The law of supply and demand runs economies. When more money is chasing the same amount of goods, prices go up, which is called inflation. Inflation happens when a basket of goods prices go up over time. The opposite of inflation is deflation, where prices fall.
Inflation can be caused by many things, including an increase in the money supply, higher oil prices, or droughts that lead to food shortages. However, it’s a massive problem in many countries, leading to higher living costs, economic instability, and even social unrest.
In Southeast Asia, inflation rates are at an all-time high. The average inflation rate is expected to be around 5%, but some countries within the area are expected to reach as high as 8%. Many experts believe that this is due to the political turmoil happening worldwide. Here’s how the region is adapting.
Banks Giving Way to Entrepreneurs
In many cases, banks are the hardest hit during inflation. When prices go up, the value of money goes down, which means that people are less likely to take out loans. This can lead to a decrease in economic activity and even recession.
To combat this, some banks are giving way to entrepreneurs. They’re providing micro-loans and other forms of financing to help small businesses get started. This helps to increase economic activity and provides a buffer against inflation.
Additionally, some banks are also giving people a chance to store their money safely. Inflation rates can decrease money’s value, but banks’ interest rates can increase its value. Essentially, high-yield savings accounts are essential to ensure that people’s money is safe from inflation. For example, the Rizal Commercial Banking Corporation in the Philippines offers high-yield savings accounts with attractive discounts for those interested in opening an account with them. This is great for people who want to safeguard their money during this economic crisis.
Additionally, investments are also an excellent way to beat inflation. They may be volatile, but over time, they have outperformed inflation. For example, the stock market has historically grown at an average rate of 7% per year, which is higher than the current inflation rate in Southeast Asia.
So there are a few ways that banks are helping people to cope with inflation. Financing entrepreneurs and offering high-yield savings accounts ensures that people’s money is safe and sound. Giving people access to suitable investment options can also help people survive this time.
Food Prices Stabilized Through Technology
Another way that Southeast Asian countries are dealing with inflation is by using technology to stabilize food prices. For example, in the Philippines, the government is working with the private sector to develop a mobile app that will help connect farmers with consumers. It will allow farmers to sell their produce directly to consumers, bypassing the middleman.
As a result, prices will be more stable because there won’t be as much of a markup. It will also help improve food quality since it comes straight from the source.
Subsidies for Essential Goods
Many countries within Southeast Asia are also providing subsidies for essential goods. It helps ensure people access the things they need, even when prices are high. For example, the Indonesian government subsidizes rice farmers to sell their rice at a lower price.
This helps to keep inflation in check because it keeps the cost of living stable. Additionally, it helps to ensure that people have enough to eat, which is essential during economic turmoil.
Price Controls on Non-Essential Goods
In some cases, countries will put price controls on non-essential goods. This helps to prevent inflation from spiraling out of control. For example, Malaysia’s government has set a price ceiling on chicken and eggs.
This helps to keep food costs down and ensures that people have access to affordable food. It also helps keep inflation in check by preventing prices from rising too high.
Increasing the Minimum Wage
Finally, many countries are increasing the minimum wage. This helps to ensure that people can still afford necessities, even when prices are high. For example, Vietnam recently raised its minimum wage by 7%.
This increase will help workers keep up with the cost of living and ensure they can still afford necessities. It will also help stimulate the economy by putting more money into people’s pockets. Other countries in Southeast Asia that have increased their minimum wage include Indonesia and the Philippines.
All in all, there are many ways that Southeast Asian countries are dealing with inflation. These are just some steps to stabilize prices and ensure people access essential goods and services.