Full-year inflation meets DBCC’s assumption of 5.8% for 2022

The country’s full-year inflation rate for 2022 reached 5.8 percent, consistent with the Development Budget Coordination Committee (DBCC)’s full-year inflation assumption as December 2022 inflation stood at 8.1 percent.

The DBCC revised its average inflation rate assumption to 5.8 percent from the previous 4.5 percent to 5.5 percent during the Committee’s 183rd meeting held on December 5, 2022.

2022 full year inflation

Top drivers of full-year inflation include electricity, gas, and other fuels at 1.1 percentage points (ppt) and operation of personal transport equipment at 1.0 ppt.

Food contributed 2.1 ppts, which was mainly driven by meat (0.44 ppt), fish (0.38 ppt), vegetables (0.23 ppt), and sugar (0.20 ppt).

Other top non-food contributors to the average inflation were food and beverage services (0.39 ppt), actual rentals for housing (0.31 ppt), and passenger transport services (0.25 ppt).

Inflation is expected to moderate within target range in the last quarter of 2023, averaging between 2.5 and 4.5 percent for the full year as global oil and food prices ease.

December 2022 inflation

The 8.1 percent inflation rate for December 2022 was mainly driven by supply constraints and increased demand from holiday spending. Electricity, gas, and other fuels remain to be the highest contributors at 1.0 ppt.

In terms of food, vegetables (0.9 ppt), meat (0.5 ppt), fish (0.4 ppt), and sugar (0.4 ppt) were the main contributors to inflation for the month.

On the other hand, food and beverage services (0.7 ppt), passenger transport services (0.6 ppt), and operation of personal transport equipment and actual rentals for housing (0.5 ppt) were among the non-food top contributors.

Core inflation, which excludes select volatile food and energy items to depict underlying demand-side price pressures, went up to 6.9 percent in December 2022, from the previous month’s 6.5 percent.

Regional inflation went above-target with Western Visayas (Region VI) at 10.5 percent, Davao Region (Region XI) at 9.3  percent, and Central Luzon (Region III) at 9.0 percent. Inflation in Metro Manila slightly increased from 7.5 percent in November to 7.6 percent in December.

Meanwhile, the seasonally adjusted Consumer Price Index (CPI), which excludes the effects of seasonal or time-related variation (e.g., climate and institutional events like holidays, harvest season, etc.) to facilitate comparison between consecutive time periods,  exhibited a slowdown. It registered a month-on-month (MoM) increase of 0.3 ppt in December 2022, from the previous month’s rate of 0.7 ppt.

Measures to address inflation

On December 29, 2022, President Ferdinand R. Marcos Jr. approved the extension of Executive Order (EO) 171 on the reduced Most Favored Nation (MFN) tariff rates through the enactment of EO 10.

The enactment of EO 10 extends the reduced MFN tariff rates of meat of swine (fresh, chilled, or frozen), maize (corn), and rice until December 31, 2023, and coal beyond 2023, provided that there will be a semestral review of the reduced tariff rates after the aforementioned period.

Equally important are the medium- and long-term efforts to increase productivity and modernize the agriculture sector as laid out in the recently approved Philippine Development Plan (PDP) 2023-2028. Other direct measures to address supply shocks are the continued provision of targeted transport, fertilizer, and fuel subsidies to affected sectors.

The government also assures the public of its commitment to fiscal responsibility, ensuring that fiscal policies will not add up to aggregate demand that will risk further inflation. In light of this, the Philippine government remains steadfast in pursuing fiscal consolidation through the faithful implementation of the Medium-Term Fiscal Framework (MTFF).