By Luisa Maria Jacinta C. Jocson, A reporter
INFLATION rose for the third consecutive month in December amid rapid increases in the prices of food, utilities and transportation, the Philippine Statistics Authority (PSA) said.
Preliminary data from the PSA showed that the consumer price index (CPI) rose to 2.9% year-on-year in December from 2.5% in November but was slower than 3.9% last year.
It also stabilized within the 2.3%-3.1% forecast for the month given by the Bangko Sentral ng Pilipinas (BSP).
The latest inflation print is slightly above the average rate of 2.7% in a BusinessWorld a survey of 13 analysts.
The December print put 2024 inflation at 3.2%, in line with the BSP forecast. It was the first time that annual inflation fell within the central bank’s target of 2-4% since 2021, when inflation averaged 3.9%. It was also very slow from 2.4% in 2020.
“For the balance, the domestic view of the inflation target and well-supported inflation expectations continue to support the BSP’s shift to a less restrictive monetary policy. Nevertheless, financial authorities will continue to monitor carefully the emerging risk of inflation, especially geopolitical factors,” the central bank said in a statement.
PSA data showed core inflation, which strips out volatile food and fuel prices, stood at 2.8% in December – faster than 2.5% last month but down from 4.4% last year.
For the full year, core inflation reached 3%, down from 6.6% in 2023.
The national statistician, Claire Dennis S. Mapa, said that the December inflation was mainly caused by the index of housing, water, electricity, gas and others which increased to 2.9% from 1.9% last month and 1.5% last year.
The index was more than half or 52.9% of inflation during the month.
One of the main drivers was electricity, which fell to 1.6% in December from a 2.5% decline in November and a 7.8% decline last year.
In December, Manila Electric Co. (Meralco) increased the total price by P0.1048 per kilowatt-hour (kWh) to P11.9617 per kWh from P11.8569 in November.
PSA also cited faster rental inflation at 2.4% from 2.2% last month and liquefied petroleum gas or LPG at 7.8% from 6.7%.
The PSA also cited transportation as the main source of December’s rapid inflation.
Transport inflation edged up to 0.9%, which is the result of a 1.2% drop in November and faster than the 0.4% clip last year.
Mr. Mapa said the increase in transport costs was caused by a slight decrease in the price of petrol (-2.4% from 8%) and diesel (-2.9% from 9.4%).
In December, the pump price adjustment stood at a total of P1.40 per liter for gasoline and P1.45 per liter for diesel, while kerosene prices decreased by P0.80 per liter.
Sea passenger traffic fell to 71.9% in December from 17.1% in November. Mr. Mapa said this is because of things that happen at certain times of the year during the holidays.
PRICES OF RICE
Meanwhile, the heavy food index and non-alcoholic beverage index remained steady at 3.4% during the month. Food inflation also stood at 3.5%.
“The good thing is that the rate of inflation of rice is going down. In fact, there is an expectation that the inflation of rice will turn negative this January,” added Mr.
Rice inflation dropped to 0.8% from 5.1% in November and 19.6% last year. Rice is generally a major contributor to inflation but recently it has fallen sharply since the government reduced the import tax on rice outside of July.
However, the fastest increase was recorded in vegetables, tubers, plantains, cooking bananas and pulses, which rose to 14.2% from 5.9% last month.
Mr. Mapa said the price of tomatoes increased to 120.8% in December from 31.3% in November. It also accounted for 0.3 percent (ppt) of overall inflation.
The price of tomatoes stood at P147.23 per kilo in the month of December, up from P84.64 per kilo last year.
Mr. Mapa said the high price of vegetables may be related to the storm damage a few months ago.
“That of course has an effect. Not only this December, every time there is a typhoon, the prices of vegetables go up a lot. Add to that the high demand (of vegetables) during holidays,” he added.
Data from the PSA showed inflation for the bottom 30 low-income families fell to 2.5% from 2.9% last month and 5% last year. Year to date, inflation has fallen 30% to 4.2%.
Inflation in the National Capital Region (NCR) rose to 3.1% in December from 2.2% posted in November and 3.5% last year. By 2024, inflation in the NCR has reached 2.6%.
Excluding the NCR, consumer prices accelerated to 2.9% from 2.6% last month and 4% a year earlier, bringing the average to 3.4% in 2024.
“We are seeing the fruits of our efforts to reduce inflation within the government’s target range of 2-4%,” said BSP Governor Eli M. Remolona, Jr. in the statement.
National Economic and Development Authority (NEDA) Secretary Arsenio M. Balisacan said the annual inflation rate for 2024 is a “significant improvement” from 2023.
“Despite the risks we have faced throughout the year, our collective efforts to curb inflation have been very successful. We will build on this momentum as we commit to keeping inflation at the level we have set for 2025,” he added.
In a separate statement, the BSP said the latest inflation result “is consistent with the BSP’s assessment that inflation will remain centered in the target range over the policy horizon.”
The BSP expects inflation to be 3.3% this year and 3.5% in 2026, both within the target of 2-4%.
However, it said the balance of risks to the inflation outlook continues to depend, citing “potential changes in fares and electricity prices.”
“The impact of the low import tax on rice remains a major downside risk to inflation. Domestic demand will likely remain strong but subdued. Private domestic consumption is expected to be supported by easing inflation and improving labor market conditions,” said the BSP.
“However, risks in the external environment may also dampen the economy and market sentiment,” it added.
Among these risks, the BSP said “complacency is not an option.”
“The prices of certain commodities may increase due to peripheral factors such as regional tensions and adverse weather conditions,” it added.
WITHIN TARGET
Analysts still see inflation stabilizing firmly within the 2-4% range.
“For now, we are sticking to our below consensus forecast that annual average inflation will decline further this year to 2.4% from 3.2% in 2024, although the risks to this projection are volatile,” said Pantheon Macroeconomics Emerging Asia chief executive. Economist Miguel Chanco said.
Chinabank Research in a note said bad weather threatens food prices amid La Niña expected this quarter.
“However, barring any unexpected shocks, we project inflation to remain at the target level going forward,” it added.
Chief Economist Rizal Commercial Banking Corp. Michael L. Ricafort said that “relatively negative” inflation could still be seen until early 2025, which would justify an extension of the policy.
Last year, the central bank introduced a total of 75 basis points (bps) of rate cuts, bringing the benchmark rate to 5.75% by the end of the year.
“Nonetheless, the BSP may continue to monitor price risks. However, since inflation is still expected to reach its target this year, we think the BSP has room to continue its pace of monetary easing,” said Chinabank.
It expects the BSP to deliver 75 bps of cuts this year to bring the policy rate to 5%.
The first poll of the Monetary Boardannual review is in Feb. 20.
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