DOF: Gov’t redoubling efforts to mitigate effects of inflation

Finance Secretary Benjamin E. Diokno emphasized that the government is redoubling its efforts to mitigate the effects of inflation after the headline inflation rate for September 2023 reached 6.1 percent.

“The Philippine government is all hands on deck in ensuring that we have the right policy measures, programs, and monitoring mechanisms in place to arrest rising commodity prices, which remain to be the top-of-mind concern of our citizens,” Secretary Diokno said following the September 2023 inflation report.

The September 2023 headline inflation rate brings the year-to-date inflation rate to 6.6 percent from January to September 2023. This is higher than the Development Budget Coordination Committee (DBCC) assumption of 5.0-6.0 percent for full year 2023.

The main contributors to the September headline inflation were Food and non-alcoholic beverages, contributing 3.7 percentage points (ppt) of the overall 6.1 percent; Restaurants and accommodation services (0.7 ppt); and Housing, water, electricity, gas and other fuels (0.5 ppt).

Food inflation in September also rose to 10.0 percent from 8.2 percent in August 2023 and 7.7 percent in the same month last year.

The main drivers to the upward trend in overall inflation were rice (1.6 ppt) and vegetables (0.8 ppt) as both food commodities posted double-digit growth in prices at 17.8 percent and 29.6 percent, respectively, mainly due to the adverse effects of the recent typhoons during the Habagat season.

“To help ensure that rice and vegetable inflation will decline for the rest of the year, the government will continue to implement a package of measures that seeks to address non-competitive market behavior, support farmers, and protect the vulnerable,” Secretary Diokno said in a statement.

Executive Order (EO) No. 39, which imposed a price ceiling on rice, was implemented beginning September 5, 2023 as a short-term measure against non-competitive practices by market players.

President Ferdinand R. Marcos, Jr. announced on October 4, 2023 that EO No. 39 will be lifted, as the palay harvest season progresses and the timely arrival of imports ensure sufficient rice supply by year-end and moderate rice inflation.

The downward pressure on rice prices, or factors that may lead to the reduction of said prices, are the adequate rice supply by year-end, low farmgate prices, and easing international rice prices. However, we need to monitor closely the outlook for international spot and futures rice prices.

Furthermore, increases in the applied and issued Sanitary and Phytosanitary Import Clearances (SPSIC) lodged within the mandate of Department of Agriculture – Bureau of Plant Industry (DA-BPI) would imply the continued arrival of rice imports in the next two months.

On the other hand, the high inflation in restaurants is partly attributed to second-round effects of higher prices of food commodities and high demand for these services.

The continued high rental cost was mainly due to the increase in demand as economic activities normalized following the pandemic.

High transport inflation was mainly caused by the slower deceleration of fuel prices year-on-year, the recently implemented fare hikes in UV express vehicles and LRT in August 2023, and the lingering effects of the jeepney fare increase in October 2022.

Core inflation, which excludes selected volatile food and energy items, continued to decline to 5.9 percent in September 2023, from the 6.1 percent print in August, albeit still higher than 5.0 percent in September 2022.

The inflation rate in the National Capital Region (NCR) also accelerated to 6.1 percent from 5.9 percent in the previous month, albeit slower than the 6.5 percent inflation rate recorded in the region in September last year..

Fifteen regions in areas outside of NCR also recorded increased inflation rates. In particular, Region III (Central Luzon) recorded the highest inflation rate at 7.9 percent, while Region VII (Central Visayas) had the lowest inflation rate at 3.8 percent.

Measures to mitigate the effects of inflation

According to the Finance Secretary, the government is currently intensifying and accelerating its efforts on warehouse investigations and forfeiture procedure, filing of charges against market players on alleged reports of anti-competitive practices, and strict price monitoring of imported rice in the logistics chain to protect farmers and ensure that the lowered tariff rates do not translate to higher profit margins for importers, traders and middlemen.

The government will further improve the utilization and implementation of Rice Competitiveness Enhancement Fund (RCEF) programs such as farm mechanization, seed development, propagation and promotion, credit assistance, and extension services to improve the productivity of rice farmers, reduce production costs, and link domestic producers to the value chain.

Meanwhile, the government is also undertaking measures to mitigate non-food inflation across several fronts. These include energy and water demand management measures; supply management measures; managing cost of electricity; careful review of wage and fare hike petitions; and monitoring the implementation of EO 41 prohibiting the imposition of pass-through fees for delivery trucks.

To help protect the vulnerable sectors, the government also continues to focus on the completion of its targeted cash transfer program as well as fuel subsidy programs for qualified drivers and operators of public utility vehicles (PUVs).

Meanwhile, the government will also accelerate the implementation of its 2023 Fuel Assistance for Farmers Program to farmers and fisherfolk.

The Inter-agency Committee on Inflation and Market Outlook (IAC-IMO) remains committed to the continued monitoring of developments in food and non-food inflation to be able to formulate timely and relevant policy recommendations to help mitigate inflationary pressures.