THE country’s overall inflation accelerated to 4.4 percent in July 2024 due to faster year-on-year increases in housing, water, electricity, gas and other fuels and heavily-weighted food and non-alcoholic beverages, the Philippine Statistics Authority (PSA) said Tuesday, Aug. 6, 2024.
The inflation rate in June was at 3.7 percent, while 4.7 percent was recorded in July last year. Year-to-date inflation stood at 3.7 percent, still within the government’s target band of three to four percent for the year.
Despite this, entrepreneur Steven Yu believes that the Philippines is on “a sound economic path with manageable inflation and one of the highest growth rates in Asia.” Yu said that the economic measures being implemented by the current administration have been effective, reflective of the strong capabilities of the economic team.
“The dominant sentiment of the business and financial community is inclined towards a subdued inflation rate for 2024 and 2025 and the acceleration of interest rate cut expectations to avert any economic hard landing,” said Yu, the past president of the Mandaue Chamber of Commerce and Industry.
Inflation is the rate at which the general level of prices for goods and services rises, leading to a decrease in the purchasing power of a currency. It means that over time, one will need more money to buy the same amount of goods and services.
Drivers
The PSA said the upward trend in the overall inflation in July was primarily influenced by the higher year-on-year increase in the index of housing, water, electricity, gas and other fuels at 2.3 percent and heavily weighted food and non-alcoholic beverages index at 6.4 percent.
The PSA said 55.5 percent of the total inflation was from food and non-alcoholic beverages or 2.4 percentage points; housing, water, electricity, gas and other fuels had 11.3 percent share or 0.5 percentage points; and restaurants and accommodation services with 10.8 percent share or 0.5 percentage point.
The food inflation for the month also went up to 6.7 percent from 6.5 percent during the month prior due to the acceleration of the year-on-year increase in meat and other parts of slaughtered land animals index at 4.8 percent, and fruits and nuts at 8.4 percent, from 3.1 and 5.6 percent, respectively, during the previous month.
Rice inflation, in particular, slowed to 20.9 percent from 22.5 percent, but it remained the top contributor to the July inflation with 1.9 percentage points.
Under non-food items, transportation inflation registered 3.6 percent in July, up from 3.1 percent in June. This increase was driven by increasing global petroleum prices due to the unexpected large withdrawals of United States gasoline stocks, optimistic fuel demand forecasts and the ongoing geopolitical tension in the Middle East, according to the National Economic and Development Authority (Neda).
“The government is relentlessly working to address our nation’s most pressing concern of ensuring food security for every Filipino amid the faster rise in prices in July and the expected typhoons and rains due to the onset of La Niña this August,” Neda Secretary Arsenio Balisacan said. He added that the weather phenomenon is expected to persist until the first quarter of 2025.
One-time uptick
Meanwhile, Finance Secretary Ralph Recto has assured the public that the inflation rate in July is likely a one-time uptick due to high base effects and is expected to temper and fall within target for the rest of the year as government interventions take full effect.
Recto said the inflation rate is expected to stabilize and fall within target for the rest of the year as the impact of government interventions, particularly the reduced rice tariffs, will be more pronounced starting this August.
However, he warned of slight increases in vegetable prices due to damages brought by typhoon Carina in the agriculture sector.
According to the Bangko Sentral ng Pilipinas (BSP), the July inflation is well within its forecast range of four percent to 4.8 percent.
“The latest inflation outturn is consistent with the BSP’s latest assessment that inflation will temporarily settle above the target range in July 2024 due mainly to higher electricity rates and positive base effects but will likely follow a general downtrend beginning in August 2024,” it said.
The central bank noted that the balance of risks to the inflation outlook for 2024 and 2025 has shifted to the downside due to the lower import tariff on rice under Executive Order 62 (Series of 2024). However, higher prices of non-rice food items, transport, and electricity continue to pose upside risks to inflation. / KOC / TPM / SUNSTAR PHILIPPINES