PH inflation climbed to 3-year-high in 2021

AFP file photo

MANILA, Philippines—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 percent 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 percent — 2021’s lowest monthly rate — last December, but the full-year average remained above the Bangko Sentral ng Pilipinas’ (BSP) 2 to 4 percent target band of price increases deemed conducive to economic growth.

On a seasonally adjusted basis, price levels in December were flat or posted zero-percent 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-percent year-on-year inflation rate in December, down from 4.5 percent in November but a faster pace than the 2.8 percent in NCR.

Central Visayas and Caraga — two of the six regions pummeled 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 percent year-on-year from 8.8 percent 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 percent.

As the economy further reopened and increased capacity in mass transportation, jeepney fare declined 0.2 percent year-on-year last month alongside a slower 1.7-percent 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 percent 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 percent from 3.9 percent in November, but meat, especially pork, remained expensive.

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

Amid the Christmas holiday season, fresh pork meat prices in Metro Manila rose 4.7 percent to P348 per kilo from November’s P332 a kilo. The year-on-year jump was a bigger 14.2 percent 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 percent from P291 per kilo a month ago and 20.3-percent 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 tons 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.

Finance Secretary Carlos Dominguez III, President Rodrigo Duterte’s chief economic manager, was amenable to Neda’s proposal to prolong EO 133’s validity, which expired in end-2021 as the President’s order stated that last year’s MAV balance cannot be carried over to 2022.

In a statement, Neda said that as of Dec. 27, 2021, “only around 46 percent or 60,000 MT out of 130,000 MT of the MAV plus with import certificates was utilized.”

Also, Chua again urged distribution of more imported pork outside Metro Manila, citing that “meat is among the top three drivers of inflation in 14 out of 16 regions outside the NCR in December 2021.” Meat inflation outside Metro Manila inched up to 11.5 percent year-on-year last month, from November 2021’s 11.3 percent.

As imports had been sold mainly in Metro Manila supermarkets and not in wet markets, the Department of Agriculture (DA) in October 2021 issued a memorandum circular in October to distribute more pork outside Metro Manila and to institutional buyers and processors.

“With the NCR and the neighboring provinces of Cavite, Rizal, and Bulacan now under alert level 3, it is important to ensure affordable food prices and the continued delivery of goods and services,” Chua said.

“To temper inflation in meat, especially pork, the government is working to increase local supply and ensure regular unloading of stocks from cold storages,” he added, referring to the stricter measures in place until mid-January, amid the current surge in COVID infections.

For Chua, low and stable inflation would help the Philippines sustain its recovery from the pandemic-induced economic slump in 2020.

“The emergence of new variants has shown us that the COVID-19 virus is not going to go away easily,” Chua said.

“The good news is even as we temporarily impose more stringent restrictions to contain the spread of the Omicron variant, we have learned to manage the risks and live with the virus,” he added.

“Economic prospects in 2022 still remain promising, and we urge everyone to play their role in the recovery by getting vaccinated, availing of booster shots, and strictly adhering to the minimum public health standards,” the Neda chief said.

The government expects to have ended 2021 with gross domestic product (GDP) growth of 5 to 5.5 percent, to reverse the worst post-war recession in 2020 when economic output shrank by a record 9.6 percent. For this year, the government targets a faster 7 to 9 percent growth, alongside expectations of within-target inflation as food supply bottlenecks were being addressed.

Prices, especially of food, also bore down heavier on poor Filipinos — end-2021 inflation among the bottom 30-percent income households was a higher 4.8 percent, compared to the 4.5-percent headline rate. This was despite a bigger drop in December 2021 inflation to 3.3 percent year-on-year among the poorest Filipino families, mainly due to slower price hikes among the food items they consumed.

The government last December reported that the prolonged COVID-19 pandemic, which shed millions of jobs and closed down thousands of businesses, coupled with elevated consumer prices jacked up the Philippines’ poverty rate to 23.7 percent in the first half of 2021, from 21.1 percent in 2018.

TSB