Annual average drops to 3.2% from 6%
Prices of basic goods and services rose faster in December at 2.9 percent from 2.5 percent the month before, largely due to an acceleration in utility price increases, though still within the target, the Philippine Statistics Authority (PSA) reported on Tuesday.
The annual inflation average for 2024, however, slowed for the first time after a two-year climb, to 3.2 percent from 6.0 percent in 2023 and 5.8 percent in 2022, government data showed.
The inflation numbers were within the government’s target of 2 percent to 4 percent for 2024.
“The uptrend in the overall inflation in December 2024 was primarily influenced by the faster annual increment in the index of housing, water, electricity, gas and other fuels at 2.9 percent during the month from 1.9 percent in the previous month, the statistics authority said.
“The annual increase of transport at 0.9 percent during the month from an annual decline of 1.2 percent in November 2024 also contributed to the uptrend,” it added.
The 2.9 percent inflation rate last December, compares with 2.5 percent in November, 2.3 percent in October and 1.9 percent in September.
“The top three commodity groups contributing to the December inflation were food and non-alcoholic beverages with 44.3 percent share; housing, water, electricity, gas and other fuels with 21.4 percent share; and restaurants and accommodation services with 12.6 percent share,” Claire Dennis Mapa, National Statistician and Civil Registrar General said.
In contrast, Mapa said clothing and footwear; health; and restaurants and accommodation services registered lower inflation rates in December.
Core inflation, which excludes selected food and energy items, went faster to 2.8 percent in December. The average core inflation rate in 2024 stood at 3.0 percent, slower than the average core inflation rate of 6.6 percent in 2023.
Within target
Eli M. Remolona, Jr., Bangko Sentral ng Pilipinas (BSP) governor, said the December inflation rate of 2.9 percent is “within the BSP’s forecast range of 2.3 to 3.1 percent.”
“The latest inflation outturn is consistent with the BSP’s assessment that inflation will remain anchored to the target range over the policy horizon,” Remolona said in a statement.
The balance of risks to the inflation outlook “continues to lean to the upside due largely to potential upward adjustments in transport fares and electricity rates,” the central bank governor said.
“The impact of lower import tariffs on rice remains the main downside risk to inflation. Domestic demand is likely to remain firm but subdued,” Remolona noted.
“Private domestic spending is expected to be supported by easing inflation and improving labor market conditions. However, downside risks in the external environment could materialize and temper economic activity and market sentiment,” he added.
The downtrend in the 2024 annual average inflation at the national level was primarily caused by the lower annual average increase in the index of food and non-alcoholic beverages, National Statistician Mapa said.
The downtrend was also supported by lower annual inflation average in housing, water, electricity, gas and other fuels.
“Except for education services, the indices of the rest of the commodity groups recorded a downtrend in their annual average inflation in 2024 compared with 2023, with the financial services recording an average annual decline of 0.6 percent in 2024 from a zero percent annual average inflation in 2023,” Mapa said.
The top three commodity groups contributing to the annual inflation average were food and non-alcoholic beverages with a 51.6-percent share, as well as restaurants and accommodation services with a 14.3 percent share, and housing, water, electricity, gas and other fuels with an 11.3 percent share.
The annual average food inflation rate was observed at 4.5 percent in 2024, slower than 8.0 percent in 2023, the national statistician said.
NCR inflation
Inflation in the National Capital Region (NCR) moved at a faster pace in December at 3.1 percent from 2.2 percent in the previous month, Mapa noted.
Following the trend at the national level and in NCR, the overall inflation in areas outside the capital region also showed an uptrend.
Eight regions in Areas Outside the NCR exhibited faster inflation rates last December. Region II (Cagayan Valley) registered the fastest inflation rate at 4.6 percent, while Region XII (SOCCSKSARGEN) recorded the lowest inflation of 1.2 percent.
Successful efforts
Secretary Arsenio M. Balisacan of the National Economic and Development Authority (NEDA), noted the “government’s efforts to temper inflation have largely been successful.”
“The 3.2-percent average inflation rate in 2024 is a significant improvement from the 6.0 percent figure in 2023,” he said in a separate statement.
“Despite the risks we encountered throughout the year, our combined efforts to temper inflation have largely been successful. We will build upon this momentum as we commit to keep the inflation rate within our target range in 2025,” Balisacan said.
