Sharper increases in the price of rice, vegetables, other food items, and non-alcoholic beverages drove inflation higher in August to 5.3 percent, snapping 6 months of deceleration, the Philippine Statistics Authority said Tuesday.
Economic Planning undersecretary and national statistician Dennis Mapa said inclement weather and steadily rising cost of fuel could push inflation higher in September while the impact of cap on rice prices imposed by the government on Tuesday may have little effect since prices of the grain last year were lower.
The government set the price ceiling on rice at P41 per kilo for regular-milled rice and P45 a kilo for well-milled rice. Mapa said data from September last year show the average price of regular-milled rice at P39.80 a kilo while well-milled rice were sold at P44 a kilo. Rice has the highest weight at close to 9 percent of the basket of goods and services used to measure inflation.
Average inflation in the first eight months of the year is at 6.6 percent, way above the Bangko Sentral ng Pilipinas’ target range of 2 percent and 4 percent.
The August inflation print was at the higher end of the central bank’s forecast range of 4.8 percent to 5.6 percent. The BSP projected inflation to rise from 4.7 percent registered in July due to higher prices of rice and other other agricultural commodities due to weather disturbances, sharp rise in fuel prices as well as increased transport costs owing to higher train fares and toll rates, and the peso depreciation.
The acceleration in August headline inflation would likely keep the BSP at a pause during the policy meeting of the Monetary Board scheduled on September 21. The central bank paused its interest-rate hike series to tame inflation in May.
Core inflation, which excludes selected food and energy items, decelerated further to 6.1 percent in August from 6.7 percent in July, bringing the average for the first eight months of the year to 7.4 percent.
Inflation for the bottom 30 percent of income households also increased to 5.6 percent in August from 5.2 percent in July. Around 51 percent of the consumer basket for the bottom 30 percent income household are accounted for by food items.
This development did not surprise Rep. Joey Salceda, who chairs the House ways and means committee, who said much of the upward price movement is driven by world trade dynamics.
“Rice, corn, and flour drive the vast majority of food inflation. Apart from the ongoing Russia-Ukraine conflict, which has driven world prices of grain upward to historic levels, the Indian export ban on rice has disrupted global rice supply. Next to China, we are the world’s largest importer of rice, so it was bound to affect us first.
Having said that, Salceda argued the Philippines as a rice trading market also gives it power over the global price dynamic, and that President Ferdinand Marcos Jr.’s EO 39 was a good initial step in signaling the country will not tolerate price manipulation in the global rice trade.
This relates to the mandate imposing price ceilings on rice to combat hoarding, profiteering, smuggling and cartelization of the staple.
“The spot price of rice has also normalized to pre-export ban levels, and the price of rice in contracts should follow this downward trend. As I have said, this indicates that President Marcos’s gambit with EO 39 achieved its desired initial effect,” he said.
Salceda also said the Philippines work with its trading partners to ensure that they honor their contracts.
“The ASEAN summit is an opportunity for President Marcos to push for a regional consensus that we will not restrict each other’s rice supply.
I also expect the downward trend in the year-on-year inflation rate to resume this September and towards the end of the year,” Salceda said.
