By Luisa Maria Jacinta C. Jocson, Correspondent
INFLATION increased for the third consecutive month in December due to a quicker surge in food, utility, and transportation costs, according to the Philippine Statistics Authority (PSA).
Preliminary reports from the PSA indicated that the consumer price index (CPI) climbed to 2.9% year-on-year in December from 2.5% in November, although it was slower than the 3.9% reported a year prior.
Additionally, it remained within the 2.3%-3.1% prediction for the month set forth by the Bangko Sentral ng Pilipinas (BSP).
The latest inflation figure is marginally higher than the 2.7% median projection from a BusinessWorld survey of 13 experts.
The December figure pushed the 2024 inflation rate to 3.2%, aligning with the BSP’s projections. This marked the first occasion since 2021 that the full-year inflation stayed within the central bank’s 2-4% target, when it averaged 3.9%. Additionally, it was the lowest since the 2.4% recorded in 2020.
“Overall, the inflation outlook being within the target and stable inflation expectations continue to endorse the BSP’s transition towards a moderately less restrictive monetary policy. However, the monetary authority will persist in meticulously observing the potential upside threats to inflation, especially geopolitical influences,” the central bank remarked in a statement.
PSA data revealed core inflation, which excludes volatile food and fuel prices, registered at 2.8% in December — an increase from the preceding month’s 2.5% but slower than the 4.4% recorded a year earlier.
For the entire year, core inflation averaged 3%, a reduction from 6.6% in 2023.
National Statistician Claire Dennis S. Mapa stated that December inflation was primarily driven by the housing, water, electricity, gas, and other fuels index, which rose to 2.9% from 1.9% the previous month and 1.5% a year ago.
This index contributed over half, specifically a 52.9% share, to the inflation increase for the month.
A significant contributor was electricity, which surged to 1.6% in December from a 2.5% drop in November and a 7.8% decrease a year ago.
In December, Manila Electric Co. (Meralco) adjusted the overall rate upward by P0.1048 per kilowatt-hour (kWh), increasing it from P11.8569 in November to P11.9617 per kWh.
The PSA noted an uptick in rental inflation to 2.4% from 2.2% the previous month, and liquefied petroleum gas (LPG) inflation rose to 7.8% from 6.7%.
Transport was also highlighted by the PSA as a primary factor in the faster inflation in December.
Transportation inflation escalated to 0.9%, recovering from the 1.2% decrease in November and outpacing the 0.4% rate a year prior.
Mr. Mapa explained that the increase in transport inflation was attributed to a slower decline in gasoline prices (-2.4% from -8%) and diesel prices (-2.9% from -9.4%).
In December, fuel price changes resulted in a net increase of P1.40 a liter for gasoline and P1.45 a liter for diesel, while kerosene prices saw a net drop of P0.80 a liter.
Passenger sea transport soared to 71.9% in December, up from 17.1% in November. Mr. Mapa mentioned that this surge can be attributed to seasonal factors linked to the holidays.
RICE PRICES
Conversely, the heavily weighted food and nonalcoholic beverage index remained unchanged at 3.4% for the month. Food inflation also held steady at 3.5%.
“The positive news is that the inflation rate for rice is decreasing. In fact, there is even an anticipation that rice inflation will turn negative this January,” Mr. Mapa added.
Rice inflation decelerated to 0.8% from 5.1% in November and 19.6% a year ago. Rice has traditionally been the largest contributor to overall inflation but has recently been on a downward trend since the government reduced tariffs on rice imports in July.
Nevertheless, pronounced increases were observed for vegetables, tubers, plantains, cooking bananas, and pulses, which surged to 14.2% from 5.9% the previous month.
Mr. Mapa noted that tomato prices skyrocketed to 120.8% in December from 31.3% in November, contributing 0.3 percentage points (ppt) to the overall inflation rate.
The average price for tomatoes reached P147.23 per kilo in December, increasing from P84.64 per kilo a year earlier.
Mr. Mapa attributed the rise in vegetable prices partly due to storm damage over recent months.
“That certainly has an impact. It’s not exclusive to this December; every time there’s a typhoon, vegetable prices tend to spike. Plus, there is heightened demand (for vegetables) during the holidays,” he elaborated.
Data from the PSA indicated that inflation for the lowest 30% of income households decreased to 2.5% from 2.9% the previous month and 5% a year ago. Year-to-date, inflation for this income bracket averaged 4.2%.
Inflation in the National Capital Region (NCR) rose to 3.1% in December from the 2.2% figure in November and 3.5% a year prior. For 2024, the average inflation in NCR was 2.6%.
Outside NCR, consumer prices accelerated to 2.9% from 2.6% a month ago and 4% a year prior, resulting in an average of 3.4% for 2024.
“We are witnessing the results of our initiatives to lower inflation within the government’s targeted range of 2-4%,” BSP Governor Eli M. Remolona, Jr. stated in a release.
National Economic and Development Authority (NEDA) Secretary Arsenio M. Balisacan remarked that the full-year average inflation for 2024 signifies a “notable improvement” compared to 2023.
“Despite the challenges we faced throughout the year, our collective efforts to manage inflation have been largely successful. We aim to build upon this momentum as we strive to keep the inflation rate within our target range in 2025,” he elaborated.
In a separate statement, the BSP commented that the latest inflation outcome is “consistent with the BSP’s evaluation that inflation will remain anchored within the target range over the policy horizon.”
The BSP anticipates inflation to average 3.3% this year and 3.5% in 2026, both falling within the 2-4% target.
However, they cautioned that the equilibrium of risks to the inflation outlook tends to lean towards the upside, citing “potential hikes in transport fares and electricity charges.”
“The influence of reduced import tariffs on rice continues to be the chief downside risk to inflation. Domestic demand is expected to remain robust yet subdued. Private domestic spending is likely to benefit from easing inflation and enhancing labor market conditions,” the BSP stated.
“Yet, external factors could emerge that may dampen economic activity and market sentiment,” they added.
In light of these threats, the BSP emphasized that “complacency is not an option.”
“Prices of certain goods may escalate due to supply-side influences such as geopolitical tensions and unfavorable weather conditions,” they asserted.
WITHIN TARGET
Analysts continue to project inflation to firmly nest within the 2-4% range.
“For the time being, we are maintaining our below-consensus projection for average annual inflation to decline further this year to 2.4% from 3.2% in 2024, although the risks surrounding this forecast are skewed to the upside,” stated Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco.
Chinabank Research noted that unfavorable weather represents a risk to food prices given the anticipated La Niña phenomenon this quarter.
“However, barring unforeseen shocks, we expect inflation to stay within target going forward,” they concluded.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort mentioned that a “relatively moderate” inflation rate might persist until early 2025, which would justify additional policy easing.
Last year, the central bank implemented a total of 75 basis points (bps) in rate adjustments, bringing the benchmark rate to 5.75% by year-end.
“Nevertheless, the BSP will likely remain alert to upward risks to pricing. However, as inflation is still expected to remain within target this year, we believe the BSP has the capacity to proceed with its gradual pace of monetary policy easing,” Chinabank noted.
They forecast the BSP will implement 75 bps of cuts this year, adjusting the policy rate to 5%.
The Monetary Board’s initial policy review for the year is slated for February 20.