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A REVIEW ON THE IMPACT OF DUTERTE’S

ADMINISTRATION ON THE ECONOMY’S INFLATION

Advanced Managerial Economics

Submitted by:

CLIFFORD T. AGUIMATANG
RAYMUND D. LORIO

June, 2022

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Table of Content

Chapter I: The Problem and its Backgrounds

Introduction………………………….…………………………………………….4

Statement of the Problem………………………………………………………….6

Significance of the Study………………………………………………………….6

Scope and Delimitations of the Study……………………………………….….…6

Chapter II: Theoretical Framework

Introduction…………………………………………………………………...…...7

Relevant Theories…………………………………………………………………7

Related Studies…………………………………………………………………..10

Conceptual Framework…………………………………………………………..11

Chapter III: Research Methodology

Introduction…………………………………………………………………..… .13

Methods and Techniques of the Study………………………………………… ..13

Population and Sample of the Study……………………………………………. 13

Research Instruments…………………………………………………………….14

Data Gathering Procedure ………………………………………………………14

Data Processing and Statistical Treatment ……………………………………...14

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Chapter IV: Presentation, Analysis and Interpretation of Data…………………….15

Chapter V: Summary of Findings, Conclusions and Recommendations

Summary of Findings…………………………………………………………….19

Conclusion……………………………………………………………………….20

Recommendations………………………………………………………………..21

Bibliography……………………………...……………………………………………..22

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CHAPTER I

THE PROBLEM AND ITS BACKGROUND

Introduction

Inflation generally affects the behavior of all races. Our decision to buy a single

product differs mainly due to inflation, as the cost of the same product purchased a month

ago may differ from the current price. Inflation is the price of goods and services that rise

over time. (Amadeo, K., 2018). In short, inflation increases our cost of living. As the cost

of living goes up, the value of the Philippine peso goes down, which reduces the ability to

buy certain goods and services.

In the Philippines, inflation is being controlled and dealt with via way of means of

the Bangko Sentral ng Pilipinas (BSP), with the principle aim of restricting and

normalizing the price of inflation so as now no longer to have an effect on the dwelling of

the Filipino human beings and for the financial system to run smoothly. Section three of

Republic Act 7653 or the New Central Bank Act, signed in 1993, said that the BSP`s

number one goal is “to hold fee balance conducive to a balanced and sustainable boom of

the financial system. It shall additionally sell and hold financial balance and the

convertibility of the peso.” A alternate withinside the authorities ruler additionally

performs an essential function withinside the boom or lower of inflation price. If the tasks

and packages affecting the importation, exportation, employment, manufacturing of

products and offerings and different outside elements like protection and order among

others aren't managed and maintained, drastic alternate withinside the inflation price

might also additionally follow. Noticeable inflation will increase have been found for the

duration of the time of then-presidents Ferdinand Marcos, Cory Aquino and Gloria

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Arroyo relationship lower back to Nineteen Seventies which have been stricken by

different factors just like the devaluation of the peso, big authorities spending,

skyrocketing international oil prices, pernicious guidelines of debt-pushed boom, crony

capitalism, more than one coup attempts, international rice crisis, and a chain of typhoons.

According to economist JC Punongbayan, Under the Rodrigo Duterte administration, the

country`s excessive inflation prices are triggered now no longer simply via way of means

of growing international oil prices. Added via way of means of Rappler, different

elements additionally make contributions to it, including the impact of the tax reform

regulation at the fee of petroleum products, the weakening peso, and the human being’s

expectancies of inflation.

According to the Philippine Statistical Office (PSA), inflation in September 2018

rose from 6.4% in August to 6.7%, the highest in more than nine years, and the ninth

straight month of inflation since January 2018. became. Government economic

executives and some businessmen have stated that recent inflation levels are "just

hiccups" and "manageable," increasing inflation to justify current numbers. Some have

tried to drag themselves into their predicament.

Recently we have been greeted by some really shocking news: inflation in the

Philippines, which measures how fast prices are rising, reached a whopping 6.4% in

August (Punongbayan, J., 2018). This sharp rise is not only the highest in 9.4 years, but

also above the government's upper limit of 6.2%, well above the government's 2018

target of 4%. In addition, the data confirms this. 6.4% is also the highest in all ASEAN

countries. In this regard, it can be noted that inflation in the Philippines was always in the

middle when President Duterte took office, but we are moving forward today. Why is the

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Philippines experiencing this abrupt change compared to other neighboring countries?

