Inflation slows down to 2.8% in January

The country’s inflation rate slowed down anew in January, marking the fourth straight month of deceleration since October last year amid slower increases in food, utilities, and transport costs, the Philippine Statistics Authority (PSA) reported on Tuesday.

At a press briefing, National Statistician and PSA chief Claire Dennis Mapa said that inflation — which measures the rate of increase in goods and services — eased to 2.8% in the first month of 2024, slower than the 3.9% rate in December 2023.

This was the slowest inflation rate since October 2020 when it clocked in at 2.3%.

Last month’s inflation print was also much lower than January 2023’s 8.7% rate.

It also fell at the lower end of the Bangko Sentral ng Pilipinas’ (BSP) forecast range for the month of 2.8% to 3.6%.

Base effects

January’s inflation rate, albeit slower, was also due to a high “base effects” year-on-year since January 2023’s rate was at its highest since November 2008.

On a similar note, the BSP said the slowdown last month is consistent with its expectations that inflation will likely moderate in the first quarter of 2024 “due to largely to negative base effects,” at the same time “some easing of supply constraints affecting key commodities.”

“However, inflation could temporarily accelerate above the target range from Q2 2024 due to the impacts of El Niño weather conditions and positive base effects,” the central bank said.

Contributors

The top contributor for the slowdown in the overall inflation in January was the Food and Non-Alcoholic Beverages index, which saw an inflation rate of 3.5% down from 6.4% month-on-month.

Mapa said the Food and Non-Alcoholic Beverages index contributed 68.5% to the overall inflation downtrend last month.

The slower inflation for the index was due to the negative inflation for vegetables at -20.8% from -9.2% as well as the -0.7% rate for meat from 0.2% and the slowdown in fish and seafood to 1.2% from 4.8%.

Also contributing to the easing was the Housing, Water, Electricity, Gas and Other Fuels index, which saw an inflation rate of 0.7% from 1.5% month-on-month, contributing 16.3% to the overall downtrend.

This as rentals declined to 3% from 3.7%, electricity to -10.2% from -7.8%, and water supply to 9.1% from 11.6%.

The third top contributor to the lower inflation print in January was the Transport index, which saw a print of -0.3% from 0.4% in December 2023. Transport contributed 6% to the overall decline.

Moreover, food inflation — which tracks price movements in a “basket” of foods commonly purchased by households — eased to 3.3% from 5.5% month-on-month due to the decrease in the prices of corn (-4.3% from -3.5%), oils and fats (-4.3% from -3.6%), meat (-0.7% from 0.2%), and sugar (-1.0% from 0.1).   

Rice inflation

While food inflation declined, the heavily weighted rice saw its inflation rate accelerate further to 22.6% from 19.6% in December last year. This is a new 14-year high for the food staple’s inflation rate.

Mapa said that the high rice inflation could be attributed to the overall trend of high rice prices in the world market as well as the base effects seen in the first seven months of 2023, when rice inflation was relatively low.

The PSA chief said an above 20% rice inflation could persist until July this year.

Inflation for bottom 30%

Similar to the overall trend, inflation for the bottom 30% income households was at 3.6%, lower than 5% in December 2023.

The downtrend in the overall inflation in January 2024 was primarily brought about by the lower year-on-year growth in the heavily weighted Food and Non-Alcoholic Beverages at 5.2% in January 2024 from 7.4% in the previous month. 

In addition, the Transport index recorded a lower annual increase of 0.3% during the month from 1.5%% in December 2023.

Food inflation for the income class also slowed down to 5.3% from 7.4% due to the faster annual decline in the index of vegetables, tubers, plantains, cooking bananas and pulses at 18.5% from 5% month-on-month. 

In addition, fish and other seafood index also posted a year-on-year decline of 0.5% in January 2024 from 3.7% increase in December 2023. 

The meat and other parts of slaughtered land animals index also contributed to the lower food inflation with its slower increase of 0.4% from 1.4% in December last year.

However, faster increment was seen in the index of rice at 24.8% in January from 21.4% in December 2023.

National Economic and Development Authority (NEDA) Secretary Arsenio Balisacan said the Inter-Agency Committee on Inflation and Market Outlook (IAC-IMO) will continue to closely monitor the prices of rice and other goods to provide the President and the Cabinet with timely and appropriate policy recommendations and ensure stable and affordable prices of commodities.  

Balisacan added that with the El Niño lingering until May, "we introduce stop-gap measures, as necessary, such as allowing further imports on key commodities until our supply stabilizes at prices affordable to consumers while ensuring remunerative prices for local producers." 

Earlier, President Ferdinand "Bongbong" Marcos Jr. issued Executive Order No. 50, extending until the end of 2024 the reduced tariff rates of pork, corn, and rice. 

Marcos also reactivated the Task Force El Niño through Executive Order No. 53, which tasks concerned agencies to intensify the government's efforts to secure sufficient water and food supply, power, health, and public safety nationwide.

In a statement, Marcos vowed to strengthen the government efforts to sustain the country’s economic growth and to address challenges following the significant slowdown on inflation for January 2024. 

“We are pleased to announce a significant slowdown on inflation for January 2024, reaching its lowest point since October 2022, at 2.8 percent,” Marcos said.

Marcos attributed the slowdown of inflation to the decline in food inflation, which dropped to 3.3 percent from the previous month and to the government measures such as the National Adaptation Plan and the reactivation of Task Force El Niño. 

“Additionally, strategic partnerships with countries like Vietnam for rice supply to allow further imports of key food commodities are crucial steps towards ensuring sustain progress,” Marcos said. 

“We remain committed to easing the burden on our citizens, as evidenced by the recent electricity bill discounts for low-income households,” he added. 

Amid all the challenges, President Marcos urged the public to join the government to overcome economic challenges and build a better future for everyone under a “Bagong Pilipinas.” —KBK/NB, GMA Integrated News