THE country’s inflation rate skyrocketed to 7.7 percent in October 2022, the highest over the past 14 years, the Philippine Statistics Authority (PSA) said on Friday, Nov. 4, 2022.
The average inflation rate from January to October 2022 stood at 5.4 percent, still within the administration’s projected range of 4.5 percent to 5.5 percent for the entire 2022.
“The continued uptrend of the October 2022 inflation was primarily due to the higher annual growth rate in the index for food and non-alcoholic beverages at 9.4 percent, from 7.4 percent in September 2022,” the PSA said.
Impact
Business leaders in Cebu said the rising inflation could cut into spending.
“Inflation will dampen demand. Unfortunately, the inflation is externally driven, so there is very little we can do to counter it. Families would have to re-prioritize their budget,” said Kelie Ko, president of Mandaue Chamber of Commerce and Industry (MCCI).
Entrepreneur Steven Yu agreed with Ko, saying that high inflation will encourage selective and prioritization of budget towards vital and immediate needs.
He also said “it will stunt the ongoing economic recovery process and pressure the Bangko Sentral ng Pilipinas (BSP) to increase interest rates which will plunge the economy further into deep recession.”
“There has to be a limit on the aggressive increase of interest rates. It will do more harm to the economy than the inflation. All these are caused by external factors, primarily by the Russia-Ukraine war,” Yu explained.
But despite the possible cutback in spending, Ko believes Cebuanos would not allow the current situation to spoil the holiday celebration, after missing it to celebrate big time for two years.
“We expect a strong year-end business performance, whether this will be sustained after the New Year is still to be seen,” he said.
Moreover, while lifting of restrictions has helped micro, small and medium enterprises to slowly recover and improve traffic to their businesses Yu said the increase in operating costs will still result in a very struggling bottomline.
“For many industries, the recovery process is stunted,” he said. “For an import dependent country like the Philippines, we are disadvantaged by the global inflationary pressure. Efforts to attain self sufficiency should be intensified.”
He added that government interventions may be needed to manage the situation such as lowering of fees, ease of doing business, financial support, lower interest rates may be needed to be executed.
The PSA noted higher annual increments in the indices of the following commodity groups that also contributed to the uptrend of the overall inflation in October 2022:
Alcoholic beverages and tobacco, 10.4 percent;
Clothing and footwear, 3.1 percent;
Housing, water, electricity, gas and other fuels, 7.4 percent;
Furnishings, household equipment and routine household maintenance, 3.8 percent;
Health, 2.6 percent;
Recreation, sport and culture, 3.0 percent;
Restaurants and accommodation services, 5.7 percent; and
Personal care, and miscellaneous goods and services, 3.7 percent.
Faster annual growth rates were also observed in rice (2.5 percent); corn (27.4 percent); flour, bread and other bakery products, pasta products, and other cereals (9.8 percent); fish and other seafood (9.4 percent); milk, other dairy products and eggs (8.7 percent); oils and fats (20.4 percent); fruits and nuts, 4.9 percent; sugar, confectionery and desserts (34.4 percent); and ready-made food and other food products not elsewhere classified (8.1 percent).
Inflation for food at the national level increased further to 9.8 percent in October 2022 from 7.7 percent in September 2022.
“Core inflation, which excludes selected food and energy items in the headline inflation, rose to 5.9 percent in October 2022 from 5.0 percent in September 2022. In October 2021, core inflation stood at 2.5 percent,” the PSA said.
“The increased inflation for vegetables, tubers, plantains, cooking bananas and pulses at 16.0 percent; and meat and other parts of slaughtered land animals at 11.5 percent predominantly influenced the higher food inflation in October 2022,” it added.
The PSA said transport and education services registered slower annual increases at 12.5 and 3.4 percent, respectively.
Information and communication, and financial services retained their previous month’s inflation rates.
Outlook
The BSP said inflation is projected “to remain elevated for the rest of 2022 but will likely decelerate in 2023 due to easing global oil and non-oil prices, negative base effects from transport fare adjustments in 2022, and as the impact of BSP’s cumulative policy rate adjustments take hold on the economy.”
“The risks to the inflation outlook appear to be tilted to the upside for 2022 and 2023 but are seen to be broadly balanced for 2024.,” the centra bank said.
It noted that the potential impact of higher global non-oil prices, additional transport fare hikes, increased food prices owing to weather disturbances, and sharp rise in sugar prices are the major upside risks to the inflation outlook.
Meanwhile, the BSP said the impact of a weaker-than-expected global economic recovery is the primary downside risk to the outlook.
The Monetary Board will review its assessment of the inflation outlook and macroeconomic prospects in its monetary policy on Nov. 17. (WITH KOC)