PHILIPPINE inflation has continued its downward trend for the third consecutive month as it slowed to 3.9 percent in December amid the surge in demand during the holiday season.
The latest inflation outturn is an improvement from 4.1 percent in November, bringing the full-year average inflation rate to six percent, according to the Philippine Statistics Authority (PSA) on Friday, Jan. 5, 2024.
It is likewise within the Bangko Sentral ng Pilipinas’ forecast range of 3.6 to 4.4 percent and is consistent with the central bank’s projections that inflation is likely to moderate in the near term due to easing supply-side price pressures and negative base effects.
CV inflation
Inflation in Central Visayas for the month inched up a bit to 3.9 percent from 3.8 percent in November. Increases were recorded in food, non-alcoholic beverages, alcoholic beverages, tobacco and transport indices.
The full-year average inflation rate in the region stands at 5.1 percent, lower than the 6.6 percent in 2022.
Inflation for most commodity groups either slowed down or retained their previous rates during the month.
The major drivers of the downtrend in inflation for December were lower year-on-year inflation in housing, water, electricity, gas, and other fuels (from 2.5 percent in November 2023 to 1.5 percent), followed by food and non-alcoholic beverages (from 5.7 percent to 5.4 percent).
Meanwhile, the top three commodity groups that contributed to the December 2023 overall inflation were food and non-alcoholic beverages with 2.1 percentage points (ppt) of the overall 3.9 percent; restaurants and accommodation services (0.6 ppt); and housing, water, electricity, gas and other fuels with 8.3 percent share or (0.3 ppt).
Food inflation slowed down to 5.5 percent in December from 5.8 percent in November and 10.6 percent a year ago. However, it continued to have the biggest inflation contribution for the month.
Rice inflation, specifically, rose to 19.6 percent during the month from 15.8 percent in November 2023. It was also the most significant contributor to December 2023’s inflation with 1.7 ppt, followed by food and beverages services and housing rentals with 0.5 ppt each.
Government intervention
National Economic and Development Authority Secretary Arsenio Balisacan in a statement stressed the importance of Executive Order 50, which extended the Most Favored Nation reduced tariff rates for key agricultural commodities like pork, corn, and rice to ensure sufficient food supply for Filipinos and prevent spikes in prices of these commodities.
“Amid an uptrend in international rice prices and the expected negative impact of the El Niño phenomenon, the Interagency Committee on Inflation and Market Outlook will closely monitor the situation and propose further temporary tariff adjustments if necessary,” he said.
“We will also push for trade facilitation measures to reduce other non-tariff barriers. While our medium-term objective to boost agricultural productivity remains, it is important to augment domestic supply to ease inflationary pressures on consumers, particularly those in low-income households,” he added.
Balisacan also underscored the need to hasten the full implementation of the El Niño National Action Plan, which seeks to increase the resilience of communities against El Niño and guide government agencies in mitigating its immediate effects.
“We must remain vigilant in monitoring the prices of our commodities and continue to implement strategies to address short-term and long-term inflation-related challenges,” Balisacan said.
Finance Secretary Benjamin Diokno, in a statement, also said a rice importation agreement with India is currently underway, and a possible expansion of the Unilateral Minimum Access Volume of select commodities, in consultation with stakeholders.
The Philippine Atmospheric, Geophysical and Astronomical Services Administration expects the El Niño phenomenon to continue until May 2024.
Forecast
The BSP, on Friday, said the balance of risks to the inflation outlook continues to lean significantly toward the upside.
Key upside risks are associated with potential pressures from higher transport charges, increased electricity rates, higher oil prices, and higher food prices due to strong El Niño conditions.
Meanwhile, the impact of a relatively weak global recovery as well as government measures to mitigate the effects of El Niño could reduce the central forecast.
“Looking ahead, the Monetary Board deems it necessary to keep monetary policy settings sufficiently tight until a sustained downtrend in inflation becomes evident,” the BSP said.
The BSP said it will continue to monitor inflation expectations and second-round effects and take appropriate action as needed to bring inflation back to the target, in keeping with the BSP’s price stability mandate.
The Marcos administration expects the inflation rate to return to the target range of two to four percent in 2024
until 2028.
