March 5, 2019

We, the economic managers, are pleased by the report that the country’s inflation rate slid further to 3.8 percent in February as price levels start to normalize and settle back to the government’s target. This is appreciably lower than the 4.4 percent rate in January, which shows the government’s resolve coupled with the appropriate measures to rein in inflation.

This brings the year-to-date average inflation to 4.1 percent, which is now only 0.1 percentage point above the higher end of the government’s inflation target range. We are confident that the successive reforms recently rolled out will sustain this environment and support the growth of the Philippine economy.

Except for communication-related expenses, slower price increases in most commodity groups were recorded. In particular, inflation of food and non-alcoholic beverages eased to 4.7 percent in February 2019 from 5.6 percent in January 2019, slightly lower compared to the 4.8 percent in the same month last year. On a month-on-month, seasonally adjusted basis, food prices posted nil growth for the second consecutive month.

Similarly, inflation in Metro Manila decelerated to 3.8 percent in February 2019 from 4.6 percent in January 2019 and 4.7 percent in February 2018. This is the lowest rate recorded in the last 18 months. All regions likewise exhibited slower overall inflation rates.

With these developments, we are optimistic that the downward path of inflation will continue for the rest of the year. This will be backed by the recent enactment of the Rice Industry Modernization Act (RA 11203), which is expected to bring down rice prices and cut inflation by 0.5 to 0.7 percentage point this year and 0.3 to 0.4 percentage point next year.

Rice inflation significantly moderated to 2.9 percent from 4.7 percent in January 2019 on the back of stable rice supply. Based on the monitoring of the Philippine Statistics Authority, prevailing retail prices of regular-milled rice has now declined by around PhP5.00 since it peaked in September 2018.

Our work does not stop here. We must ensure that the change to a rice tariff regime—from government-led to market-led—is seamless and fast. The crafting and promulgation of the Implementing Rules and Regulations or IRR of the new law, as part of the first steps, are now underway. The new regime will include the operationalization of a National Single Window system, which will facilitate seamless trade transactions.

A concern that may hamper food production is the presence of El Niño, which, according to the Philippine Atmospheric, Geophysical, and Astronomical Services Administration, will likely continue until June 2019. Around 19 provinces are expected to experience drought this year including Metro Manila. Thus, the government must take pro-active measures to mitigate its adverse impacts on the agriculture sector in the immediate term and to increase its resiliency against extreme weather conditions over the medium to long term.

We will also remain watchful of developments in the global oil market. While prices have already gone up by around PhP7 to 8 since the start of the year, current domestic fuel prices are still relatively lower compared to pump prices in 2018, even including the second round of increases in fuel excise tax this year. Of particular note is the sharp deceleration in inflation for transport to 1.2 percent in February 2019 from 2.5 percent in the corresponding month last year despite the increase in fuel excise tax.

As such, the Land Transportation Franchising and Regulatory Board should increase its efforts to cover more of the targeted beneficiaries of the Pantawid Pasada Program in order to temper possible demand for transport fare hikes should oil prices continue to increase.

Nevertheless, the economic team is upbeat that inflation is again starting to become manageable.  While we constantly keep a close watch on the general prices of goods, we can now pay greater attention to programs that will further propel economic growth and help us reach our long-term development goals.