And at least what can we do to correct our inflation rate and bring it back to normal?

Statement of the Problem

The general problem of the study is the effect of inflation during the Duterte

Administration.

Specifically, the study sought to answer the following:

1. What do you think is the reason for the surge in inflation in the Philippines under

the Duterte administration?

2. Do you have any suggestions on how the government will tackle the surge in

inflation?

Significance of the Study

The study is deemed beneficial and significant to the following groups and

institutions:

Future Researchers. This study is useful and can be used as a reference if they

want to take a broader approach to the subject of this study.

Government. The current government may also find this study useful in that it has

access to the insights of those who have experienced the effects of inflation.

Scope and Delimitations of the Study

This study is limited to the realized effects and possible perceived causes of

drastic increase of inflation rate during the Duterte Administration. The study covered the

managers of Landbank of the Philippines – South East Luzon Branches Group.

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CHAPTER II

THEORETICAL FRAMEWORK

This chapter is dedicated to introducing the relevant theories, research, and

literature that formed the framework of this research. This section also includes a

presentation of the survey paradigm as an answer to the survey questions raised in the

first chapter. In addition, this paper contains a list of variables with the definitions used in

this study.

Relevant Theories

Different economists advocate different inflation theories. Economists who have

developed the theory of inflation can be broadly divided into two categories: monetarists

and structuralists.

Monetarists have linked inflation to a monetary cause and proposed monetary

measures to control it.

Structuralists, on the other hand, believe that inflation is due to an imbalanced

economic system, and have used both monetary and financial measures to solve

economic problems.

Market-Power Theory of Inflation. In the economy, when a seller's individual

or group sets a new price together that is different from the competitive price, that price is

known as the market power price. Such groups maintain prices at a level where they can

make the most profits without worrying about the purchasing power of consumers.

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According to an advanced version of inflation's market power theory, oligopolies

are free to raise prices without increasing demand. This rise in price levels is due to

higher wages (because of trade unions) in the oligopolistic industry.

Higher wages are offset by higher product prices. Increasing personal income

increases purchasing power and leads to further inflation.

Apart from that, some economists have come to the conclusion that fiscal and

monetary policies are not applicable in real-world situations because they cannot control

rising price levels. This policy only works if the price rises due to increased demand.

In addition, this policy cannot be applied to oligopolistic price increases due to

rising production costs. Monetary policy can reduce inflation by raising interest rates and

regulating the flow of credit in the market. However, this does not affect the oligopolistic

price. This is because costs are passed on to the prices of goods and services.

Conventional Demand-Pull Inflation. Inflation's market power theory

represents the extreme end of inflation. According to this theory, inflation also exists

when there is no excessive demand. Traditional demand-pull theorists, on the other hand,

believed that aggregate demand exceeded aggregate supply as the only cause of inflation.

In a full employment equilibrium, inflation is inevitable as demand increases. In

addition, the economy reaches maximum capacity with full employment. At this point,

while the demand for goods and services grows rapidly, the supply of goods and services

cannot be increased. Due to this imbalance between supply and demand, inflation occurs

in the economy.

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Structural Theories of Inflation. In addition to the above two extreme

objectives, there is an intermediate group of economists called structural economists.

According to structural inflation theory, market power is one of the factors that cause

inflation, but it is not the only one. Proponents of structural theory believed that inflation

was due to some of the structural mismatches or institutional features of the business

environment within the county.

Mark-up Theory. The markup theory of inflation was proposed by Professor

Gardner Ackley. According to him, inflation cannot arise solely from demand and cost

factors, but it is the cumulative effect of demand and cost push activity. Demand-pull

inflation is inflation caused by excess aggregate demand, which leads to further price

levels. Rising price levels stimulate production, but increase the demand for factors of

production. As a result, both cost and price go up.

In some cases, wages can go up without increasing over-demand for the product.

This leads to lower supply at higher price levels to offset the rise in wages due to product

prices. A shortage of products on the market will lead to further price increases.

