The nation’s headline inflation took a soothing dip in January as food prices found their equilibrium, the Philippine Statistics Authority said Tuesday. 

This welcome trend is expected to ease the heat on the central bank, potentially freeing it from the need to crank up interest rates.

Data from PSA showed that the country’s inflation rate significantly slowed to 2.8 percent in January 2024 from 3.9 percent in December 2023.

“This is the lowest inflation rate since the 2.3 percent inflation rate recorded in October 2020,” National Statistician Dennis Mapa said in a briefing.

Headline inflation, or the general movement of prices for goods, also further eased from 8.7 percent in the same period last year.

The headline inflation rate matched the 2.8 percent forecast in a Daily Tribune poll, and was the second consecutive month that it fell within the central bank’s 2.0 to 4.0 percent target range.

Core inflation, excluding the volatile food and energy costs, decelerated to 3.8 percent in January from 4.4 percent in the preceding month.

Contributors

PSA noted slower inflation across 10 of the 12 subsectors, with food inflation moderating to 3.5 percent year-on-year from 5.4 percent and transport inflation reporting negative inflation at -0.3 percent year-on-year. 

Mapa attributed the slower food inflation rate to the decrease in the prices of corn, oils and fats, meat, and sugar.

Other expenses contributing to the downward trend in inflation include housing, water, electricity, gas, and other fuels, which rose from 1.5 percent in December to 0.7 percent in January.

Highest rice inflation

While headline inflation has slowed, Mapa said rice inflation has increased to 22.6 percent year-on-year as the continuing El Niño weather phenomena hindered local output.

He said this has been the highest since March 2009, with 22.9 percent.

Rice inflation was 19.6 percent in December 2023. The rate of increase in the rice cost kicked the highest in 14 years, wherein rice inflation accelerated to 19.6 percent from 15.8 percent recorded in November 2023, making it the fastest rice inflation since March 2009.

He attributed the faster price of rice inflation to the low base where the rice price came from January to July 2023, also noting that rice prices in the world market are high.

“Dito naman sa inflation natin, kung titingnan natin yung time series nung rice inflation in 2023, ito ay mababa mula January hanggang July of 2023. Nagkaroon lang tayo ng pagtaas nung August last year, talagang pumalo siya nung September, and then nagtuloy-tuloy na (As for our inflation, if we look at the time series of rice inflation in 2023, it is low from January to July of 2023. We only had an increase in August last year, it really hit in September, and then continued),” Mapa added.

He added: “May mababang base na pinanggalingan ang presyo ng bigas. Ang aming kalkulasyon ay patuloy itong tataas in terms of inflation rate simply because the base is relatively low in 2023 (The price of rice has a low base of origin. We calculate that it will continue to increase in terms of inflation rate simply because the base was relatively low in 2023).”

The PSA tracked the movements in average prices of three sub-rice groups: regular-milled, well-milled, and special rice.

Mapa said the average monthly price for regular milled rice was P49.65 per kilo, over P10, up from P39.60 per kilo in January 2023. It had a year-on-year increase of around 25.4 percent, said Mapa.

In December 2023, it was registered at P48.48 per kilo — a 2.4 increase from last month’s price.

For well-milled rice, the PSA official said it was registered at P54.91 per kilo last month, higher than P43.92 per kilo in the same month the previous year, recording a 25 percent year-on-year increase.

Last December, its average price was P53.82, indicating an approximate 2 percent month-on-month increase.

For special rice, the average price last month was P63.90 per kilo, a rise from P53.76 per kilo in the same month the previous year. It registered an 18.9 percent year-on-year increase. 

Last December, it was priced at an average of P63.8, hitting a 1.3 percent month-on-month increase.

When asked when the expected increase in rice price will persist, Mapa said: “Sa world market, mataas ang presyo ang tinitingnan natin. Sa discussion with the Department of Agriculture, nakikita nila patuloy ang pagtaas (In the world market, we are looking at high prices. In a discussion with the Department of Agriculture, they see a continuous increase).”

“Our expectation is [that] we will have rice inflation in the vicinity of 20 percent or higher until July,” he added.

In the 2.8 percent overall inflation rate, rice contributed 1.3 percentage points, he said.

Base effects

Comparably, the Bangko Sentral ng Pilipinas said the recent deceleration is in line with its projections that inflation will probably decline in the first quarter of 2024 “due to largely to negative base effects” and concurrently experience “some easing of supply constraints affecting key commodities.”

“However, inflation could temporarily accelerate above the target range from Q2 2024 due to the impacts of El Niño weather conditions and positive base effects,” BSP said in a statement.

In a separate statement, Budget Secretary Amenah Pangandaman said the recent decline in inflation is “good news” for the Philippines, highlighting positive implications for businesses and the government’s development agenda.

“This means that businesses have a greater opportunity to thrive while the government can focus on areas of growth and development,” Pangandaman said.

She emphasized the positive economic outlook: “Overall, with lower inflation and lower unemployment rates, we are off to a very good start this 2024, towards high and sustained growth.”

Despite facing challenges like global headwinds and climate change, she attributed the progress to the effectiveness of the administration’s economic policies.