Why is inflation control important for economic growth and stability?
Answer (1)
Controlling inflation is important because it protects the economy from uncertainty, supports long-term growth, and ensures that everyone—especially the poor—can afford basic needs.When inflation is moderate and stable—around 2% to 4% per year—families can budget properly, businesses can plan ahead, and investors feel confident. But when inflation is too high or unpredictable, the economy becomes unstable. Prices of food, fuel, and transportation change rapidly. This hurts poor families the most because they spend most of their income on necessities.For example, if rice prices rise from ₱40 to ₱60 per kilo in just a few months, many families in the Philippines may have to reduce meals or skip school-related expenses. This weakens health, education, and future productivity. At the same time, businesses may stop hiring or investing because they cannot predict future costs.Inflation also weakens the value of savings. A student saving ₱1,000 for future tuition might discover that, after a year of high inflation, that amount is no longer enough. Retirees living on fixed pensions will also suffer because their monthly income will not keep up with rising prices.From the point of view of the government, uncontrolled inflation can lead to political unrest. If basic goods become too expensive, people may lose trust in public leaders. That’s why inflation control is not just an economic issue, but also a social and political one.Countries with stable inflation attract more investors. For instance, many foreign businesses invest in the Philippines because the BSP has shown it can manage inflation well over time. This leads to more jobs, better wages, and stronger economic growth.