Therefore, Professor Gardner provided a model of markup inflation in which both

factors of demand cost are determined. Increased demand leads to higher product prices

as customers spend more on their products.

On the other hand, the cost of manufacturing is high because the product is sold to

the company, not the customer. This also raises the price of the product. Similarly, rising

wages will lead to higher production costs, which will further raise the price of goods.

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Therefore, according to Professor Gardner, inflation is caused by excessive

demand or rising wages. Therefore, both monetary and fiscal policies need to be used to

curb inflation. However, these two measures are not sufficient to curb inflation.

Bottle-Neck Inflation. Bottleneck inflation was introduced by Professor Otto

Ecstein. According to him, the direct relationship between wages and product prices is a

major cause of inflation. In other words, inflation occurs when wages and product prices

rise at the same time. But he believed that raising wages and the theory of market power

alone could not provide a clear explanation for inflation.

After analysis of inflationary situation, Prof Eckstein says that the inflation occurs

due to the boom in capital goods and wage price spiral. In addition, he also advocated

that during inflation prices in every industry is higher, but few industries show a very

high price hike than rest of the industries.

These industries are known as bottleneck industries and are responsible for rising

prices for goods and services. In addition, Professor Xtine argued that the concentration

of demand for products from the bottle industry would lead to inflation.

Related Studies

Presented below are the related studies pertaining to inflation and comparison of

inflation in the Philippines to other ASEAN countries.

“Our results show that while inflation in all three countries is affected by

different external factors, Malaysia and Singapore avoided high inflation despite high

levels of economic growth through ‘tight’ monetary policy. In contrast, the Philippines

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had high inflation, even with a stagnant economy, due to ‘loose’ monetary policy and the

monetization of government debt.” (Alba, J., et.al, April 1998)

The above quote is correct, as the cause of inflation in developed countries is

generally identified as the growth of the money supply. Inflation, on the other hand, is not

a purely monetary phenomenon in developing countries. In addition, factors usually

associated with fiscal imbalances, such as increased growth in the money supply and

devaluation of exchange rates due to the balance of payments crisis, dominate the

inflation process in developing countries.

The latest inflation scenario in the Philippines. After experiencing unprecedented

50.32% of normal inflation in 1984, many Filipinos were among the democratic spaces

created by the Aquino government, especially when inflation collapsed for the second

consecutive year in 1986 and 1987. I thought I witnessed the worst below. In 1987, it was

3.9 (Yap, 1996). Yes, in the decades that followed, from the 1990s to the 2000s, average

annual inflation did not even exceed 20%. Economic analysts and policy makers attribute

these inflation rates to solid economic fundamentals, but some economists, especially

central bank authorities, attribute them to sound financial programming.

Conceptual Framework

This shows the research paradigm for the perceived causes of Inflation Rate

during the Duterte Administration. It represents the Input-Process-Output (I-P-O) model

in analyzing the inflation and its causes.

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Figure 1. Schematic Diagram of the Conceptual Model of the Study

The frame of conceptual framework shows the input of research consisting of

classroom discussions on topics. Articles and references related to literature and research

on the causes of inflation during the Duterte administration.

The second framework represents a process that includes systematic steps for

conducting an investigation. This includes research on the topic and history of the

inflation movement over the past few years, and interviews with selected sample sizes on

the perceived causes of the dramatic increase in inflation during the Duterte

administration.

Lastly, the third frame represents the output, which consists of the perceived

causes of drastic increase in inflation rate identified by the respondents of this research.

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CHAPTER III

RESEARCH METHODOLOGY

This chapter discussed the method of research, the description of respondents,

sources of data, data gathering instruments and procedures.

Methods and Techniques of the Study

This study used a descriptive study design to achieve that goal. Researchers

believed that descriptive studies could provide a detailed analysis of the perceived causes

of rising inflation during the Duterte administration. This study did not test specific

relationships between variables, but provided information on trends and attributes with

the aim of better understanding the causes of rising inflation during the Duterte

administration.

Researchers used descriptive qualitative research methods. The data collection

included textual information from the interview questionnaire. Creswell (2003) defined

qualitative research as an approach in which questioners assert knowledge based

primarily on the construction of knowledge from experience, the experience from the

perspective, or both.

