Diokno expects elevated inflation in December

Published December 6, 2022, 3:58 PM

by Chino S. Leyco

The Department of Finance (DOF) expects inflation to remain elevated in the final month of the year due to increased demand from higher economic activity and supply constraints.

In a statement, Finance Secretary Benjamin E. Diokno said on Tuesday, Dec. 6, that the average rate of increase in consumers prices would settle at 5.8 percent this year, higher than the 3.9 percent posted in 2021.

Inflation averaged 5.6 percent in the first 11-months of the year after it clocked in at 8.0 percent in November.

Diokno said heightened economic activity coupled with supply woes have put upward pressure on headline inflation.

“We expect inflation to moderate within target range in the second half of next year, averaging between 2.5 and 4.5 percent for full year 2023 as global oil and food prices ease,” Diokno said.

According to the Philippine Statistics Authority, last month’s inflation was the highest since the global financial crisis in November 2008, which was recorded at 9.1 percent.

The DOF estimates showed that electricity, gas, and other fuels remain the highest contributor to inflation at 0.9 percentage point.

Main contributors to the higher food inflation are vegetables (0.7 percentage point), meat and food and beverage services (0.6 percentage point), fish and other seafood (0.5 percentage point), and sugar (0.4 percentage point).

Passenger transport services and operation of personal transport equipment contributed 0.6 percentage point and 0.5 percentage point, respectively. Food and beverage services also contributed 0.6 percentage point to inflation.

Meanwhile, inflation in the national capital region (NCR) decreased to 7.5 percent, from the 7.7 percent in October 2022.

For areas outside the NCR, Region XI (Davao Region) had the highest inflation rate for November 2022, which stood at 9.7 percent.

In contrast, the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM) had the lowest inflation rate at 6.0 percent.

On Monday, the Development Budget Coordination Committee (DBCC) slightly adjusted its average inflation rate assumption for 2022 to 5.8 percent from the previous assumption of 4.5 to 5.5 percent given the persisting high prices of food and transport costs.

The DBCC also expects inflation to moderate in the medium-term, reaching 2.5 percent to 4.5 percent in 2023 before returning to the target range of 2.0 to 4.0 percent in 2024 until 2028.

Despite the sharp increase in inflation, the economic managers reassured the public that the government is committed to take actions that will mitigate the lingering effects of the pandemic and the impact of geopolitical tensions.

“We are hopeful that the public consultation on the extension of Executive Order (EO) No. 171, conducted by the Tariff Commission, will be favorable and help ease food and energy inflation next year,” Diokno said.

EO 171 reduced the Most Favored Nation tariff rates on pork, rice, corn, and coal and is set to expire by the end of the year.