Slower annual increases in prices of food and non-alcoholic beverages pulled inflation lower to 4.9 percent in October, the Philippine Statistics Authority yesterday said.
This makes the national average inflation from January to October 2023 at 6.4 percent, still above the 2 percent to 4 percent target range of the government.
Dennis Mapa, national statistician and civil registrar general, said the downtrend in the overall inflation was primarily brought about “by the slower year-on-year increase in the heavily-weighted food and non-alcoholic beverages at 7 percent in October 2023 from 9.7 percent in the previous month.”
Mapa said restaurants and accommodation services, with an inflation rate of 6.3 percent during the month from 7.1 percent in September , also contributed to the downtrend of the headline inflation.
He noted slower annual increases in the indices of alcoholic beverages and tobacco; furnishings, household equipment and routine household maintenance; health; transport; recreation, sport and culture; and personal care, and miscellaneous goods and services.
“Food inflation at the national level slowed down to 7.1 percent in October 2023 from 10 percent in the previous month. In October 2022, food inflation was higher at 9.8 percent,” Mapa said.
He said the deceleration of food inflation was primarily influenced by the lower annual growth of vegetables, tubers, plantains, cooking bananas and pulses.
This was followed by rice with an inflation rate of 13.2 percent in October from 17.9 percent in September.
Corn index also recorded an annual decrease of 2.4 percent during the month from an annual growth rate of 1.6 percent in September, while oils and fats index decreased further at 2.5 percent annual drop in October from 1.3 percent annual decline in the previous month.
Meanwhile, compared with their previous month’s inflation rates, higher year-on-year growth rates were observed in the indices of milk, other dairy products and eggs at 7.5 percent during the month from 7.3 percent in September, and fruits and nuts at 13.5 percent in October from 11.6 percent in the previous month.
Inflation rate in the National Capital Region (NCR) also decelerated to 4.9 percent in October from 6.1 percent in September, mainly brought about by the slower annual increase in food and non-alcoholic beverages.
Inflation rate in areas outside NCR likewise slowed down to 4.9 percent in October from 6 percent in September, also mainly due to the slower annual increase in food and non-alcoholic beverages.
Decisive, timely actions
Finance Secretary Benjamin Diokno said this positive development “is the result of the government’s decisive and timely actions in mitigating inflation.”
“The government will continue to implement a package of measures to address non-competitive market behavior to help ensure that rice and vegetable inflation will further decelerate for the rest of the year, while also supporting farmers and protecting the vulnerable,” Diokno said.
Rosemarie Edillon, National Economic and Development Authority (NEDA) undersecretary, said Secretary Arsenio Baliscan ordered that even as inflation has eased, “it is crucial to continue monitoring the prices of commodities particularly food, transportation, energy amid global challenges such as the geopolitical uncertainties and also the El Niño.”
She said among the measures that the government is implementing or plan to continue implementing to cushion the impact of inflation include subsidies or some form of aid for vulnerable sectors or those heavily affected, and importation to increase the food supply.
“We also need to address the longstanding challenges in agriculture and food production, and help our local farmers boost their productivity and resilience through investment in irrigation, R&D (research and development), post-harvest facilities and others,” Edillon added.
Apart from the inflation update, the Economic Development Group, during the sectoral meeting, also recommended the extension of the reduced tariff rates for the most favored nation under Executive Order (EO) No. 10, Series of 2022 until the end of 2024.
It will be subject to a mid-year review.
Under EO 10, which the President issued in December last year to address rising prices of commodities, the tariff rates for imported swine meat within the minimum access volume (MAV) quota will be 15 percent while those exceeding the quota will be 25 percent.
Tariff on corn within the MAV quota is 5 percent and those exceeding the quota is 15 percent, while tariff on rice for both within and excess of the MAV quota is 35 percent.
The tariff rate is effective until December 31.
The government will also intensify the utilization of Rice Competitiveness Enhancement Fund programs, such as farm mechanization, seed development, propagation and promotion, credit assistance, and extension services to improve the productivity of rice farmers, reduce production costs and link them to the value chain, Diokno added.
“The national government continues to undertake measures to mitigate non-food inflation across several fronts, namely on demand and supply management measures for energy and water; careful review of wage and fare hike petitions; and monitoring of the suspension of pass-through fees for delivery trucks as enforced under Executive Order No. 41,” Diokno said, adding the government also aims to complete the provision of financial assistance to the vulnerable sectors.
“This ensures the protection of the purchasing power of the most vulnerable families and the continued delivery of essential services such as public transportation and agricultural activities,” Diokno said.
Within target data
“There is no urgency for more local policy rate hikes amid stronger peso, lower global oil prices, better weather conditions that help ease food prices, as all of these factors are conducive to the anchoring inflation and the achievement of within target inflation data by early 2024,” said Michael Ricafort, RCBC chief economist.
Ricafort said provided there is no escalation of geopolitical risks particularly on the Israel-Hamas war and the effects on world oil prices and no large storm damage that tends to increase food prices for the rest of 2023, “headline inflation could ease further to a little over 4 percent from November to December and could ease further to below the 2 percent-4 percent BSP (Bangko Sentral ng Pilipinas) inflation target by January 2024 to even below 3 percent by January 2023 and 3 percent levels for February-March 2023.”
“Next local policy rate-setting meeting could match the pause in the latest Fed rate decision to maintain healthy interest rate differentials to support the stability of the peso exchange rate, import prices, and overall inflation,” Ricafort added.
In an off-cycle move, the Monetary Board late last month decided to raise the key rate of the BSP by 25 basis points to 6.50. The interest rates on the overnight deposit and lending facilities were also raised to 6.0 percent and 7.0 percent, respectively. With Jocelyn Montemayor