Population and Sample of the Study

To gather the necessary data needed for the study, the researchers selected ten (10)

selected Managers under the Landbank of the Philippines – South East Luzon Branches

Group, in which they all refused to be mentioned in this research. The interview to the

different Managers and Heads in the various areas/departments under the administrative

division provides valuable result to the assessment of the perceived causes of increase of

inflation rate during the Duterte Administration.

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Research Instruments

For this study, an interview was conducted which started from April 2022 up to

May 2022. The researchers produced a list of questions to be asked during the interview

which focused on their perceived causes of the drastic increase of Inflation rate during the

Duterte Administration.

Data Gathering Procedure

The researchers used the primary data collected from the interviews. The

interview was conducted so as not to affect the respondents' daily work and work. During

the interview, all personal information and / or political views and opinions were kept

strictly confidential and discussed with the interviewees for academic and research

purposes only. In addition, with the consent of each interviewee, the researchers recorded

the entire interview and transcribed it for analysis.

Data Processing and Statistical Treatment

Researchers have transcribed recorded interviews for analysis and carefully

managed them to ensure the quality of the recorded audio. Researchers read the

transcribed interviews multiple times to get a feel for the overall data. At the same time,

researchers wrote short phrases, ideas, or keywords in the margins to facilitate analysis.

The researchers organized the interpreted data by concept and set a qualitative

interpretation of the data.

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CHAPTER IV

PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA

This chapter presents the data analysis, interpretation and presentation there-to on

the study of the perceived causes of the increase of inflation rate during Duterte

Administration. The data are categorized based on how it was presented on the first

chapter.

Question 1. What do you think are the possible reason for the drastic

increase of inflation rate in the Philippines during the Duterte Administration?

The following discusses the causes and effects of inflation during the Duterte

Administration.

First, as mentioned in the statement above, one of the factors’ influencing

inflation is the combination of international and domestic commodities, especially oil

imports, whose prices have clearly risen around the world. I'm continuing. The

Philippines is one of the countries with the lowest oil production, so it is forced to import

oil. According to the survey, we are one of the largest oil importers compared to other

neighboring ASEAN countries.

Given the rise in oil prices in Japan, the rise in prices corresponds to the rise in

prices of all goods and services. This increase has a domino effect, with an increase in

one factor revealing an increase in the other. High product prices mean that consumers

have low purchasing power.

The second reason for the high inflation rate in the Philippines is the current crisis

of supply shortages of many agricultural products, especially rice. I heard the news that

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the president flatly denied that there was a problem with the rice supply. However, in

connection with this, there was news that in some parts of the country, inflation in one

month was double-digit, which happened to be the highest inflation rate in the United

States. In fact, not only rice, but also vegetables, fish, and sugar confectionery.

Affected by high inflation, these products are one of our basic needs. These are

the products we take to survive. Those who have not reached their limits will not be

affected by rising prices, but those who fall into the "worst of the poor" category at the

minimum wage will be hit hardest. Higher prices mean less purchasing power for the

average consumer.

Third possible cause of high inflation rate is the continuous decrease in the value

of Peso. According to the news, it has been 12.2 years since the value of our peso became

the lowest. In addition, our currency has been one of t weakest in ASEAN today. Because

we pay imports in foreign currencies, a weaker peso necessarily makes imports costlier.

As such, oil becomes costlier too, as well as all the other goods and services in the

economy that rely on it. (Punongbayan, J., 2018). If we’ll look closely, the widening

trade gap between imports and exports of commodities means that we are currently

paying more dollars than we are earning, and the abundance of pesos is its weak value. It

is comparable only to. Another factor contributing to the import-export gap is the raw

materials (mainly steel) used in the Duterte administration's "build, build, build"

infrastructure. Therefore, it can be said that this project partially condemns the weakness

of the peso. This is not necessarily a bad thing, but as suggested in the statement above,

weak pesos are generally expensive to import.

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Finally, another reason of the drastic increase of inflation rate is because of the

implementation of Tax Reform for Acceleration and Inclusion Law (TRAIN Law). At

first glance, the ZUG law has had a positive effect on workers bringing back higher

wages, as the tax that should be levied on income tax is levied on other commodities.

