MANILA, Philippines — Governments should assess the purchasing power of their populations to gauge the severity of the pandemic’s impact on the value of cash earned especially by poor families, the Asian Development Bank (ADB) said yesterday.
In a blog, ADB statisticians Kaushal Joshi and Mel Lorenzo Accad, and World Bank statistician Inyoung Song urged governments to measure the purchasing power of their people to grasp how the health crisis changed the capacity of currencies to buy goods and services.
“There are a variety of methods to track economic recovery after the pandemic, but purchasing power parity conversion is one of the most effective in reflecting the real sizes of economies and the incidence of poverty so that all economies can be assessed more meaningfully as possible,” they said.
In evaluating purchasing power parities (PPP), different currencies are converted to a common reference currency. Afterward, adjustments are made to get their price differences.
In 2017 the PPP for the gross domestic product of the Philippines was P19.385 when compared to the US dollar. The data analysts said on average, P19.385 worth of products in the Philippines equates to $1 worth of similar commodities in the US.
“When converted based on purchasing power parities from 2011 for the commodities consumed by the households, the international poverty threshold of $1.90 a day buys the same volume of commodities across all economies,” they added.
The experts also said policymakers and stakeholders can employ the International Comparison Program (ICP) in tracking the recovery of their economies from the pandemic.
The ICP provides estimates of PPP across the world that can be taken to compute GDP and its components and enable real-time comparisons between countries.
Based on the latest ICP, the 32 Asia-Pacific economies assessed by the program accounted for 56 percent of world population and 40 percent of global GDP in 2017 using PPP. China sustains the largest PPP-based GDP in the world at $19.6 trillion, followed by the US at $8.1 trillion.
In the Philippines, the purchasing power of consumers keeps on dropping during the lockdown, as prices of basic goods accelerate while wages remain the same. Last year, inflation settled at 2.6 percent, from 2.5 percent in 2019.
Inflation also jumped to 4.5 percent in the first quarter, from 2.7 percent during the same period last year, attributed to the increase in prices of goods, particularly meat products.
On the other hand, the last time the minimum wage in Metro Manila was adjusted was in 2018, as workers struggle to seek a pay hike now given the financial beating that firms endured during the shutdowns.