Inflation rose to its highest level in more than 14 years and showed no sign of easing in January, rising to 8.7 percent from 8.1 percent a month ago and 3 percent a year ago, driven mainly by faster increases in the prices of housing, water, electricity, gas, and fuel, the Philippine Statistics Authority (PSA) said Tuesday.
“The January 2023 inflation was the highest since November 2008 at 9.1 percent,” national statistician and civil registrar general Dennis Mapa said in a briefing.
PSA data also showed that core inflation—a measure of inflation that captures changes in the price of goods and services, excluding food and energy—accelerated to 7.4 percent from 6.9 percent in December, the highest since April 1999.
The housing, water, electricity, gas and other fuels index had an inflation of 8.5 percent in January 2023 from 7 percent in December 2022. This was followed by food and non-alcoholic beverages at 10.7 percent, up from 10.2 percent in December 2022.
Also contributing to the faster inflation was restaurants and accommodation services with an inflation of 7.6 percent from 7 percent in December 2022.
Higher annual increases were also observed in the indices of alcoholic beverages and tobacco, 10.9 percent; clothing and footwear, 4.4 percent; furnishings, household equipment, 5.2 percent; health, 3.3 percent; recreation, sport and culture, 4.2 percent; and, personal care, and miscellaneous goods and services, 5 percent.
“On housing, rents were adjusted especially amid the reopening of the economy. Rates were steady during the pandemic but adjustments were noted at the end of 2022. We will monitor if there will be changes in the months ahead,” Mapa said.
Asked if faster inflation could be expected in the coming months, Mapa said the risk would come from the prices of food. He also said although onions had a lower weight in the food basket, its inflation increased by 132.2 percent, making it the “major contributor to food inflation” for the month.
The January 2023 inflation went beyond the projected target range of 7.5 percent to 8.3 percent for the month of the Bangko Sentral ng Pilipinas.
Michael Ricafort, the chief economist of Rizal Commercial Banking Corp., said that global crude oil and other global commodity prices went up after the economic reopening of China in December 2022, thereby leading to higher local prices of gasoline, diesel, LPG, and other fuels.
“Other global commodity prices also corrected higher during the month, such as grains and metal prices, amid the economic reopening narrative in China, which is the world’s second largest economy and the world’s biggest buyer of crude oil and other major global commodities,” Ricafort said.
He said the BSP could raise the local policy rate to match any future rate hikes by the US Federal Reserve Board.
Ricafort said the one-year extension on reduced import tariffs on pork, meat, rice, corn, coal would help ease inflationary pressures.
Also, he said better weather conditions into the dry season would lead to increased production of various agricultural products that would increase local supplies and would help reduce prices, especially food prices, which account a large weight on the inflation basket.
Hongkong and Shanghai Banking Corp.’s economist for the Asean region Aris Dacanay said the January inflation was a surprise.
“No one saw it coming. In fact, the market expected inflation to go down; the forecasts surveyed by Bloomberg ranged from 5.4 percent to 8.0 percent, which means all forecasts were below the December 2022 CPI of 8.1 percent year-on-year and everyone expected inflation to have already peaked,” Dacanay said.
Dacanay said inflation rates in most of Asean have been trending downwards since the fourth quarter of 2022, but inflation in the Philippines has yet to reach its peak.
Finance Secretary Benjamin Diokno said the President remained “on top of the situation” as the Marcos administration continues to adopt a whole-of-government approach to tame inflation especially on key food items.
He added that the government will continue providing targeted subsidies to sectors most affected by the rising inflation.
National Economic and Development Authority Secretary Arsenio Balisacan said higher agricultural productivity, food supply augmentation, and energy security remained the top priorities of the government to temper upward price pressures.
President Ferdinand Marcos Jr. on Tuesday said he expects to see inflation going down with the drop in the prices of fuel and imported agricultural products.
He said it was unfortunate that inflation has continued to increase, noting that the measures the government has taken have not yet “gone through the system.”
“As I said, the importation of many of the agricultural products, which have been a large part of the inflation rate, we have already taken some measures so that the supply will be greater and so that will bring the prices down but that will take a little time,” the President said.
Albay Rep. Joey Sarte Salceda, chairman of the House committee on ways and means, said: “January’s inflation levels will surely go down by February.”
But Salceda said that fish and egg prices will likely remain elevated throughout 2023 unless corn prices and supply improve.
“I am sure the overall price level in February and every month in 2023 will be lower than 8.7 percent. Vegetable prices – especially onion – will go lower, especially during this harvest season,” he said.
Corn prices have a year-on-year inflation rate of 16 percent and have continued to accelerate month-on-month by 1 percent.
“This will drive [up] prices of fish, because corn accounts for 60-70 percent of costs in aquaculture. Every 1 percent increase in corn prices leads to a P2-5 price increase in tilapia prices,” Salceda said.
Senator Risa Hontiveros assailed the government for not doing enough to curb the increasing inflation rate, saying it needs to take the bull by the horns.
She said the Filipino people are already hurting with the rising inflation and the spiraling costs of goods and services.
The country’s business community called on the national government to act quickly to bring down the rate of inflation following the record high inflation rate in January 2023.
Philippine Chamber of Commerce and Industry (PCCI) president George Barcelon said it cannot be helped that consumers continue to spend for necessities despite high prices.
“The main contributors of this 8.7 percent inflation rate in January 2023 are mainly from high food prices and increase in utilities and transportation costs, which contribute to it too. People spend for these necessities even when prices are up,” he said.
“If domestic agriculture cannot cope with demand, there will be more imports to augment domestic supply like onions and sugar,” Barcelon added.
The business group also noted that the exchange rate has appreciated, which contributed to high inflation.