Mr. Marcos: Inflation out of control, but main drivers mainly imported
Inflation shot to a 14-year high of 8 percent in November, up from 7.7 percent a month ago, due to faster increases in the prices of food and non-alcoholic beverages, the Philippine Statistics Authority (PSA) reported Tuesday.
The rate was significantly higher than the 3.7 percent in the same month a year ago and brought the average inflation from January to November this year to 5.6 percent.
Even President Ferdinand Marcos Jr., speaking at an event hosted by the Joint Foreign Chambers, said the country’s inflation is “running rampant and out of control.”
“We just received the poor news from the Philippine Statistics that in November we hit 8%. And we are now trying to identify the areas of the economy that are – that are the main drivers of that inflation. The main drivers of that inflation, unfortunately, are still imported – is still imported inflation,” he said.
However, the Bangko Sentral ng Pilipinas (BSP) said last week it expected the price of goods to rise further before gradually declining in the succeeding months, projecting November inflation to go from a range of 7.4 percent to 8.2 percent.
The BSP’s Department of Economic Research said inflation is expected to gradually decelerate in the succeeding months as the effects of weather disturbances and transport fare hikes dissipate.
It said the “timely implementation of non-monetary measures” will also help ease price pressures in the months ahead.
The President also said the government is working to slow down the rise in fuel and power costs at least heading into Christmas, saying Filipinos have already suffered much from the spiraling prices of goods amid worldwide inflation.
“The November 2022 inflation was the fastest since the 9.1 percent in November 2008 during the global financial crisis,” Divina Gracia del Prado, deputy national statistician, said in an online briefing. She said the highest inflation in history based on the series was in January 1999 at 10.7 percent.
The inter-agency Development Budget Coordination Committee on Monday slightly increased the average inflation rate assumption for 2022 to 5.8 percent from the previous estimate of 4.5 to 5.5 percent, given the persistently high prices of food and transportation.
Del Prado said the latest full-year 5.8 percent assumption of DBCC could be attained even if inflation hits 8.5 percent in December.
The November rate was within the Bangko Sentral ng Pilipinas forecast range of 7.4 to 8.2 percent for the month.
The central bank said inflation is expected to slow down in subsequent months due to the easing of global oil and non-oil prices, and as its interest rate hikes work their way into the economy.
Economic Planning Secretary Arsenio Balisacan said the government is committed to providing timely assistance to those hit hardest by inflation and is implementing measures that boost agricultural productivity to ensure the country’s food security.
“The government is continuously implementing targeted subsidies and discounts to allay the impact of the higher prices of essential goods, especially for the vulnerable sectors and low-income earners of our society,” Balisacan said.
The Department of Budget and Management released P5.2 billion last week to cover the third tranche of the Targeted Cash Transfer program of the Department of Social Welfare and Development.
This covers a total of 9.8 million identified beneficiaries who are most affected by the continuous rise in commodity prices.
“To ease price pressures, we continue to implement measures to boost food production and reduce the cost of bringing farm produce to the market,” Balisacan said.
The Department of Agriculture has expanded the Kadiwa Program, which aims to connect producers to consumers, allowing a higher profit share for local farmers and more affordable prices for consumers.
Additionally, the government is supporting the agriculture sector by implementing programs to lower the costs of inputs, provide financial assistance in the form of fuel discounts to farmers and fishers, develop innovations, and strengthen the agricultural value chain.
Michael Ricafort, the chief economist of Rizal Commercial Banking Corp., said inflation could still peak around the fourth quarter of 2022 at about 8 percent levels and could mathematically ease thereafter “especially in 1Q 2023 due to higher base/inflation effects as global crude oil prices reach the immediate high in March 2022.”
“Thus, further local policy rate hikes could still be possible for the coming months, as supported by generally strong economic data, also as a function of future Fed rate hikes,” Ricafort said.
On Nov. 17, 2022, the policy-setting Monetary Board of the BSP raised the benchmark policy rate by 75 basis points to a near 14-year high of 5 percent in a bid to rein in inflation and support the peso. The last time the policy interest rate reached 5 percent was in February 2009.
PSA data showed that the sustained acceleration of inflation in November 2022 was mainly due to the higher year-on-year growth rate in the index of food and non-alcoholic beverages at 10.0 percent, from 9.4 percent in October 2022.
Also contributing to the uptrend was the higher annual increment in the index of restaurants and accommodation services at 6.5 percent, from 5.7 percent in October 2022.
Moreover, relative to their annual rates in October 2022, annual increases were also higher in the indices of alcoholic beverages and tobacco, 10.6 percent; clothing and footwear, 3.6 percent; furnishings, household equipment and routine household maintenance, 4.5 percent; health, 2.8 percent; information and communication, 0.7 percent; recreation, sport and culture, 3.3 percent; education services, 3.6 percent; and personal care, and miscellaneous goods and services, 4.2 percent.
On the other hand, slower year-on-year increases were observed in the indices of housing, water, electricity, gas, and other fuels at 6.9 percent; and transport at 12.3 percent.
Food inflation at the national level rose further to 10.3 percent in November 2022, from 9.8 percent in October 2022. In November 2021, the food inflation stood at 2.3 percent.
“The uptick in the food inflation was primarily influenced by the higher annual growths in the vegetables, tubers, plantains, cooking bananas and pulses index at 25.8 percent; and rice index at 3.1 percent,” PSA said.
Inflation in the National Capital Region was lower at 7.5 percent in November 2022, from 7.7 percent in October 2022. In November 2021, the inflation rate in the area was observed at 2.2 percent.
The slowdown of inflation in NCR was primarily brought about by the slower annual increase in the housing, water, electricity, gas, and other fuels index at 3.7 percent, from 4.4 percent in October 2022.
Also contributing to the downtrend was the lower annual increment in the indices of transport at 14.8 percent; food and non-alcoholic beverages at 11.2 percent; and alcoholic beverages and tobacco at 7.6
percent.
Following the trend at the national level, inflation in areas outside NCR or in the provinces rose to 8.0 percent in November 2022, from 7.6 percent in October 2022. In November 2021, the inflation rate in the area was recorded at 4.0 percent.
The increasing inflation in areas outside the NCR was primarily influenced by the higher year-on-year change in the food and non-alcoholic beverages index at 9.7 percent, from 9.0 percent in October 2022. The restaurants and accommodation services index, recording a 5.6 percent annual increment, also contributed to the uptrend.
Albay Rep. Joey Sarte Salceda played down the risk of rising inflation, saying that the November rate was on track with his projections of a peak of 8.5 percent and an annual average of about 6 percent.
“We are on track to meet that number,” Salceda said.
He also said the problem remains “food, feed, and fuel.”