Inflation in the Philippines averaged 5.2 per cent last year, its quickest pace since the global financial crisis a decade ago, as domestic consumer prices rose faster than expected last year due to food supply bottlenecks, excise taxes slapped on consumption and skyrocketing global oil prices.
However, the government reported on Friday that the inflation rate during the month of December last year eased to 5.1 per cent, the lowest since 4.6 per cent in May last year.
Compared with November, prices in December slid 0.4 per cent, making it two straight months of month-on-month declines, the latest Philippine Statistics Authority (PSA) data showed.
“The slowdown of inflation in December 2018 was mainly driven by the slower annual increments in the indices of food and non-alcoholic beverages at 6.7 per cent and transport at four per cent” from eight per cent and 8.9 per cent last November, respectively, the PSA said.
Last December’s rate was the first time since August that inflation fell below the six per cent level.
In September and October, the inflation rate hit 6.7 per cent, a nine-year high, such that the government immediately addressed the lack in food supply, especially of rice, as these had elevated prices.
Prices of consumer goods also increased last year as the Tax Reform for Acceleration and Inclusion (Train) Act imposed higher or new excise taxes on cigarettes, sugary drinks, oil products and vehicles, among other goods, to compensate for the restructured personal income tax regime that raised the tax-exemption cap.
The Department of Finance (DOF) had said that the Train Law accounted for just 0.4-0.7 per cent of last year’s inflation.
The full-year inflation last year was above the government’s two to four per cent target range or what was considered as moderate price increases.
The 2018 rate was also the highest since 2008’s 8.2 per cent year-on-year increase in prices, making it a 10-year high, PSA data showed.
“Compared to 2017 average rates, the annual average hikes in 2018 were higher in the indices of all the commodity groups, except for clothing and footwear, communication and education,” the PSA said. The inflation rate in 2017 was only 2.9 per cent.
In Metro Manila, inflation averaged a faster 5.5 per cent last year, while the 12-month rate in areas outside the National Capital Region was 5.1 per cent or slightly lower than the national average.
In an economic bulletin, DOF Undersecretary and chief economist Gil S Beltran said that moving forward, “low oil prices in the world market will give the country relief for 2019, at least for the first few months”.
Under the Train Law, the second tranche of oil excise tax hikes took effect on January 1 this year.
Beltran also recommended to continuously strictly implement Administrative Order No 13 issued by President Duterte last year that eased food importation in order to “cut red tape, which adds to price escalation”.
In a joint statement, Socioeconomic Planning Secretary Ernesto M Pernia, Budget Secretary Benjamin E Diokno and Finance Secretary Carlos G. Dominguez III said the slower inflation in December “signifies 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,” the economic managers said.
As such, “we continue to exert all efforts to bring inflation within the government’s target range of two to four per cent, and ensure price stability all year round,” they added.
“While we can say that the worst seems over given the signs of easing price pressures, we continue to be vigilant of possible risks,” according to the economic team.
To further bring down prices, they urged the removal of import quota by passing the Rice Tariffication Bill into law; preparing the agriculture sector for a looming dry spell to be brought about by “El Nino” phenomenon this year; curbing smuggling and anticompetitive behaviour, especially in the rice sector, as well as sustaining the fight against illegal fishing.
Malacanang also vowed to continue implementing measures to curb inflation.
Presidential spokesperson Salvador Panelo said the Duterte administration would not be lax amid the lower inflation in December. He added that “Filipinos can expect that we will remain vigilant as we continue to monitor the prices of basic goods and commodities, and implement measures to further ease the burden of our countrymen.”
Senators also cheered news of easing inflation, but cautioned the government not to let its guard down, considering the new round of increases on the excise taxes on fuel.
“Slowing of inflation is welcome relief for the public after months of increasing prices,” Sen. Juan Edgardo Angara told reporters in a text message. The chair of the Senate ways and means panel, however, said trade officials should remain watchful of artificially inflated prices.
Senator Joseph Victor Ejercito welcomed the drop in inflation but expressed regret about the government’s decision to push through with the hikes in excise taxes on fuel under the train law.
Under the Train law, an additional levy of P2.24 ($0.043) a litre was imposed for diesel and gasoline last January 1. PHILIPPINE DAILY INQUIRER/ANN