Philippines: Inflation quickens to 3.4% in February

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Inflation quickened to a two-month high of 3.4 percent in February from 2.8 percent in January, snapping four straight months of decline amid faster upticks in food prices such as rice and meat and transport costs.

The February inflation print, however was lower than the 8.6 percent booked in the same month last year and was within the 2.8 percent to 3.6 percent forecast of the Bangko Sentral ng Pilipinas (BSP).

Prior to the pick-up last month, the rate of increase in the average prices of consumer goods and services has been declining since September 2023.

National Statistician Dennis Mapa said in a press briefing yesterday the uptrend in inflation was driven by food and non-alcoholic beverages, which posted an inflation rate of 4.6 percent in February from 3.5 percent in the previous month.

Food inflation went up to 4.8 percent from 3.3 percent due to higher rice and meat prices.

Rice posted a higher inflation rate of 23.7 percent in February from the previous month's 22.6 percent.

Mapa said the February rice inflation was the highest since the 24.6 percent recorded in February 2009.

World market prices of rice have been rising and all three classifications of the staple tracked by the Philippine Statistics Authority also posted increases, Mapa said.

'Assuming no reduction in the price, and the movement will continue, we should be expecting high rice inflation until July or August this year,' Mapa said.

Meat recorded a 0.7 percent increment in February after easing by 0.7 percent in January.

The transport commodity group was cited as another driver of the higher headline inflation rate as the index registered a 1.2 percent increase from a 0.3 percent decline.

Housing, water, electricity, gas and other fuels also contributed to the uptrend as it recorded a faster uptick of 0.9 percent in February from the previous month's 0.7 percent.

National Economic and Development Authority Secretary Arsenio Balisacan said the government would continue to monitor food supply and prices and implement policies to ensure affordable and adequate food especially for the most vulnerable sectors.

'As we navigate the economic landscape, it is imperative that we remain vigilant and proactive in our approach to managing inflationary pressures. While we have seen some relief from certain inflation risks, we must not become complacent. The potential impact of a strong El Niño weather pattern on food prices is a significant concern for our community,' Balisacan said.

Balisacan said the government is coming up with strategies to respond to the challenges.

While international rice prices have started to ease and local supply is expected to increase with the dry season harvest beginning this month through April, he said the Department of Agriculture is working closely with the International Rice Research Institute to increase the country's rice production.

The NEDA also said the next phase of the test for the African swine fever vaccine is awaiting Food and Drug Administration approval.

This vaccine, once proven effective, will be rolled out to help ensure adequate pork supply in the country.

ING senior economist Nicholas Mapa said the February inflation print was driven in large part by another supply side shock with food inflation reversing to accelerate.

For the coming months, he said 'the direction of inflation will be driven largely still by supply side factors and thus we will have to brace for episodes of sharp shifts and reversals as supply constraints remain unaddressed.'

Oxford Economics economist Makoto Tsuchiya said the latest inflation outturn is not seen as the start of a significant reacceleration in prices, as the upside came from the supply side.

Tsuchiya said the demand side inflationary pressures are limited.

'With the economy set to slow this year amid soft external demand and the lagged impact of monetary policy, we don't see a strong risk of demand-pull inflation,' he said.

Diwa Guinigundo, former BSP deputy governor and now country analyst at GlobalSource Partners, said the central bank is likely to avoid moving too fast in easing its current monetary stance.