Philippines inflation climbed to three-year-high in 2021

Vegetable deflation plus slower price increases in fish and rice helped bring down the nationwide inflation rate last month. - Bloomberg

MANILA (Philippine Daily Inquirer/Asia News Network): The country ended 2021 with a three-year-high, above-target inflation rate of 4.5 percent, which meant that faster-than-manageable price hikes, especially of food and oil prices, tempered consumer spending at a time it was needed to rev-up economic recovery and address poverty that was aggravated by the prolonged pandemic.

Last year’s average rate of increase in prices of basic commodities was the highest since the 5.2 percent in 2018, when a spike in rice prices eventually led to liberalized trade. Rice tariffication, or allowing more imports in exchange for higher revenue through tariff, hurt local farmers but lowered prices of the staple food.

Rice inflation slowed to 0.9 per cent year-on-year from 1 percent last November. Rice also posted a deflation, or lower year-on-year prices, at the start of implementation of the Rice Tariffication Act in 2019.

In 2021, the economic team pushed for more pork imports to augment domestic supply which was battered by the African swine fever (ASF) outbreak since late 2020.

While President Duterte had issued executive orders (EOs) to raise the pork import volume cap at lower tariffs, importation had been slow which led to price spikes as a result of high demand during the Christmas holiday season.

Headline inflation eased to 3.6 per cent — 2021’s lowest monthly rate — last December, but the full-year average remained above the Bangko Sentral ng Pilipinas’ (BSP) 2 to 4 pe rcent target band of price increases deemed conducive to economic growth.

On a seasonally adjusted basis, price levels in December were flat or posted zero-per cent growth compared to November’s, Philippine Statistics Authority (PSA) data on Wednesday (Jan 5) showed.

Vegetable deflation plus slower price increases in fish and rice helped bring down the nationwide inflation rate last month.

Not even the onslaught of Super Typhoon Odette (Rai) made a dent on vegetable and fish supply, National Statistician Dennis Mapa told a press briefing. It also helped that the government had allowed fish importation toward the end of 2021 amid closed fishing season.

PSA data showed that areas outside the National Capital Region (NCR) posted a 3.9-per cent year-on-year inflation rate in December, down from 4.5 per cent in November but a faster pace than the 2.8 per cent in NCR.

Central Visayas and Caraga — two of the six regions pummelled by Odette — posted higher inflation rates in December compared to November, PSA data also showed.

The December nationwide rate decelerated partly as transport inflation, which included petroleum and fuel prices, fell to 6.1 per cent year-on-year from 8.8 per cent in November.

The jump in oil prices eased, although still high, to 29.4 percent year-on-year in December from November’s 42.1 per cent.

As the economy further reopened and increased capacity in mass transportation, jeepney fare declined 0.2 per cent year-on-year last month alongside a slower 1.7-per cent increase in tricycle fare compared to previous months.

Mapa said higher oil prices — owing to their low base in 2020 when the Covid-19 pandemic slashed global demand amid lockdowns which restricted mobility and travel across borders — was a contributor to the above-target 2021 inflation rate.

However, it was still food and non-alcoholic beverages, which accounted for 38.34 per cent of the consumer price index (CPI) basket, that contributed the most to 2021’s inflation spike.

In December 2021, food inflation eased to 3.1 per cent from 3.9 per cent in November, but meat, especially pork, remained expensive.

Meat inflation inched up to 11.3 per cent year-on-year last month from 10.7 per cent in November, Mapa said. Pork inflation alone rose to 17.9 per cent from 17.3 per cent a month ago.

Amid the Christmas holiday season, fresh pork meat prices in Metro Manila rose 4.7 per cent to P348 per kilo from November’s P332 a kilo. The year-on-year jump was a bigger 14.2 per cent from P305 per kilo in December 2020, Mapa said.

In areas outside Metro Manila, pork prices, while less expensive, also climbed to P296 a kilo last month, up 1.8 per cent from P291 per kilo a month ago and 20.3-per cent higher than P246 a kilo a year ago.

The National Economic and Development Authority (Neda) had been flagging pork imports arriving in trickles, which the state planning agency reiterated on Wednesday to push an extension until December 2022 of EO No. 133.

The executive order in 2021 raised minimum access volume (MAV), or the amount of pork that could be imported, to 254,210 metric tonnes from 54,210 MT or about four times.

In a text message, Socioeconomic Planning Secretary Karl Kendrick Chua, who is also Neda chief, said the proposal to extend the EO’s provisions on MAV had to be first recomputed based on the projected gap in demand and supply for 2022.