By Luisa Maria Jacinta C. Jocson, Reporter
INFLATION accelerated for a third straight month in December amid a faster rise in food, utility and transport prices, the Philippine Statistics Authority (PSA) said.
Preliminary data from the PSA showed the consumer price index (CPI) rose to 2.9% year on year in December from 2.5% in November but was slower than 3.9% a year earlier.
It also settled within the 2.3%-3.1% forecast for the month given by the Bangko Sentral ng Pilipinas (BSP).
The latest inflation print is slightly higher than the 2.7% median estimate in a BusinessWorld poll of 13 analysts.
The December print brought 2024 inflation to 3.2%, in line with the BSP’s forecast. This was the first time that full-year inflation fell within the central bank’s 2-4% target since 2021, when inflation averaged 3.9%. It was also the slowest since 2.4% in 2020.
“On balance, the within-target inflation outlook and well-anchored inflation expectations continue to support the BSP’s shift toward a less restrictive monetary policy. Nonetheless, the monetary authority will continue to closely monitor the emerging upside risks to inflation, notably geopolitical factors,” the central bank said in a statement.
PSA data showed core inflation, which discounts volatile prices of food and fuel, stood at 2.8% in December — faster than the previous month’s 2.5% but slower than the 4.4% a year ago.
For the entire year, core inflation averaged 3%, easing from 6.6% in 2023.
National Statistician Claire Dennis S. Mapa said December inflation was mainly due to the housing, water, electricity, gas and other fuels index, which accelerated to 2.9% from 1.9% a month earlier and 1.5% in the previous year.
The index accounted for more than half or a 52.9% share of the uptrend in inflation during the month.
One of the main drivers was electricity, which jumped to 1.6% in December from the 2.5% contraction in November and 7.8% decline a year ago.
In December, Manila Electric Co. (Meralco) raised the overall rate by P0.1048 per kilowatt-hour (kWh) to P11.9617 per kWh from P11.8569 in November.
The PSA also cited faster inflation in rentals at 2.4% from 2.2% a month ago and liquefied petroleum gas or LPG at 7.8% from 6.7%.
The PSA also cited transport as a main source of faster December inflation.
Transport inflation picked up to 0.9%, a reversal of the 1.2% drop in November and faster than the 0.4% clip a year earlier.
Mr. Mapa said the rise in transport inflation was due to the slower deceleration of prices of gasoline (-2.4% from -8%) and diesel (-2.9% from -9.4%).
In December, pump price adjustments stood at a net increase of P1.40 a liter for gasoline and P1.45 a liter for diesel, while kerosene prices had a net decrease of P0.80 a liter.
Passenger sea transport jumped to 71.9% in December from 17.1% in November. Mr. Mapa said this was due to seasonal factors amid the holidays.
RICE PRICES
Meanwhile, the heavily weighted food and nonalcoholic beverage index remained steady at 3.4% during the month. Food inflation was likewise steady at 3.5%.
“The good news is that the inflation rate of rice is easing. In fact, there’s even an expectation that inflation for rice will turn negative this January,” Mr. Mapa added.
Rice inflation slowed to 0.8% from 5.1% in November and 19.6% a year prior. Rice is typically the biggest contributor to overall inflation but has recently been on a downtrend since the government slashed tariffs on rice imports in July.
However, faster increases were recorded for vegetables, tubers, plantains, cooking bananas and pulses, which climbed to 14.2% from 5.9% a month ago.
Mr. Mapa said the price increase of tomatoes soared to 120.8% in December from 31.3% in November. It also accounted for 0.3 percentage point (ppt) of overall inflation.
The average price of tomatoes stood at P147.23 per kilo in December, rising from P84.64 per kilo year ago.
Mr. Mapa said higher vegetable prices could be partly attributed to storm damage in the past few months.
“That of course has an effect. It is not unique to this December, every time there’s a typhoon, it’s the prices of vegetables that really spike. Add to that the high demand (for vegetables) over the holidays,” he added.
Data from the PSA showed inflation for the bottom 30% of income households eased to 2.5% from 2.9% a month prior and 5% in the previous year. Year to date, inflation for the bottom 30% averaged 4.2%.
Inflation in the National Capital Region (NCR) accelerated to 3.1% in December from the 2.2% print in November and 3.5% a year ago. For 2024, inflation in NCR averaged 2.6%.
Outside NCR, consumer prices quickened to 2.9% from 2.6% a month earlier and 4% in the year prior, bringing the average to 3.4% in 2024.
“We are seeing the fruit of our efforts in bringing down inflation within the government’s target range of 2-4%,” BSP Governor Eli M. Remolona, Jr. said in a statement.
National Economic and Development Authority (NEDA) Secretary Arsenio M. Balisacan said the full-year average inflation in 2024 is a “significant improvement” from 2023.
“Despite the risks we encountered throughout the year, our combined efforts to temper inflation have largely been successful. We will build upon this momentum as we commit to keep the inflation rate within our target range in 2025,” he added.
In a separate statement, the BSP said the latest inflation outturn is “consistent with the BSP’s assessment that inflation will remain anchored to the target range over the policy horizon.”
The BSP expects inflation to average 3.3% this year and 3.5% in 2026, both within the 2-4% target.
However, it said the balance of risks to the inflation outlook continues to lean to the upside, citing “potential upward adjustments in transport fares and electricity rates.”
“The impact of lower import tariffs on rice remains the main downside risk to inflation. Domestic demand is likely to remain firm but subdued. Private domestic spending is expected to be supported by easing inflation and improving labor market conditions,” the BSP said.
“However, downside risks in the external environment could materialize and temper economic activity and market sentiment,” it added.
Amid these risks, the BSP said “complacency is not an option.”
“Prices of certain commodities may rise due to supply-side factors like geopolitical tensions and adverse weather conditions,” it added.
WITHIN TARGET
Analysts still see inflation settling firmly within the 2-4% range.
“For now, we’re sticking to our below-consensus forecast for average annual inflation to fall further this year to 2.4% from 3.2% in 2024, though the risks to this projection are skewed to the upside,” Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco said.
Chinabank Research in a note said bad weather poses a risk to food prices amid the expected La Niña this quarter.
“Still, barring unexpected shocks, we project inflation will remain within target going forward,” it added.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said a “relatively benign” inflation print might still be seen up to early 2025, which would justify further policy easing.
Last year, the central bank delivered a total of 75 basis points (bps) worth of rate cuts, bringing the benchmark rate to 5.75% by yearend.
“Still, the BSP will likely continue to be vigilant of upside risks to prices. However, with inflation still expected to settle within target this year, we think the BSP has room to continue with its gradual pace of monetary policy easing,” Chinabank said.
It expects the BSP to deliver 75 bps of cuts this year to bring the policy rate to 5%.
The Monetary Board’s first policy review for the year is on Feb. 20.
