Lower food, transport costs slow inflation to 6.1%


THE country’s headline inflation slowed to 6.1 percent in May 2023, the fourth consecutive decline for the year, on the back of slower increases in the prices of transport and food and non-alcoholic beverages, according to data released by the Philippine Statistics Authority (PSA).

PSA data showed that inflation slowed from 6.6 percent in April but was still higher than the 5.4 percent posted in May 2022. The rate in May 2023 was also the slowest in 12 months, when inflation in May 2022 was at 5.4 percent.

According to PSA, among the 13 commodity groups, the downtrend of the headline inflation in May 2023 was “primarily” brought about by the annual decline in the index of transport at -0.5 percent from 2.6-percent annual increase in the previous month.

“The heavily-weighted food and non-alcoholic beverages also pulled down the overall inflation during the month with a lower inflation rate of 7.4 percent from 7.9 percent in April 2023,” PSA said.

PSA also noted the third main source of deceleration for the May 2023 inflation was restaurants and accommodation services, which registered slower inflation at 8.3 percent from 8.6 percent in the previous month.

Meanwhile, core inflation was at 7.7 percent, a drop from the 7.9 percent in April 2023. The core inflation excludes selected food and energy items in the headline inflation.

National Statistician Dennis Claire S. Mapa said, partly in Filipino, “We’re seeing a drop in core inflation. Perhaps there are just items under core inflation that are really hard to bring down. These are the items that are lesser in terms of volatility, and as we’ve been mentioning, we have made announcements on inflation in specific commodities like personal care—it’s really hard to bring these down.”

He added that they are “really monitoring those items that are non-food because the food items now, including transport, energy, have declined, but with non-food there are still items there that are really hard to bring down.”

Neda: monitoring system in place

For its part, the National Economic and Development Authority (Neda) assured the public that a “coordinate and proactive monitoring system” is in place to keep food and energy prices within the target range amid the further easing of the country’s inflation to 6.1 percent in May 2023.

“We are confident that we can achieve the government’s inflation target this year as we work closely with concerned government agencies in monitoring the primary drivers of inflation,” Socioeconomic Planning Secretary Arsenio M. Balisacan.

On May 26, 2023, President Ferdinand R. Marcos, Jr. signed Executive Order No. 28, creating the Inter-Agency Committee on Inflation and Market Outlook

(IAC-IMO), to enhance coordination in managing inflation and mitigating the impact of rising commodity prices.

Balisacan said the committee is keeping tabs not only of current trends and data on local and international prices, but also the level of domestic production, import arrivals, climate outlook, and other relevant supply and demand information for key commodities.

“As the risks to the inflation outlook lean towards the upside due to potential increases in transport fares, wage adjustments, higher electricity rates, and domestic prices of key food items resulting from the impact of El Niño, the government is working to implement the necessary interventions as we aim to keep prices low and stable for Filipino consumers,” Balisacan said.

Weather-related risks

Meanwhile, University of the Philippines Diliman School of Economics head of research Renato E. Reside Jr. believes that while inflation slowed to 6.1 percent in May 2023, there are still certain risks to watch out for in the coming months such as the “usual weather related risks.”

“The usual weather-related risks that can reduce the productivity of harvests of essential agricultural commodities in the country,” Reside replied to a Viber query of the BusinessMirror on Tuesday.

He noted that “any other potential disruption to the food supply chain whether domestic or imported supplies” should also be watched out for.

Moving forward,Reside said “The government would do well to ensure access to sufficient food inputs and output. This includes keeping import windows open, keeping transport routes open, investing in post harvest and adequate cold storage facilities. Also encouraging investment in Agriculture.”

On right track–Marcos

President Ferdinand R. Marcos Jr. said the country is on the right track in further slowing down the inflation rate.

In a brief video message posted on his Facebook page, the President attributed the decline to the success of the government’s anti-inflation measures.

“It would seem that we have started off in the right direction, on the right foot. It appears the policies, which we implemented to revive and revitalize our economy, were right, “ Marcos said.

“We will continue with what we are doing so we can go back to our favorable [economic] situation,” he added.

Among the measures taken to address the high cost of living are the expanded Kadiwa program and distribution of subsidies for vulnerable groups.

Government economic managers aim to keep the country’s inflation rate within the range of 5 to 7 percent this year.

Supply bottlenecks

Trade Secretary Alfredro E. Pascual said the government was able to reduce food costs by addressing supply chain bottlenecks.

“For example, if there is a big harvest in a certain area, that harvest cannot reach where the demand is.  So, the solution there is to make sure that the logistics are available to be able to deliver the harvest where the demand is,” Pascual said in a press briefing.

Another major contributor for the lower inflation, he said, was the drop in the prices of coal and oil, which affect transportation costs.

Wage hike

Despite the downward trend of inflation, Federation of Free Workers (FFW) still seeks a P150 daily wage hike nationwide since many employees are still struggling with the high cost of living.

“The average inflation rate from January to May still stands at 7.5 percent, highlighting the ongoing burden faced by Filipino workers,” FFW said.

“The easing of inflation alone is not sufficient to address the persistent challenges arising from the rising cost of living,” it added.

The bills granting the proposed wage hike are pending in Congress.

The Department of Finance (DOF) has warned against potential inflationary effects if the measure is passed into law. With Samuel P. Medenilla

Image credits: Nonoy Lacza/BM