MANILA - Philippine inflation is now at a 26-month high, even after President Rodrigo Duterte ordered a price cap on surging pork and chicken prices in February.
Inflation hit 4.7 percent in February, from 4.2 percent in January, and 2.6 percent in February 2020. Inflation in the National Capital Region, however, decelerated to 4.1 percent last month, from 4.3 percent in January. This is also a reversal from January when Metro Manila inflation was higher than the national average by a tenth of a percentage point.
One key contributor to slower inflation in Metro Manila was meat prices. Meat inflation for February hit 20.4 percent, from 21.6 percent in January. The price cap on pork and chicken meat on orders of President Rodrigo Duterte took effect on Feb. 8.
However, meat inflation outside NCR accelerated to 20.8 percent, from 15.9 percent in January.
Overall, meat inflation still accelerated to 20.7 percent in February, from 17.1 percent in January, in spite of the deceleration of meat prices in Metro Manila.
National Statistician Undersecretary Dennis Mapa discussed the impact of the price cap, and whether or not it was an efficient solution to rising inflation.
“At this point, I cannot say, we are looking at the data, the facts from the February round. Prices of pork in Metro Manila went down. Prices of pork outside Metro Manila went up," Mapa said.
This chart by ABS-CBN Data Analytics shows meat inflation in orange. It is spiking. Vegetable inflation, shown in green, meanwhile, declined in February. Fish prices, shown in gray, and rice prices, shown in blue, are on a slight uptrend.
Food and transport inflation, shown here in blue and orange, respectively, were again the biggest contributors to faster inflation. They are both on a clear uptrend. Rising world oil prices, and the continued effects of the African Swine Fever outbreak on local meat supply remain the biggest contributors to the trend.
They aren’t the only contributors though. This chart shows 7 out of the 11 commodity groups tracked by the Philippine Statistics Authority saw accelerated inflation in February, shown by the dark blue bars.
The result— Philippine inflation is at a 26-month high. It is also above the Philippine Monetary Board’s preferred range of between 2 and 4 percent for a second straight month. The Philippine Central Bank, however, was spot on with its February inflation forecast of 4.7 percent.
"Average inflation is expected to remain with the 2.0-4.0 percent target range over the policy horizon. The projected upward trend in inflation is seen to be temporary, driven primarily by supply side factors. The overall balance of risks to future inflation continues to lean toward the downside owing mainly to the continued uncertainty caused by the pandemic on domestic and global economic activity," Bangko Sentral ng Pilipinas Governor Benjamin Diokno said.
"Meanwhile, upside risks could emanate from the possibility of an early rollout of COVID-19 vaccines in the Philippines," he added.
Diokno also reiterated that the current "elevated" inflation rate does not merit monetary action.
“The sources of near term inflation are supply side shocks in nature that should not require a monetary response unless they lead to second round effects. Supply side shocks are best addressed by non- monetary interventions that ease domestic supply constraints. Currently, direct measures are being pursued by the National Government to enhance the availability of affected commodities," Diokno said.
The Monetary Board’s next policy meeting is on March 25. It did not take any action in its first policy meeting of 2021 in February.
With the February inflation rate at 4.7 percent, the Philippines has by far the highest inflation level amongst major ASEAN economies.
The closest to the Philippines, shown in red in this chart, is Indonesia, shown in gray. Indonesia’s inflation, however, appears to be on a downward trajectory. Vietnam’s inflation, shown in green, meanwhile, has bounced back into positive territory after turning negative in January.
S&P Global Ratings recently noted that high inflation could be a problem for the Philippines and its nascent economic recovery, as it could weigh on household consumption.