After five consecutive months of uptrend, the country’s inflation slightly eased in August to 6.3 percent due mainly to lower annual increases in transportation, food and non-alcoholic beverages.
In August last year, inflation rate was at 4.4 percent.
The average inflation from January to August now stands at 4.9 percent, way above the full-year average target of between two and four percent.
Core inflation, which excludes volatile food and energy items, stood at 4.6 percent from 3.9 percent in July. In August last year, core inflation was at 2.8 percent.
Dennis Mapa, undersecretary of the Philippine Statistics Authority, said the slowdown in inflation at the national level in August “was primarily due to the lower annual increment recorded in the index for transport at 14.6 percent, from 18.1 percent in the previous month.”
This was followed by food and non-alcoholic beverages whose index declined to 6.3 percent from 6.9 percent in July 2022.
The index for information and communication also exhibited lower annual growth at 0.4 percent, from 0.5 percent in July 2022.
Inflation rates were higher for the following commodity groups : alcoholic beverages and tobacco; clothing and footwear; housing, water, electricity, gas and other fuels; furnishings, household equipment and routine household maintenance; health; recreation, sport and culture; education services; restaurants and accommodation services; and personal care, and miscellaneous goods and services.
Food prices down
“Inflation for food at the national level slid to 6.5 percent during the month, from 7.1 percent in July 2022. In August 2021, it was lower at 5.9 percent,” Mapa said.
He said the following food groups exhibited faster annual growth during the month: rice by 2.2 percent; flour, bread and other bakery products, pasta products and other cereals by 8 percent; milk, other dairy products and eggs by 6.5 percent; oils and fats by 19.6 percent; fruits and nuts by 3.9 percent; sugar, confectionery and desserts by 26 percent; and ready-made food and other food products by 5.8 percent.
Inflation in the National Capital Region (NCR) increased to 5.7 percent in August from 5.1 percent in July due to the higher annual increases in the restaurants and accommodation services index, alcoholic beverages and tobacco and education services.
Following the trend at the national level, inflation in areas outside NCR slowed down to 6.5 percent, from 6.8 percent the previous month.
Mapa said six regions in areas outside NCR exhibited lower inflation in August, eight regions had higher inflation rates and two regions retained their previous month’s inflation rate.
“Region 9 (Zamboanga Peninsula) had the highest inflation rate of 9.1 percent, while the Bangsamoro Autonomous Region in Muslim Mindanao remained as the region with the lowest inflation at 4.9 percent,” Mapa said.
Above-target
The August 2022 inflation outturn of 6.3 percent is within the Bangko Sentral ng Pilipinas’ (BSP) forecast range of between 5.9 to 6.7 percent.
“(It is) Consistent with the BSP’s assessment of elevated price pressures over the near term due to broadening price pressures. The uptick in inflation remains supply-driven, but signs of broadening price pressures are also being noted,” Felipe Medalla, BSP governor, said.
He stressed the BSP’s baseline projections “continue to indicate above-target inflation in 2022, with inflation decelerating back to the target in 2023 and 2024 following the recent BSP policy rate hikes.”
“Upside risks continue to dominate the inflation outlook in the near term due to the potential impact of higher global non-oil prices, the continued shortage in domestic fish supply, the sharp increase in the price of sugar, as well as pending petitions for transport fare increases,” Medalla said.
Medalla noted “the impact of a weaker-than-expected global economic recovery as well as the resurgence of local COVID-19 infections” as the main downside risks to the outlook.
“The BSP’s recent policy actions are intended to bring inflation and inflation expectations back to the target to ensure the balanced and sustainable growth of the economy in the medium term. The BSP is prepared to take further policy actions to bring inflation toward a target-consistent path over the medium term, consistent with its primary objective to promote price stability,” Medalla said.
“The BSP also continues to urge timely implementation of non-monetary government interventions to mitigate the impact of persistent supply-side pressures on commodity prices,” he added.
For the fourth consecutive time this year, the Monetary Board last month decided to raise the key rates of the BSP.
BSP’s overnight reverse repurchase facility went up by 50 basis points (bps) to 3.75 percent. The interest rates on the overnight deposit and lending facilities were raised to 3.25 percent and 4.25 percent, respectively.
The Monetary Board has raised the key rates by a total of 175 bps to combat broadening price pressures.
“The BSP will continue to carefully monitor and assess pertinent economic developments that could affect the price dynamics and growth prospects of the country. The Monetary Board will update its assessment of the macroeconomic outlook as well as conduct its review of the monetary policy stance on September 22,” Medalla said.
Targeted subsidies
The National Economic and Development Authority (NEDA) meanwhile said “targeted subsidies, vibrant agriculture will help ease global inflationary pressures.”
“Recovery is uneven within countries and across countries, and this results in very inefficient supply chains. This is expected to be temporary as markets transition to find the new balance between supply and demand. The situation is made worse by the protracted Russia-Ukraine war, and the country’s weather disturbances particularly La Niña. These serve to magnify the low productivity in our agricultural sector, which needs to be supported immediately,” NEDA Secretary Arsenio Balisacan said.
Balisacan noted that inflation in neighboring Southeast Asian countries has been mostly in the uptrend, with Thailand recording its new 14-year high at 7.86 percent in August 2022. Singapore also recorded its fastest pace in more than 13 years with headline inflation at 7 percent in July 2022.
“It is our top priority to ensure that Filipino households have sufficient and healthy food on their table, especially the poorer sector of the society. We will continue implementing programs that reduce transport and logistics costs to bring inflation down and to protect the purchasing power of our consumers. Most importantly, it is imperative to transform Philippine agriculture into a dynamic and productive sector to speed up our recovery and significantly reduce poverty in the country,” Balisacan said.
