Still-high prices of food, particularly rice, pushed inflation faster in September, hitting 6.1 percent from 5.3 percent the previous month, and the Bangko Sentral ng Pilipinas (BSP) expects prices to remain elevated.
The Philippine Statistics Authority (PSA) said inflation now averages at 6.6 percent, way above the government’s full-year target range of between 2 and 4 percent.
PSA said the uptrend in the overall inflation was “primarily brought about by the higher year-on-year increase in the heavily-weighted food and non-alcoholic beverages at 9.7 percent from 8.1 percent.
Transport, with inflation rate of 1.2 percent, also contributed to the uptrend of the headline inflation.
Food inflation at the national level rose to 10 percent from 8.2 percent, mainly brought about by the higher inflation for rice with a double-digit inflation rate of 17.9 percent in September from 8.7 percent in August.
This was followed by meat and other parts of slaughtered land animals with an inflation rate of 1.3 percent. Faster annual growth rate was also noted in fruits and nuts at 11.6 percent and corn at 1.6 percent.
Core inflation, which excludes selected food and energy items, decelerated further to 5.9 percent in September, bringing the average to 7.2 percent.
Eli Remolona, BSP governor, said “higher prices for oil and key agricultural commodities drove inflation during the month.”
“Inflation is likewise expected to remain elevated in the coming months due to continued impact of supply shocks on food prices and the rise in global oil prices. Nonetheless, inflation is still projected to decelerate back to within the inflation target by end-2023 in the absence of further supply shocks,” Remolona said.
He stressed that the risks to the inflation outlook remain skewed significantly to the upside for 2023 to 2025.
“The potential impact of new petitions for transport fare adjustments, higher domestic prices of key food items facing persistent supply constraints, higher-than-expected minimum wage adjustment in areas outside NCR (National Capital Region), impact of El Niño weather conditions on food prices and utility rates, and higher electricity rates are the major upside risks to the inflation outlook,” Remolona added.
Remolona said the BSP stands ready to resume monetary policy tightening as necessary to prevent the renewed broadening of price pressures as well as the emergence of additional second order effects in view of the persistent upside risks to the inflation outlook.
As inflation is still projected to revert within the target range by the fourth quarter, the Monetary Board last month decided to maintain key rates.
After the fourth straight meeting, the target reverse repurchase (RRP) rate is still at 6.25 percent. The interest rates on the overnight deposit and lending facilities were retained at 5.75 percent and 6.75 percent, respectively.
Addressing challenges
Meanwhile, the Presidential Communications Office (PCO) said the government is committed to addressing the challenges posed by the 6.1 percent inflation rate and has initiated a series of measures, including a digital Food Stamp Program, fuel subsidies, and targeted assistance for farmers, which extend beyond the short term.
It added President Ferdinand Marcos Jr. and his Cabinet are also actively working on measures that would alleviate transportation costs and make long-term investments in irrigation and modern farming practices to support the agricultural community.
“Our economic managers anticipate a moderation in rice prices, as local production increases due to the onset of the harvest season and the entry of rice imports previously ordered. This will further alleviate the burden on our citizens,” PCO said.
All hands on deck
Benjamin Diokno, finance secretary, said “the government is all hands on deck in ensuring that we have the right policy measures, programs, and monitoring mechanisms in place to arrest rising commodity prices, which remain to be the top-of-mind concern of our citizens.”
“To help ensure that rice and vegetable inflation will decline for the rest of the year, the government will continue to implement a package of measures that seeks to address non-competitive market behavior, support farmers, and protect the vulnerable,” Diokno said.
Lower tariff
The Inter-Agency Committee on Inflation and Market Outlook, meanwhile, recommended on October 3 the extension of the lower Most Favored Nation (MFN) tariff rate on rice under Executive Order (EO) No. 10 until December 2024, but subject to review in July 2024.
PCO said Socioeconomic Planning Secretary Arsenio Balisacan said the recommended extension aims to address the increasing price of rice and ensure enough supply through timely and adequate importation.
“The policy response, however, must be complemented by efforts to improve the predictability and transparency of issuing the Sanitary and Phytosanitary Import Clearance for rice and all commodities,” PCO said quoting Balisacan.
The administration was already considering revisiting the proposal to temporarily lower rice tariffs, regardless of origin, if the global price of rice continues to rise due to the impacts of El Niño and the rice export bans among key rice-exporting countries, he added.
Over the weekend, President Marcos, Jr. issued EO 41 which prohibits the collection of pass-through fees on national roads and urged local government units to suspend the collection of fees from vehicles transporting goods. With J. Montemayor
