Filipinos’ purchasing power has further eroded as the increase in the prices of basic goods and services remained high, such that a peso in 2018 is worth just 86 centavos in July, shrinking from 87 centavos in June.
The Philippine Statistics Authority (PSA) on Friday said inflation in the Philippines accelerated to 6.4 percent in July, the fastest year-on-year growth since October 2018, as the effects of increased wages and higher transport fares kicked in.
The PSA calculates inflation as well as the purchasing power of the peso based on prices of goods and services and the value of the Philippine currency in 2018.
The Bangko Sentral ng Pilipinas (BSP) said the emergence of these so-called “second-round” effects—higher wages and transport fares, which rippled out from the price shocks in the global crude oil and non-oil (food and fertilizer, in particular) markets mainly caused by the Russia-Ukraine war—is putting greater upward pressure on prices of basic goods and services.
The BSP added that, along with these factors, expectations among businesses and investors that inflation will remain high were adding heat to the rise in prices. Press Secretary Trixie Cruz-Angeles on Friday said Malacañang was no longer surprised by the 6.4-percent inflation in July this year.
Angeles said the government had already anticipated the high inflation given the nonstop increase in global oil prices.
“We have expected this. So we’ll just wait until it evens out,” she said.
Data from the PSA show that inflation has been rising month after month since 3 percent in February.
The latest readout brought the seven-month or January-July average to 4.7 percent, breaching the BSP’s target range of 2-4 percent.
Central bank officials earlier expressed resignation that the full-year average inflation for 2022 will be higher than the upper end of the BSP target range, which is 4 percent.
Based on the latest BSP forecast, inflation is expected to remain high in the remainder of this year, but is expected to ease in 2023 and settle within target in 2024. National Statistician Dennis Mapa said at a briefing the biggest contributors to increased inflation in July was the food and non-alcoholic beverage basket of goods, particularly chicken meat, fish, sugar and bread.
“A second group of commodities that showed faster inflation in July is the transport index, because of the continuous rise in prices of gasoline, diesel and road transport, especially jeepney fares,” Mapa said.
Meanwhile, the subgroup “housing, water, electricity, gas and other fuels”—while registering slower increases in prices—still contributed to higher inflation in July because of greater costs of electricity, housing rent, and cooking gas or liquefied petroleum gas.
Due to these same factors, Mapa said inflation felt by the poorest 30 percent of households in the Philippines revved up to 5.9 percent in July from 5 percent in June and from 4.4 percent in July 2021.
January to July inflation for the bottom 30 percent of households was pegged at an average of 4 percent.
Economic Planning Secretary Arsenio Balisacan said in a statement the government is focused on ensuring that food is affordable and supplies are secure to arrest a further rise of inflation.
“We are also helping reduce energy, transport and logistics costs, especially for vulnerable sectors of our population,” Balisacan said. “It is our urgent priority to ease price pressures and protect the public’s purchasing power.”