BY EDISON JOSEPH GONZALES
The biggest threat facing many Philippine businesses may not be whether they can sell their products this holiday season, but whether they can afford to keep selling them at prices their customers can pay.
A peso near P63 against the US dollar, sharply higher fuel costs and 13.5 percent logistics inflation are squeezing businesses that rely on imported inputs, according to Philippine Chamber of Commerce and Industry (PCCI) Vice President for Trade and Industry Bryan Ang.
Ang, who was interviewed on BNC’s “Follow the Money,” said the peso has fallen from about P55.90 against the US dollar a year ago to nearly P63, a decline of roughly 14 to 15 percent.
For businesses that depend on imported raw materials and finished products, the slide has made it increasingly difficult to plan inventory purchases ahead of the holiday season.
Businesses normally stock up when they expect consumer demand to rise, but the speed of the peso’s decline has made it harder to predict how much inventory will cost when it arrives, Ang said.
The currency pressure is coming alongside higher fuel and logistics costs. Ang cited logistics inflation of 13.5 percent and rice inflation of 19.4 percent, saying the impact of higher fuel costs extends across sectors.
“Fuel will hit all sectors,” Ang said, particularly pointing to commercial transport and small businesses.
Rice, he added, is not only a staple for consumers but also a basic input for small businesses, including restaurants and sari-sari stores.
The problem is that businesses cannot simply pass those higher costs on to consumers, Ang said, because household take-home pay has not risen enough to absorb higher prices.
“So you cannot just increase prices,” he said. “You may just lose your customers.”
Instead, businesses are holding back on hiring, limiting inventory orders and slowing expansion plans.
Ang said widespread closures have not yet emerged, but businesses selling government-monitored goods subject to price caps are already complaining about the pressure on their margins.
Those businesses are dealing with higher fuel costs and a wage hike of P60 or P85, he said, while commercial transport operators continue to face elevated fuel prices and unresolved import congestion.
Ang urged the government to consider suspending excise taxes and to expedite proposed income-tax relief for upper- and middle-income wage earners, saying more money needs to reach consumers’ pockets.
He also called for greater support for the commercial transport sector, which he said has been absorbing elevated fuel costs without the same assistance given to marginalized transport operators.
For businesses, some longer-term responses include shifting from conventional combustion-fuel vehicles to hybrid or electric vehicles and installing solar panels at manufacturing facilities.
But those measures will not immediately solve the pressure on margins.
In the short term, Ang said businesses are trying to preserve operations. Manufacturers may reduce working hours, while trading companies can slow the pace of inventory imports.
“We can reduce the working hours, but that is the last thing we want to do when we are in the manufacturing business,” he said.
Ang said businesses are hoping for stronger holiday demand as overseas Filipino workers send remittances and employees receive 13th-month pay, which could put more money in consumers’ pockets.
For now, however, small-business owners are confronting an unusually difficult combination of rising costs and limited pricing power.
Asked to describe how they are feeling, Ang gave two words: “Survival and frustration.”