Salceda: 8.7% inflation rate to go down ‘but there's a floor’

Inflation is expected to slow down in February but the government's target of 2% to 4% inflation for the next two years might be difficult to achieve, an economist in the House of Representatives said on Tuesday.

Albay Representative Joey Salceda, the chairman of the House Committee on Ways and Means, thus said after the Philippines recorded an 8.7% inflation rate for January.

“You can be sure 8.7% will go down, but there’s a floor. All in all, it looks like 8% is a cyclical level, but 5% is structural," Salceda said in a statement.

"So, that makes your 2-4% inflation target almost off the table, unless you make decisive efforts on the key drivers. High corn prices: that’s enemy number one,” he added.

The rate of increase in the prices of commodities logged for the past month was the highest since 9.1% of inflation was recorded in November 2008.

The Cabinet-level economic cluster Development Budget Coordination Committee (DBCC) in December retained the inflation target of 2% to 4% for 2023 to 2024.

“The inflation target range of 3.0% ± 1.0 percentage point (2-4%) continues to be an appropriate quantitative representation of the medium-term goal of price stability that is optimal for the Philippines given the current structure of the economy and outlook for macroeconomic conditions over the next few years,” the BSP said then.

The DBCC is composed of the secretaries of Finance, National Economic and Development Authority, Budget and Management, and the governor of the BSP.

“This announcement of the medium-term inflation target is in line with the BSP’s commitment to transparency and accountability as well as the forward-looking approach in the conduct of monetary policy,” the central bank said.

The BSP in late January said inflation was expected to remain elevated for the month despite the projected deceleration from the 14-year high in December due to the higher prices of utilities and commodities.

“I am sure the overall price level in February and every month in 2023 will be lower than 8.7%. Vegetable prices—especially onion— will go lower, especially during this harvest season,” Salceda said.

Salceda, however, said fish, eggs, and dairy prices will remain high.

“I expect fish prices, as well as egg and dairy prices, to remain elevated. Corn drives those prices, and corn prices—imported or domestic—are expensive,” Salceda pointed out.

Corn prices, Salceda said, have a year-on-year inflation rate of 16%, and have continued to accelerate month-on-month by 1%.

“This will drive prices of fish because corn accounts for 60-70% of costs in aquaculture. Every 1% increase in corn prices leads to a P2-5 price increase in tilapia prices,” Salceda said.

“Egg is exacerbated by problems in poultry supply and smuggling of frozen chicken, which kills domestic raisers. But egg supply issues are not isolated. Nearby areas like Guam are already experiencing shortages,” he added.

Salceda reiterated his call for a review of the rate tariff for corn and allocate its collection for increasing corn production.

Imported corn, Salceda said, could be even P2 more expensive than a locally produced one. —NB, GMA Integrated News