The rate of increase in the prices of basic goods and services in the Philippines settled at 3 percent year-on-year in January, slowing down for the fifth month in a row from 4.4 percent last August through 3.2 percent in December, based on 2018 prices of consumer goods.
Reckoned with the previous base year of 2012, which the Philippine Statistics Authority used up to December 2021, inflation has similarly eased month after month since 4.9 percent in August.
National Statistician Dennis Mapa said in a press briefing the slowdown in the overall inflation was mainly due to the lower annual increase related to the basket of goods that consists of housing, water, electricity, gas and other fuels — 4.5 percent in January from 5.1 percent in December 2021.
Also contributing to the downtrend in the overall inflation was the lower annual increments registered in the indices of alcoholic beverages and tobacco (5.6 percent); health (3.1 percent); restaurants and accommodation services (3 percent); recreation, sport and culture (1.5 percent); and education services (0.6 percent).
Clothing and footwear
These offset higher annual increases in the indices of clothing and footwear (2 percent); furnishing, household equipment and routine household maintenance (2.4 percent); transport (7 percent); information and communication (0.7 percent); and personal care and miscellaneous goods and services ( 2.2 percent).
Further, inflation for food and nonalcoholic beverages and financial services remained at their previous month’s level of 1.6 percent and 43.3 percent, respectively.
“Food inflation remained at 1.6 percent at the national level in January 2022,” Mapa said. “In the previous year of the same month, inflation for food was recorded at 6.4 percent.”
In particular, higher growth rates were seen in flour and other cereals; milk, other products and eggs; sugar and deserts; oil and fats and ready-made food.
Within target range
“Similarly, the annual growth rate of the index of rice went up to one percent during the month, from -0.1 percent in the previous month, while fish and other seafood retained its previous month’s annual rate of 6.2 percent,” Mapa said.
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno told reporters that the new base year puts average inflation in 2021 at 3.9 percent, which is within the government’s target range of 2 to 4 percent. Using 2012 prices as benchmark, inflation last year was recorded at 4.5 percent—beyond the higher end of the goal.
Last month, the BSP had to issue an open letter to President Duterte explaining why inflation was off target— mainly due to insufficient supply of key food items such as pork as well as rising energy prices, particularly crude oil.
The results for January “supports the narrative that inflation is on its downward trajectory,” Diokno said.
The BSP expects that inflation will decelerate further in coming months, reverting back to the target range over the policy horizon.
“The sustained economic growth in the fourth quarter of 2021 reflects easing community restrictions and the resulting improvement in mobility and market sentiment,” the regulator said in a statement.
But the BSP added that the lingering threat of COVID-19 infections due to more virulent variants and its potential impact on broader global economic activity continue to cast significant uncertainty on the near-term outlook for economic growth.
Commenting on the latest numbers, ING Bank senior economist on the Philippines Nicholas Mapa said the change of base year for inflation will have a material impact on 2022 numbers.
“(B)ut we believe price pressures could intensify in the coming months,” the ING economist said. “Supply side bottlenecks remain unresolved as domestic hog production continues to be hampered by the spread of African Swine Fever while crude oil prices edge higher. “
He added that improving economic conditions have fueled the modest rebound of demand-side pressures, which could nudge inflation higher as well.