However, if you look at the whole ZUG law and see the whole picture, you can say that

the effect is not good. why? For example, the income tax paid by taxpayers will be

reduced, and some of the lost state income will be collected by increasing the sin tax

(taxes on cigarettes, alcoholic beverages, etc.) and the profit tax (lottery)., and gasoline.

As already mentioned, as a cost factor for all goods and services, gasoline means that its

price increase means only the corresponding increase in the prices of the goods and

services that depend on it. Also, the higher the price, the lower the purchasing power of

people.

Question 2. Do you have any suggestion on how will the government

remediate the drastic increase in the inflation rate?

Below are the recommended solutions and alternative courses of action in order to

normalize the inflation rate during the Duterte Administration:

First, given that almost all of the causes and consequences described are due to or

due to the implementation of the ZUG Act, it must be done to accommodate the

continued increase in management. I think it's correct to say that changes and adjustments

are needed. Inflation rate. In this regard, the imminent implementation of rising oil prices

over the next few years must also be withheld in order to immediately stop runaway

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inflation. Instead of raising oil prices, the government can regain lost income by raising

interest rates and speeding up rice imports and distribution across the country.

Second, the government can correct rice mistakes by increasing rice imports,

speeding up rice distribution, and passing rice tariffs. Duterte will also benefit us by

immediately dismissing the incompetent officials who caused this unnecessary rice crisis.

Third, inflation affects consumer behaviour, so economic managers need to curb

people's expectations of future inflation. They can do this by regaining the trust of the

people and showing us all that they are in control of the economic situation.

Third, inflation affects consumer behaviour, so economic managers need to curb

people's expectations of future inflation. They can do this by regaining the trust of the

people and showing us all that they are in control of the economic situation.

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CHAPTER V

SUMMARY OF FINDINGS, CONCLUSIONS AND

RECOMMENDATIONS

This chapter presents the summary of the findings, the conclusions based on the

results obtained, analysed and interpreted data presented in the previous chapter and

recommendations of the study on the perceived causes of increase in the inflation rate

during Duterte Administration.

Summary of Findings

From the research problems and the result of the interview, the major findings can be

summarized below:

1. What do you think are the possible reason for the drastic increase of inflation

rate in the Philippines?

Out of ten (10) interviewed Managers of Landbank of the Philippines –

South East Luzon Branches Group, the perceived causes of the drastic increase of

Inflation Rate during the Duterte Administration are:

a) Importation of Oil where price is increasing in the world market.

b) The importation of Rice and other agricultural products,

c) the decreasing value of Peso compared to dollar and lastly

d) the implementation of TRAIN LAW and the Build, Build, Build project

of the government.

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2. Do you have any suggestion on how will the government remediate the

drastic increase in the inflation rate?

From the result of the interview, it was summarized that as per the interviewee,

The suggestions are: a) Amendment of the recently implemented TRAIN Law, b)

fast tracking of the imported and distribution of Rice and the passing of the rice

tariffication bill, and since inflation affects the behaviour of the consumers c) the

government and economist must regain the trust of the people.

Conclusion

In view of the foregoing, the following conclusions were draws:

1. That the perceived causes of drastic increase of inflation rate during the

Duterte Administration based from the interviewee are:

a. Importation of Oil and its increasing prices in the world market

b. Importation of Rice and other agricultural products

c. Decreasing value of Peso

d. Implementation of TRAIN Law and (Build, Build, Build)

2. The suggested ways to remediate the inflation rate are”

a. Implemented TRAIN Law must be amended

b. Passing of the Rice Tariffication Bill

c. Regaining peoples trust and confidence

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Recommendations

In light of the findings and conclusions of the study, the following

recommendations were drawn:

1. In order to control the continuing increase of the inflation rate, since some of

the areas that is identifiably causes the shoot of inflation, certain law,

amendments and adjustments must be made by the government.

2. Regardless of the positive and or negative effects of inflation and how people

perceived it, the government must do something about this matter before it’s

too late for all of us.

3. The researcher also recommends that a future study should be made in relation

to this matter in order for the people to have an awareness on how we must

deal with the increasing rate of inflation in the near future.

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Thanh, Su Dinh. “Threshold Effects of Inflation on Growth in the ASEAN-5 Countries:

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