In line with the Department of Social Welfare and Development’s (DSWD) plans, there is the likelihood of softening food inflation in the coming months, the NEDA chief noted.
He cited the DSWD’s plan to expand its Local Adaptation to Water Access and Breaking Insufficiency through Nutritious Harvest for the Impoverished projects in 323 cities and municipalities across 67 provinces by 2025, that could ease food inflation.
The recent amendment to the Agricultural Tariffication Law under Republic Act No. 12078 is expected to enhance the rice sector’s resilience as funds allocated to the Rice Competitiveness Enhancement Fund will be raised annually to P30 billion from P10 billion in the run up to 2031, Balisacan said.
“As we enter 2025, we remain optimistic about curbing inflation through strategic, timely, and proactive measures. At the same time, we are intensifying efforts to improve productivity, encourage innovation, and build resilience toward ensuring food security and protecting consumers’ purchasing power,” he added.
Finance Secretary Ralph G. Recto credited the slower inflation rate to “effective government interventions that sustained the moderation of rice prices, providing much-needed relief to low-income families.”
“With the President’s decisive leadership, whole-of-government approach, and concerted efforts of stakeholders, we were able to manage the inflation to finally settle within our target after two years,” the Finance chief said.
“The sustained moderation in rice prices is particularly a welcome relief especially to our lower-income households and highlights the positive impact of our interventions,” he added.
Rice inflation slowed significantly to 0.8 percent in December last year from 5.1 percent in November and 19.6 percent in December 2023, Recto noted.
“Rice prices have been steadily declining as a result of the implementation of Executive Order (EO) No. 62 in July 2024, which lowered import tariffs on rice,” he said.
“This also helped offset the lingering effects of high prices of food commodities due to the onslaught of typhoons Nika, Ofel, and Pepito in November 2024,” Recto said.
“The continued drop in rice prices has benefitted the bottom 30 percent of households as headline inflation for the said group declined to 2.5 percent in December 2024 from 2.9 percent in the previous month and 5.0 percent in December 2023,” Recto said.
The finance department also supports the staggered implementation of electricity rate increases and an enhanced lifeline program on water services that offers higher discounts to support low-income customers to help mitigate the impact of non-food inflation, He added.
Remolona said the inflation outlook within target and well-anchored expectations “continue to support the BSP’s shift toward less restrictive monetary policy.”
Inflation is expected to remain within the target range this year, the central bank chief said.
The policymaking Monetary Board last month reduced the central bank’s Reverse Repurchase Rate by another 25 basis points to 5.75 percent.
he interest rates on the overnight deposit and lending facilities were also adjusted to 5.25 percent and 6.25 percent, respectively.
This was the third consecutive 25 basis-point rate cut by the Monetary Board for 2024, totaling 75 basis points.
“Nonetheless, the monetary authority will continue to closely monitor the emerging upside risks to inflation, notably geopolitical factors,” Remolona said.
“The Monetary Board will maintain a measured approach to monetary-policy easing to ensure price stability conducive to sustainable economic growth and employment,” he added.
The first monetary policy meeting for 2025 is set for February 20.
2025 forecast
Michael Ricafort, RCBC chief economist, sees inflation averaging between 3.0 and 3.5 percent this year, allowing the central bank to further ease key rates to between 5.00 percent and 5.25 percent.
“Inflation for December was the fastest in 4 months but still among the slowest in more than 4 years largely due to higher transport and utility prices, also partly due to the seasonal increase in demand during the Christmas and New Year holiday season,” Ricafort said.
He noted some residual effects from the typhoons and floods in the latter part of 2025 that led to temporary increases in some agricultural prices.
“Relatively benign inflation at 2 percent levels is still possible up to early 2025,” Ricafort said.
Inflation moving within the central bank’s target could justify future policy rate cuts that would match future Fed rate cuts in 2025, the economist said.
During the Monetary Board’s last policy meeting, Remolona said the risk-adjusted inflation forecast was pegged at 3.4 percent for 2025 from 3.3 percent in the previous meeting. The risk-adjusted forecast was left unchanged at 3.7 percent.
Domestic demand will likely remain firm but subdued, with private domestic spending to be supported by easing inflation and improving labor market conditions, Remolana said.
The Monetary Board will maintain its easing posture for this year, giving a cumulative rate cut range from 25 to 75 basis points, he added.
