Inflation drops to 5.1 percent in December 2018


By Rose de la Cruz


December inflation dropped to 5.1 percent, from 6 percent in the previous month, of 2018 indicating that

price pressures have started to dissipate with inflation expected to fall within target for 2019 and 2020.


Year-on-year headline inflation for 2018 averaged at 5.2 percent and was above the Government’s inflation target range of 3.0 percent ± 1.0 percentage point for the year.


Headline inflation decelerated further to 5.1 percent year-on-year in December 2018 from 6.0 percent in the previous month.


Likewise, core inflation—which excludes selected volatile food and energy items to measure underlying price pressures—eased to 4.7 percent in December from 5.1 percent in November. Month-on-month seasonally-adjusted headline inflation also remained negative in December at -0.4 percent from -0.3 percent in the previous month.


The BSP nevertheless continues to keep a close watch over price developments and shall consider this latest development and all other relevant information at its next monetary policy meeting to ensure that the monetary policy stance remains consistent with its price stability objective.


The slowdown in inflation rate for both food and non-food items weighed down on overall inflation in December 2018. Food inflation moderated further during the month as most food items posted lower year-on-year inflation rates while inflation for large-weighted commodities such as rice also fell with the ongoing harvest season and additional supply from rice imports.


Similarly, non-food inflation also slowed down due primarily to lower transport inflation. This in turn was due mainly to the decline in international oil prices as reflected in the downward price adjustments of domestic petroleum products and the provisional rollback of the passenger jeepney minimum fare in selected areas.

"The latest inflation outturn confirms further the BSP's earlier assessment that the inflation target for 2019 - 2020 shall be achieved. The within-target inflation outlook over the policy horizon largely reflects the estimated impact of the rice tariffication law, lower global oil prices, and latest monetary policy adjustments by the BSP.


Nonetheless, the BSP continues to keep a close watch over price developments in the country and shall consider all relevant information at its next monetary policy meeting on 7 February 2019 to ensure that the monetary policy stance remains consistent with the BSP’s primary mandate of price stability.”

Economic managers


Economic managers of the country welcomed the news of inflation rate dropping to 5.1 percent in December, signifying, they said, that the mitigating measures already in force are broadly effective.


The rate of price increases has remained manageable, giving the country adequate elbow room to sustain its economic growth and reach its development goals. Still, we understand that the faster inflation particularly in the middle of 2018 had affected many Filipinos, most especially those in the disadvantaged sectors. For this very reason, the economic team took swift and decisive measures to tame inflation as directed by the President.


Inflation in Metro Manila decelerated for the fourth consecutive month to 4.8 percent in December 2018 from 5.6 percent in November. The rest of the regions felt slower inflation rates in December 2018 compared to the previous month.


The economic cluster also said “while we can say that the worst seems over given the signs of easing price pressures, we continue to be vigilant of possible risks.”


For this year, with the expected signing into law of the Rice Tariffication Bill, rice prices are expected to decline by P7 per kilo. “We recognize, however, that this favorable effect can only be sustained if there are more players in the rice market, starting from production and financing to postharvest and trading,” the managers said.


Rice supply


Ensuring supply of rice and other major agricultural products from local sources likewise remains crucial over the near term with the looming El Niño phenomenon in 2019. Short-maturing, high-yielding, and resilient varieties of crops should be utilized, alongside efficient water management systems. Over the medium to long-term, reassessing the vulnerability and suitability of farm areas should also be prioritized to bring forth adaptive farming activities.


The economic team will aggressively push for the full operationalization of the National Single Window.  At the same time, the government pledges to step up its anti-smuggling measures, aiming that only duly-taxed imports enter the country. We also need the Philippine Competition Commission to be vigilant in curbing anti-competitive behavior, particularly in the rice market. In the fisheries sector, the government is strengthening its crackdown against illegal fishing. Ten out of the 13 fishing grounds in the Philippines were reportedly overfished. This effort must be accompanied by sustainable coastal resource management to help increase fish production.


We also advise the Department of Agriculture to hasten the issuance of the Fisheries Administrative Order No. 259 to compensate for the limited supply as some parts in the Visayas are under closed fishing season.


Falling crude prices


For the past two months, the Philippines continues to benefit from the falling prices of international crude oil resulting in a series of oil price rollbacks. The Department of Energy, on its end, is closely monitoring domestic pump prices to ensure that the new excise tax on oil is not yet reflected in the prices at the start of the year, as old fuel inventories are not subjected to the tax increase.


We also ask concerned government agencies to fast-track the implementation of the mitigating measures scheduled this year under the Tax Reform for Acceleration and Inclusion Law, particularly the unconditional cash transfer and fuel vouchers.


These could fend off possible second-round effects, which may arise from further demand for wage and fare increases.


As we welcome 2019, we assure the general public that our dedication and commitment to our collective long-term vision of a good life for all remain undiminished.





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Friday, 24 January 2020
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