit not exacerbate the Savings-Investment Gap (SIG)?

 

What areas might be targeted for such increases?

 

Defense spending, perhaps, especially in light of the escalating territorial disputes with China.

 

Alternatively, could it be preparations for the 2025 national elections or pre-election spending?

Figure 5

 

The surge in February's Local Government Unit (LGU) allocations echoes the upsurge seen in Q1 2020, with the LGU spending binge peaking in the post-election period of August 2022. (Figure 5, topmost pane)

 

Or could it be a combination of all three: stimulus, defense, and pre-election spending?

 

It's intriguing, particularly for administration officials to assert that there will be no tax increases during the incumbent leadership's term. This forecast relies on either a sustained upturn in the economy or the possibility that authorities will opt for the increased use of the inflation tax rather than implementing direct taxes.

 

As an adage goes, "Never believe anything until it is officially denied."

 

Our bet is that the deeper embrace of the SIG translates to the next wave of the inflation cycle and higher taxes, which are coming very soon.

 

IX. March 3.7% CPI Reveals that the Fiscal Deficit-CPI Cycle Tango Remains Intact

 

On that note, March CPI of 3.7% reportedly beat the consensus estimates of 3.8%. This marked the second consecutive month of increases for the CPI, which was primarily attributed to rising rice prices.

 

Reuters, April 5, 2024:  Philippine annual inflation accelerated for the second straight month in March as the rice component jumped at the fastest pace in 15 years, giving the central bank reason to keep policy settings tight. The consumer price index rose 3.7% in March from a year earlier, the statistics agency said on Friday, picking up from the previous month's rate of 3.4%. Economists in a Reuters poll had forecast annual inflation in March at 3.8%, within the central bank's 3.4% to 4.2% forecast for the month

 

Sure, after the BSP chief upped his forecast to 3.9% in the third week of March, the flock of sheep followed their shepherd with higher projections. And so, the CPI beat.

 

While the consensus views inflation as primarily driven by supply-side factors and considers it "transitory, " our position is that deficits, which create economic imbalances, contribute to higher prices.

 

This is compounded by misallocations resulting from the BSP's liquidity-driven business cycle.

It comes as no surprise that the surge in fiscal spending, resulting in historic deficits, has coincided with the uptrend in the CPI. (Figure 5, middle and lowest charts)

 

Furthermore, with the Philippine savings rate at its lowest level, insufficient to fund the rapid growth of public debt (SIG), banks have become the primary source of funding.

 

Figure 6

 

The banking system's Net claims on the central government (NGoC) have been relentlessly increasing skyward. It grew by 15.9% YoY to the second-highest level of Php 5.015 trillion in January, which accounted for about 34.2% of the Php 14.8 trillion public debt over the same period. (Figure 6, topmost image)

 

The injected liquidity is expected to continue percolating into the system, resulting in uneven increases in relative prices.

 

Furthermore, the government will continue to blame "greed" on the marketplace until the fundamental laws of economics expose the underlying realities

 

Lastly, it is remarkable how the establishment portrays inflation as merely a statistic that represents the government's control valve. Does the average person care about the CPI rate? They care about the prices of goods and services they interact with and the purchasing power of their money. Despite falling CPI, the loss of purchasing power remains a top concern of the public, according to this survey.

 

The government can declare whatever numbers they wish to seduce gullible savers into funding their boondoggle, but eventually, inflation would erode society’s moral fiber and social cohesion.

 

In any case, the USD Philippine Peso exchange rate ($USDPHP) should be one of its best barometers and hedge against inflation. (Figure 6, middle and lowest charts)

 

 

___

References:

 

Dr. Mihai Macovei, The Case Against the New "Secular Stagnation Hypothesis," Quarterly Journal of Austrian Economics, September 4, 2021, Mises.org

 

Philippine Statistics Authority, Technical notes, The Country’s Total Gross Saving in 2022 Expands to PhP 4.90 Trillion June 29,2023, PSA.gov.ph

 

Philippine Statistics Authority, Gross Regional Domestic Expenditure, PSA.gov.ph

 

Philippine Statistics Authority. (2022). Technical Notes on the Consolidated Accounts, and Income and Outlay Accounts. PSA.gov.ph

 

Prudent Investor, January 2024’s Seasonal Fiscal Surplus in the Shadow of DBCC’s 5.1% Deficit-to-GDP Target, What Higher for Longer International Rates Means Substack, March 18,2024