Philippine inflation heats up to 3-year high in April

By Katherine K. Chan, Reporter

ELEVATED oil prices continued to feed into food and utility costs, pushing annual inflation to a three-year high of 7.2% in April, the Philippine Statistics Authority (PSA) said on Tuesday.

Faster-than-expected inflation now puts more pressure on the Bangko Sentral ng Pilipinas (BSP) which earlier signaled that it could keep hiking interest rates as needed to temper inflation amid the oil crisis.

 PSA data showed that the consumer price index (CPI) accelerated to 7.2% in April, from 4.1% in March and 1.4% a year ago.   

This was the fastest headline print since the 7.6% seen in March 2023, and also well-above the central bank’s 5.6%-6.4% estimate for the month. 

It also blew past the estimates of 17 analysts in a BusinessWorld poll, where the median forecast was at 5.5%.

Month on month, inflation sped up to 2.6%, the fastest since the 3.4% recorded in January 2000. 

National Statistician Claire Dennis S. Mapa noted that faster price increases in food and nonalcoholic beverages, transport, and utilities drove the CPI higher last month.

April marked the second consecutive month that the headline print accelerated past the BSP’s 2%-4% target.   

As of April, inflation averaged 3.9%, a tad below the upper end of the BSP’s full-year goal.   

Despite fuel price rollbacks, transport inflation was faster at 21.4% in April from 9.9% in March.   

This as gasoline inflation quickened to 59.6% in April from 27.3% in the prior month and diesel to 122.7% from the revised 59.6% in March. This was the highest reading for both petroleum products since the CPI rebasing in 2018.

Last month, fuel retailers implemented price cuts after back-to-back hikes since the Middle East war erupted in late February.   

Month on month, pump price adjustments stood at a net decrease of P0.58 per liter for gasoline, P28.18 per liter for diesel and P17.71 per liter for kerosene.

As of end-April, the cost of gasoline ranged between P72.53 and P104.93 a liter, diesel from P75.93 to P101.96 a liter and kerosene from P125.39 to P147.98 a liter. These prices were still significantly higher than a year ago.

Inflation for liquefied petroleum gas (LPG) surged to 45.8% in April from the revised 3.7% in March, even as the government suspended the excise tax on LPG and kerosene.

Inflation for housing, water, electricity, gas and other fuels also picked up to 8.2% in April from the revised 4.7% the previous month.   

In April, Manila Electric Co. raised electricity rates by 53.35 centavos per kilowatt-hour (kWh), bringing the overall rate for the month to P14.3496 per kWh. 

High fuel costs spilled over into food prices in April, bringing inflation for the heavily weighted food and nonalcoholic beverage index to 6% from the revised 2.9% in March.   

This was attributed to the 11.1% inflation in cereals and cereal products (from 3.6% in March); 9.4% in fish and other seafood (from 6.6%); and 10.4% in vegetables, tubers, and the like (from 7%).

Meanwhile, rice inflation remained in positive territory for a second month in a row, accelerating to 13.7% from 3.6% a month ago.   

Based on PSA data, the average per-kilogram (kg) cost of local regular milled rice climbed by 15.95% to P51.53 in the second half of April from P44.44 a year earlier. The price of well-milled rice also grew by 15.32% year on year to P58.88 from P51.06 per kg, while the price of special rice went up by 9.8% to P66.23 per kg from P60.32 per kg.

PESO DEPRECIATION
PSA’s Mr. Mapa noted that the peso depreciation also drove up inflation and weakened the peso’s purchasing power.

Last month, the local unit touched the P61-a-dollar level for the first time, plunging to a new all-time low close of P61.567 against the greenback on April 29.

“Our diesel and gasoline are priced in US dollars, of course, that’s why it had an impact on the price, which in turn had a direct impact on our inflation rate and, of course, on the purchasing power of the peso,” Mr. Mapa said.

“So, the impact of the peso’s weakening contributed to the rise in the price of inputs, particularly the ones we import, and it has impacted the inflation rate, among others,” he added.

According to the PSA, the purchasing power of peso, or the value of each P1, continued to drop to a new record-low of 73 centavos in April. This brings the value of P100 in 2018 to just P73 now.

The PSA also reported that core inflation, which strips out volatile food and fuel prices, picked up to 3.9% in April from 3.2% in March and 2.2% a year earlier. This was the highest core print since the 4.4% logged in December 2023.   

In the National Capital Region (NCR), inflation quickened to 5.5% in April from the revised 3.5% in March and 2.4% in the prior year.

Inflation in areas outside NCR was also faster at 7.7% in April, from 4.2% a month earlier and 1.2% last year.

Meanwhile, inflation for the bottom 30% of income households accelerated to its fastest pace in over three years at 8.5% in April, from 4.2% in March and 0.1% in the same month last year.

In a statement, the Department of Economy, Planning, and Development said the administration is “intensifying targeted interventions,” after inflation sizzled last month.

“Amid the Middle East conflict disrupting fuel supply chains, the government is intensifying targeted interventions, particularly to temper upward price pressures on food, energy, and transport, while ensuring the continued stability of domestic supply,” Economy Secretary Arsenio M. Balisacan said. 

MORE RATE HIKES?
Meanwhile, Chinabank Research said the BSP will likely hike rates anew but has limited room for aggressive tightening as rising inflation will soon drag economic growth.

It now projects the headline print to hold above 7% in the coming months, with the full-year clip likely to end at around 6%.

“We expect the BSP to raise rates further. However, elevated inflation will continue to weigh on consumption and growth, constraining the BSP’s ability to hike rates aggressively and placing greater responsibility on the government to curb additional inflationary pressures,” Chinabank Research said.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the BSP could extend its rate-hike cycle, much like during the 2022 oil crisis triggered by Russia’s invasion of Ukraine.

“There is a possibility of BSP rate hike/s, similar to the previous cycle four years ago, in an effort nip inflationary pressures at the bud and better manage inflation and prevent it from spiraling further… even if the unintended consequences include slowing down the economy,” he said in a Viber message. 

At its April 23 meeting, the central bank ended its nearly two-year easing cycle with a 25-basis-point rate hike, which brought the key policy rate to 4.25%. This marked its first tightening move since October 2023.

BSP Governor Eli M. Remolona, Jr. at that time said that they could hike rates as much as needed to keep prices stable despite its expected impact on domestic growth.

The BSP sees inflation hovering above 5% for most of the year to average 6.3% by end-2026. This was higher than its earlier forecast of 5.1%.

Meanwhile, Jose Enrique “Sonny” A. Africa, executive director of the think tank IBON Foundation, said the faster April inflation clip reflects lapses in the government’s response to the over two-month long energy crisis. 

“The Marcos Jr. (administration) didn’t create the oil shock, but its refusal to cut oil taxes and control oil firm overpricing is making sure that tens of millions of poor, low-income and middle-class Filipinos fully absorb it,” he said in a Facebook post on Tuesday.

“The latest inflation figures clearly underscore how the (government’s) response is too slow, reaches too few, and gives too little,” he added.