October 5th, 2023
House Ways and Means Chair Joey Sarte Salceda (Albay, 2nd district) says that the reported year-on-year inflation rate of 6.1% in September is “due to oil and rice price shocks during month” but “is expected to dissipate in the October figures” due to the sharp decline in global oil prices during the end of September and compliance with the rice price ceiling imposed by the President.
“The September inflation figure is due almost entirely to rice price spikes and the global oil price spike. The PSA collects data on the first five days of the month, and on the 15-17th days, so it captured a lot of the speculative rise in global oil prices, but not the sharp declines that followed September 27.”
“So, this is a snapshot in time past, and we have to analyze it in that light. The weeks after data collected were entirely better, and we’ll catch that next month,” Salceda added.
“In other words, this is probably the worst inflation rate we will record for the -ber months, and it gets better from here.”
Salceda added that “the estimates I released to fund managers last month was actually at 6.2%, using modelling I’ve used since the 1990s. This inflation is imported.”
Rice prices went up 17.9% year-on-year in September, “but world prices of rice also sharply declined on September 27, and are now at their August lows.”
“So, the September figures also do not capture the sudden decline in world prices. Correctly, President Marcos has also already lifted the rice price cap under EO 39, as both global and local conditions have since become more manageable.”
“In short, things have gotten better, and the data didn’t capture it yet because the methodology covers the first half of the month. Expect it captured in the October figures.”
Salceda also noted a sharp decline in the sugar inflation rate, as the milling season started in September.
“Sugar inflation is back in the single digits, most likely due to the start of the milling season. I expect better prices in the October and November inflation figures, as the milling also peaks during that period.”
“I am also pleased with corn and meat figures. Corn is down to 1.6% inflation and meat, its most correlated food product, is down to 1.6% inflation. As I frequently emphasize, we have a future in these areas. Maybe even better prospects, long-term, than the rice industry. Combined, it’s a bigger share of the economy anyway.”
Risks need to be controlled
Despite having optimistic predictions for the inflation rate in October and beyond, Salceda says that “we still need to mitigate risks.”
“I think the risk of further oil spikes has come to pass. Weak demand has undercut the efforts of OPEC countries to boost prices with supply cuts. So, expect oil to be in the neighborhood of just 70-80 USD per barrel over the coming weeks.”
“But food prices still need to be watched out for, especially because the ber months typically tend to be bonus season, which is naturally inflationary.”
“With sufficient food, we can manage the inflationary impacts of sudden injections of income among employees.”
“As for rice, there is no alternative to producing more and more rice per hectare. We are still at very improvable levels. The DA under President Marcos has already produced a bumper crop early this year. We need to keep doing even better.”