The rate of price increases in the country posted a further uptick to 3.5 percent in December, but Bangko Sentral Gov. Benjamin Diokno said this remains transitory given the recent weather disturbances.
Last month’s inflation print is higher than the previous month’s 3.3 percent.
Diokno said average inflation in 2020 stood at 2.6 percent, within the government’s 2 to 4 percent target band until 2024.
“The BSP continues to expect inflation to settle within the target range over the policy horizon,” he said.
Diokno said risks to the domestic inflation rate in the coming months “continue to lean toward the downside owing mainly to the continued uncertainty caused by the pandemic on domestic and global economic activity”.
“Nevertheless, upside risks emanate from the possibility of an early rollout of Covid-19 (coronavirus disease 2019) vaccines in the Philippines, which is expected to ease the existing lockdown measures and expand further operating capacity of the economy,” the BSP chief said.
He said the rollout of vaccines in other countries is also expected to result in a stronger-than-expected global economic recovery, and this “could present upward price pressures on global oil and food prices.”
“The BSP stands ready to deploy its full arsenal of instruments as needed in fulfillment of its mandate to maintain price and financial stability conducive to sustainable economic growth,” he added.
The December inflation rate brought the full-year figure to 2.6 percent, as food prices rose amid the seasonal spike in demand due to the holiday season and possibly the spillover effects of typhoons.
Philippine Statistics Authority chief and National Statistician Dennis Mapa said last month’s inflation rate picked up to its highest level since March 2019 mainly brought about by an increase in prices of food and non-alcoholic beverages, particularly meat like pork, vegetables, and fish.
“So on meat, we know this is partly on (high) demand and the ASF (African swine fever) where we have a problem on the supply so that one caused the increase… (Price of) corn in the NCR (National Capital Region) also rose partly because of the holidays. Hopefully, that would start to go down in January,” he said.
Mapa said the spike last month in the prices of vegetables, particularly garlic, onions, and tomatoes, was possibly due to the spillover effects of typhoons that hit the country in the previous months.
“The celebrations particularly last Christmas and the New Year pushed the demand (for these vegetables) to increase and also we have concerns related to the supply… Because of the typhoon, most probably we had supply problems,” he added.
He said the index of vegetables accelerated to 19.7 percent in December 2020 from the previous month’s 14.6 percent.
The PSA chief attributed the higher inflation of food and non-alcoholic beverages to the slight increase in rice prices at 0.1 percent in December 2020 after 19 months of negative inflation.
“This is because of the varieties of rice na pumapasok (entering the country) and the prices, of course, would vary and that caused actually the slight increase in the rice inflation for the NCR,” he said.
Mapa said rice inflation outside the NCR, however, remained negative last month.
“I cannot tell right now if this is the start of an upward trend. We will see in the next month or two if it is really going to be positive,” he added.
The PSA reported that food and non-alcoholic beverages, with inflation of 4.8 percent last month, have a 54-percent share in the overall inflation.
Mapa further said higher transport costs, particularly tricycle and jeepney fares, were also among the main sources of acceleration of the December 2020 inflation.
“We are seeing this (rise in inflation) since the (coronavirus) lockdown that fares are really high particularly on tricycles in areas outside the NCR and even here in the NCR,” he said.
The chief statistician said the NCR registered an inflation of 3.2 percent last month from 3.5 percent in November, while those in areas outside NCR rose to 3.7 percent from 3.3 percent.
The PSA said two regions in areas outside NCR registered the highest inflation — the Region 2 or Cagayan Valley and Region 5 or Bicol Region.
On higher inflation in Cagayan Valley, Mapa said “definitely, this is caused by the typhoons and flooding experienced in that region.”