November 7th, 2023
Rep. Joey Sarte Salceda
7 November 2023
These are very good numbers. I attribute the significantly lower year-on-year inflation this month to the following:
(1) Corn inflation is negative 2.4 percent, which has led to lower inflation levels in meat, at just 0.8 percent. As I have often emphasized, there is a very strong argument for more investments in corn – where we can compete with the world. President Marcos has been very aggressive about promoting investments in the meat and fisheries sector, and I expect the same level of aggressiveness in this regard from the new DA Secretary, who comes from that sector.
(2) Oil prices, while still above 80 USD per barrel, declined from 90 USD per barrel, and fears of a spike in global oil prices did not materialize. Higher oil demand due to the -ber months will likely keep oil prices above USD 75 for the next few weeks, however. So, I expect very moderate deceleration of inflation in the operation of personal transport.
(3) Electricity, gas, and fuels also recorded negative inflation, at negative 1.4 percent, largely due to moderately reduced oil prices.
There are some areas that I continue to watch out for:
(1) Food inflation remains high at 7.0 percent, while recreational services is experiencing a very low 0.1 percent inflation. What could be happening is disposable income is being largely spent on food instead of recreational activities. This has implications on economic growth, especially in the fourth quarter.
(2) Flour is also at the high 7.4 percent inflation level, even as world wheat prices have declined by as much as 32 percent year-on-year. We should look at market dynamics and see whether abuse is taking place in the domestic market.
(3) Rice prices should normalize but will remain elevated in 2024. The Food and Agriculture Organization recorded a 2 percent month-on-month reduction in aggregate world rice prices, September vs. October, due to weak import demand. What is within our control now is to reduce wastage in the October domestic rice harvest by improving our post-harvest facilities and practices. As much as 17 percent of our total palay harvest is wasted due to poor post-harvest practices. If we can significantly reduce this number, we should be able to make a dent on import demand and reduce our vulnerability to global rice price shocks.