Overall inflation in the Philippines dropped to 4.9 percent in October 2023 from 6.1 percent in the previous month, lower than the Bangko Sentral ng Pilipinas (BSP)’s forecast of 5.1 to 5.9 percent.
This brings the year-to-date (YTD) inflation rate to 6.4 percent, closer to the Development Budget Coordination Committee (DBCC) assumption of 5.0 to 6.0 percent for the full year 2023 but above the government’s inflation target of 2-4 percent for the year.
“This positive development is the result of the government’s decisive and timely actions in mitigating inflation, a testament to President Ferdinand R. Marcos, Jr.’s firm resolve to protect the purchasing power of Filipino families,” Finance Secretary Benjamin E. Diokno said.
The downtrend in inflation was mainly due to slower year-on-year (YoY) increases in food and non-alcoholic beverages (7.0 percent) and restaurants and accommodation services (6.3 percent).
Meanwhile, the top three commodity groups that contributed to the October 2023 overall inflation were food and non-alcoholic beverages with 2.6 percentage points (ppt) out of the overall 4.9 percent; restaurants and accommodation services (0.6 ppt); and housing, water, electricity, gas and other fuels (0.6 ppt).
Food inflation, specifically, slowed down to 7.1 percent from 10.0 percent in the previous month, contributing 2.5 ppts to the overall inflation. In the same period a year ago, food inflation was higher at 9.8 percent.
Although rice remains the top contributor to headline inflation at 1.2 ppt with a 13.2-percent inflation rate YoY, it posted a 4.7 ppts decline from the 17.8 percent inflation in the previous month as supply has started to stabilize following the beginning of the harvest season.
Non-food inflation continues to be within the government’s target range of 2-4 percent as it decelerated to 3.4 percent from 3.5 percent the previous month. The main contributors to non-food inflation were food and beverage serving services (0.6 ppt), housing rentals (0.5 ppt), personal care (0.21 ppt), as well as passenger transport (0.16 ppt).
The sustained elevated inflation in restaurants remains partly attributed to the second-round effects of higher prices of food commodities and high demand for these services.
Meanwhile, the continued high rental cost remains mainly due to increased demand as economic activities normalize after the pandemic.
On passenger transport, inflation was primarily due to the increase in transport fares, particularly those that were implemented for UV express vehicles and LRTs beginning in August and jeepneys in October. The slower deceleration of fuel prices YoY also contributed to the sustained transport inflation for the month.
Core inflation, which excludes selected volatile food and energy items, continued to decline to 5.3 percent from 5.9 percent in the previous month, bringing the average core inflation to 7.0 percent.
The National Capital Region (NCR) also saw a downtrend in inflation to 4.9 percent from 6.1 percent in September 2023. All regions outside NCR also recorded slower inflation rates, except for Region VII (Central Visayas), which posted a higher annual increase.
Government measures to mitigate inflation
To help further reduce the upward pressures on the price of rice, President Marcos, Jr. issued a directive on the implementation of various measures to ensure the affordability of rice prices and to protect consumers after the lifting of the price ceiling.
The government will continue to implement a package of measures to address non-competitive market behavior to help ensure that rice and vegetable inflation will further decelerate for the rest of the year, while also supporting farmers and protecting the vulnerable.
Efforts on warehouse investigations and forfeiture procedures, the filing of charges against market players on alleged reports of anti-competitive practices, and strict price monitoring of imported rice in the logistics chain are being doubled by the government to ensure that the lowered tariff rates do not translate to higher profit margins for importers, traders, and middlemen.
The government will also intensify the utilization 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 them to the value chain.
Meanwhile, the national government continues to undertake measures to mitigate non-food inflation across several fronts, namely on demand and supply management measures for energy and water; careful review of wage and fare hike petitions; and monitoring of the suspension of pass-through fees for delivery trucks as enforced under Executive Order No. 41.
The government also aims to complete the provision of financial assistance to the vulnerable sectors through its Targeted Cash Transfer (TCT) Program aimed at assisting the most vulnerable families; the Pantawid Pasada Program for drivers and operators of various modes of public transportation and delivery services; and its fuel subsidy program for farmers and fisherfolk following the lifting of the election ban spending.
“This ensures the protection of the purchasing power of the most vulnerable families and the continued delivery of essential services such as public transportation and agricultural activities,” Secretary Diokno said.
To help mitigate oil inflation, the government aims to issue guidelines to revise the implementation of the ethanol blend for gasoline. Increasing the percentage of ethanol in the mixture could help decrease the cost of gasoline.
Additionally, the DOF shall support proposals to amend the 2024 General Appropriations Act (GAA) provision on fuel subsidies for the transport sector, which shall enable the government to enact measures in a more timely manner.
To help mitigate the second-round effects of toll rate hikes on food inflation, the government is also pushing for the implementation of toll rate hike exemptions for delivery trucks catering to agricultural products.
“The IAC-IMO remains committed to the continued monitoring of developments in food and non-food inflation, especially on emerging supply shocks in the market, which allows for the timely formulation of relevant policy recommendations to mitigate inflationary pressures,” Secretary Diokno said.