Philippine Dec CPI eases further but 2018 inflation hits a decade high

07, Jan. 2019

Philippine inflation slowed further in December on a lower rate of increase in food prices, particularly rice, as supply constraints eased, but food prices remain relatively high, hurting low-income families.
Philippine inflation slowed further in December on a lower rate of increase in food prices, particularly rice, as supply constraints eased, but food prices remain relatively high, hurting low-income families.

By Darlene Basingan

QUEZON CITY, NNA – The Philippines’ inflation slowed further in December as the rate of increase in food and transportation costs continued to ease, but the average inflation for 2018 surged to a10-year high of 5.2 percent.

The consumer price index rose 5.1 percent on year last month, decelerating from 6.0 percent in November and marking the slowest rise since June, the Philippine statistics Authority (PSA) said Friday.

The figure fell below central bank’s forecast of 5.2 to 6.0 percent but it was still well above 2.9 percent seen in December 2017.

On the month, the CPI for all items fell a seasonally adjusted 0.4 percent, the largest drop for 2018, after dipping 0.3 percent in November.

The core CPI excluding volatile food and energy prices – a key measure of the long-term inflation trend – also decelerated to 4.7 percent in December from 5.1 percent in November, but was still higher than the 2.2 percent recorded in December of 2017.

The rate of increase in prices of commodities in the Philippines peaked in September and October last year at 6.7 due to food supply constraints and higher oil prices, which pushed up the costs for public transportation.

“The rate of price increases has remained manageable, giving the country adequate elbow room to sustain its economic growth and reach its development goals,” the Duterte administration’s economic team said in a statement.

“Still, we understand that the faster inflation particularly in the middle of 2018 had affected many Filipinos, most especially those in the disadvantaged sectors. For this very reason, the economic team took swift and decisive measures to tame inflation.”

Inflation in food and non-beverages commodities slowed to 6.7 percent in December from 8.0 percent the previous month, mainly due to an increase in rice supply, which constitutes a huge portion of the consumer basket of Filipinos, particularly lower income families. The year-on-year rise in rice prices eased to 26.3 percent in December from 28.8 percent the previous month.

“We had both the [good] harvest in November… and the arrival of [rice] imports,” Socio Economic Undersecretary Rosemarie Edillion told NNA in a phone interview on Friday. “We opened the importation also to the private sector…so the prices of commercial rice would also go down.”

Also contributing to the slower rate of increase in consumer prices is transportation that eased to 4.0 percent from 8.9 percent the previous month. Global oil prices had fallen in the previous months, prompting a rollback in local fuel prices, and the withdrawal of provisional fare increase for jeepney transport.

For its part, the Philippine central conducted a series of rate hikes totaling 175 basis points to tame inflation. As the inflation rate eased, the bank maintained its monetary policy stance in December, leaving its benchmark short-term interest rate at 4.75 percent, after tightening credit for the fifth straight time the previous month.

Despite the easing commodity prices, some Filipinos are still burdened by relatively high prices of goods.

Pilar Relocio, 60, who earns a measly 6,000 pesos ($114.32) a month as a launderer, said she had more difficulty making ends meet as the prices for basic commodities rose.

“It’s very difficult. Because of my very low monthly income, I could no longer buy the things I want to buy. I can only buy very cheap products,” Relocio said.

Annual average inflation in 2018 jumped to 5.2 percent from 2.9 percent in 2017, posting the highest gain since 8.2 percent in 2008. It is well above the government’s target range of 2 to 5 percent for 2018.

Annual average core inflation also rose to 4.7 percent in 2018 from 2.7 percent the previous year.

But Socio Economic Undersecretary Edillion said it is not a cause for concern.

“One, we think it’s temporary. Two, some part of the inflation is kind of our own making because we wanted alcohol and tobacco prices to really go up… for health reasons,” he said.

With the slowdown in inflation last month, the central bank and the government’s economic team are confident that they can achieve their inflation target for 2019 and 2020.

They are counting on the anticipated signing of a bill called Rice Tariffication Act, which would remove import restrictions, allowing the private sector to import more rice at a 35 percent tariff.

“It also provides additional funding so that we could put in place very aggressive measures to make our rice sector competitive,” Edillion noted.

The government also vows to implement more mitigating measures, such as conditional cash transfers and fuel vouchers for those who will be affected by another excise tax on oil that will be implemented this year.

“These could fend off possible second-round effects, which may arise from further demand for wage and fare increases,” the Duterte’s economic team said.

Amid the positive news, many ordinary Filipinos like Relocio are hoping that the government will make good on its promises to bring down prices this year.

“The president should really further lower the commodity prices,” she said.