THE inflation data released by the Philippine Statistics Authority (PSA) for January may have allowed economic managers to heave a sigh of relief, but local economists said the latest figures highlight “threats” to millions of poor Filipinos.
The PSA reported on Tuesday that the January inflation rate settled at 4.4 percent, slower than the 5.1 percent recorded in December, but higher than last year’s 3.4 percent. Excluding select food and energy items, core inflation in January was also at 4.4 percent.
University of the Philippines School of Statistics Dean Dennis S. Mapa noted, however, that inflation for food and nonalcoholic beverages remained high at 5.6 percent, even if it is lower than the 6.7 percent posted in December 2018.
Mapa said this will translate to a 5.1-percent inflation for the bottom 30 percent, or the poorest 30 percent of the population. The poorest Filipinos are considered very sensitive to the movements in food prices.
“The relatively higher food inflation brings the inflation rate of the poorest 30 percent of the households to about 5.1 percent in January 2019, using a comparable 2012 base year. Thus, threats to the welfare of the poor still persist,” Mapa told the BusinessMirror via e-mail on Tuesday.
“The poor inflation figure that I am quoting has base year 2012, so it will be comparable with the headline inflation. The poorest inflation of the PSA now has a base year 2000, so relatively higher. Income growth and inflation rate will have an impact on poverty incidence,” he added.
Mapa noted that Regions 1, 2, 4B, 5, 7 and the Autonomous Region in Muslim Mindanao (ARMM) experienced higher food inflation. PSA data showed food and nonalcoholic beverage inflation in Region 1 (Ilocos Region) was at 8.1 percent; Region 2 (Cagayan Valley), 7.8 percent; and Region 4B (Mimaropa), 6.9 percent.
Inflation in Region 5 or Bicol was at 6.3 percent; Region 7 (Central Visayas), 6.6 percent; and the ARMM, 6.6 percent.
Poorest regions, higher food inflation
MANY of the regions that recorded higher food inflation are among the poorest nationwide. Based on the 2015 poverty data, ARMM’s poverty incidence was highest at 53.7 percent while poverty incidence in the Bicol region was at 36 percent. Also, poverty incidence in Region 7 was at 27.6 percent while Mimaropa’s poverty rate was at 24.4 percent, still above the country’s national poverty rate of 21.6 percent in 2015.
“Much work is needed for the appropriate government agencies to bring down food prices in the regions and the fine-tuning of the social protection programs for the poor households,” Mapa said.
Ateneo Center for Economic Research and Development (Acerd) Director Alvin P. Ang said food supply remains a critical factor in the inflation outlook for this year. However, he said inflation would likely average 3.3 percent this year, “barring unforeseen circumstances.”
“We expect inflation to fall to an average of 3.3 percent for the year barring unforeseen circumstances. The January figure is close to our estimate of 4.5 percent. Again it is food supply that’s more critical for inflation and that we could manage than oil,” he said.
Triggers
WHILE the January inflation rate indicates that commodity prices are stabilizing, University of Asia and the Pacific School of Economics Dean Cid Terosa told the BusinessMirror that the upcoming elections could trigger an increase in prices.
Terosa added that a possible increase in world pump prices and adjustments to fuel excise taxes due to the Tax Reform for Acceleration and Inclusion (TRAIN) law could jack up inflation in the short-term.
“Inflation can be tempered by sustained stable prices for petroleum products and agricultural commodities, including rice. Stronger production and higher productivity across sectors in the economy can tame wild price fluctuations,” he said.
The Banko Sentral ng Pilipinas (BSP) also sees the volatility in the global oil market as a factor that will likely continue to influence the outlook for inflation.
Interventions
IN a briefing on Tuesday, National Statistician Lisa Grace S. Bersales said the top 3 contributors to inflation were food and nonalcoholic beverages at 49.7 percent; housing, water, electricity, gas and other fuels, 20.4 percent; and restaurant and miscellaneous goods and services, 12.6 percent.
The food and nonalcoholic beverages segment has a weight of 38.34 percent, the highest share in the basket of goods or the Consumer Price Index (CPI). Rice alone accounted for 9.59 percent, the highest share of any single commodity in the CPI.
In a joint statement, the National Economic and Development Authority, Department of Finance, and the Department of Budget and Management urged the Department of Agriculture to facilitate a comprehensive crop management system to ensure adequate food supply this year.
In the fishery sector, the economic managers said, more efforts should be geared toward sustainable management of coastal and other marine resources, particularly in addressing the decline of available fish in open waters.
“These are measures for the short term. There is a resounding consensus among members of the Economic Development Cluster that the agriculture sector needs greater attention now more than ever. The agriculture sector must work toward resiliency and be adaptive to extreme weather events,” the economic team said.
Malacañang gave assurances that the government will be vigilant in monitoring the movement of consumer prices.
From a peak of 6.7 percent in October, inflation started to ease in November last year. Despite this, the BSP said it will remain watchful of price movements and their potential impact on the next monetary policy move of the Monetary Board.
The Monetary Board will hold its first policy meeting of the year on February 7. Market analysts and economists expect the BSP to keep all monetary levers unchanged.
In their last meeting in December, the Monetary Board decided to keep rates unchanged due to expectations that inflation will stabilize in the coming years. The BSP projected inflation to average 3.18 percent and 3.04 percent for 2019 and 2020, respectively.
With reports by Bianca Cuaresma and Bernadette D. Nicolas
