MANILA, Philippines — It is not only in the Philippines that Filipinos are suffering from the effects of inflation. Filipinos in Canada are similarly grappling with what they describe as among their biggest concerns—the rapid rise in prices.
Many Canadians are planning to reduce many aspects of their spending due to high-interest rates and inflation, according to a January 2023 report of the Canadian Survey of Consumer Expectations.
About 87% of the respondents said they will reduce their travel, accommodation, food service and entertainment expenses. Some 73% said they will cut down on clothing and footwear spending, while 58% will tighten their belts on groceries.
More Canadians have cut down on buying discretionary items to save up for more urgent needs, the survey showed. From the 52% of respondents during the fourth quarter of 2020, 64% of respondents in the fourth quarter of 2022 said they will cut down on spending.
This year, Canada’s annual average consumer price index (CPI), which measures the average change in prices paid by consumers over time for a market basket of goods and services, was at 6.8%, according to Statistics Canada. This is compared to the 3.4% CPI in 2021 and 0.7% in 2020, which shows a new high in 40 years.
For Filipino-Canadian economist Cesar Polvorosa Jr., the CPI report for 2022 can be attributed to the inflationary effects of the global crisis.
But Polvorosa noted that this result did not come as a shock because the rise in prices started from the inflation spiral in the energy sector.
Gasoline prices skyrocketed to 28.5%, while the spike in food prices reached 9.8%, which is the highest since 1981, noted Polvorosa, who teaches at Algoma University and Humber College Longo Faculty of Business in Ontario.
A perfect storm
Polvorosa called the events in the last three years, including the COVID-19 pandemic and the Russia-Ukraine war, a “perfect storm” which caused rapid inflation.
He said in an interview with CBC/Radio-Canada that it was the pandemic and the global lockdowns that disrupted supply chains around the world.
After countries eased pandemic restrictions, a lot of demands that were put on hold were released. However, many products ranging from automotive tech, computer chips, to food were not part of those that were released because of the supply chain disruptions, Polvorosa said.
During this time, many Canadians also received financial aid from their government to cope with the health crisis. The net effect of these events was the rapid rise in the prices of goods, he added.
The economist explained that the increase in borrowing interest rates at the Bank of Canada is a usual solution to fight inflation.
“High-interest rates mean that borrowing money is now more expensive,” Polvorosa said.
This means fewer consumers will borrow money and invest in business. This could lead to lesser demand, which could, later on, slow down inflation.
The Bank of Canada adjusted its bank rate to 4.75% last January, the eighth rate hike in the last 12 months, which according to Polvorosa is “aggressive” due to economic headwinds.
In December 2022, Canada posted an inflation rate of 6.3%, a decrease from 8.1% in June last year, which is a good sign that the interest rate hikes in Canada are now affecting the economy.
The Bank of Canada is still treading a tightrope because high-interest rates translate to lower levels of borrowing, which could result in the weakening of businesses and unemployment.
But Polvorosa is optimistic that Canada will soon find stability unless dragged down by the global economy.